Bling Economy
A good brand can go a long way – just ask Prada, Gucci and many of the other luxury brands that are experiencing a surge in profits at a time when global growth forecasts are painting a dim picture of the future.
According to the Australian Financial Review, luxury goods company Compagnie Financiere Richemont reported a 35% year on year increase in organic sales growth for the five months to the end of August.
PPR, owner of Gucci, Bottega Veneta and Balenciaga, saw 23% organic sales growth in the second quarter of 2011 following a 20% gain in the prior three month.
The ‘bling economy’, as it’s known, is profiting from newly wealthy consumers in emerging nations such as China, India, Russia and Brazil – but it’s not just new target segments that have boosted profits for these companies.
The strength of their brand has helped these companies to fly in the face of adversity.
Not only have they established a strong brand presence – an essential component of awareness – they have, through consistent delivery of high quality products and service, built considerable brand equity which has allowed them to leverage their offer in new markets.
However in the food industry, where margins are considerably lower and consumers are much more interested in price and value over brand, Heinz – one of the world’s biggest food manufacturers – has learnt the hard way.
The company has blamed Coles and Woolworths for flooding the market with private label or “home brand” goods, which has driven it to shut one factory, downsize two others and scramble to reinvent itself in Australia.
Qantas, Australia’s dominant airline, may have suffered brand damage (this is yet to materialise) after a dispute with the unions caused one of the biggest aviation disruptions on record, impacting 70,000 customers, however the loyalty and satisfaction of customers that choose to fly Qantas – over other, lower cost airlines – even in the days immediately following the strike is testament to the strength of the Qantas brand.
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2 Comments on “Bling Economy”
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Tyler Durden says:
It is a crying shame that the BRICs have not learnt about the mistakes of the West and its associated profligacy!
One a more serious note, I do wonder how much damage failure such as AIG in the States, or the bad press coverage around insurance companies in the wake of the QLD floods.
J Hollins says:
Interesting and clearly seen in Prada’s decision to have their latest stock market listing in Hong Kong.. not Milan, London, Paris or New York.