Every quarter in the Lounge we hold a week-long workshop with 2 calls and daily prompts to help members plan the next 3 months in their business. It’s one of my favorite things in the Lounge and this most recent wrap call was sooo good I had to share some of the takeaways on the podcast.
Prefer to listen to the episode? Click here.
Luxury Goods Continue to Do Well in Recessions
In this week’s lesson, we’re talking about why you don’t have to worry about recessions if you sell a luxury product…. at least that’s how it started. But even if you don’t sell luxury products stick around because in true form I ended up going a lot deeper than that.
Now of course, this is a blanket statement that doesn’t always ring true… but the high-level concept will track the majority of the time.
What Consumers Feel the Effects of a Recession
The thing about recessions and any time of financial uncertainty, it’s usually the lower and middle classes that feel the effects the most. The top % of earners and wealth holders, those true luxury customers, are rarely phased by a recession. They have multiple different income streams and investments, and while they might not always be super liquid… there is always a way to cash in on equity somewhere.
And when I say true luxury customers, I mean the ones who can really afford it. Not the ones who save up to treat themselves to a pair of Valentino Rockstuds for her 40th birthday, or even celebrate a big win by buying themselves a Louis Vuitton. I’m talking about the ones who own more luxury goods than they do not… or could at least afford to.
When I was working the boutique circuit in the early 2000s… luxury was everywhere. There were tweens carrying multi-color Louis bags, Coach might as well have been a target brand, and the Juicy Couture velour tracksuit was a sign of status.
Mind you, I was also in a particular environment. I lived and worked in the suburbs of New York City, and all the Wall Street guys and their families lived there too. Our local mall was the Westchester… the first mall in our area to have all the luxury stores. I remember when it first opened. I was still in high school and a total mall rat… but that mall was too fancy to just hang out and walk around.
Higher Income Consumers Generally Continue to Spend in Recessions
Anyway… by the time I opened my brick-and-mortar in 2009, the housing market had crashed and a lot of those Wall Street guys were out of a job. Sadly, my best customer was the wife of a bankruptcy lawyer, he was having his best year ever.
Now, I wasn’t selling luxury. I was in the contemporary market. That’s more like where Juicy fell too. For me, contemporary was a stretch (at least if I had to pay full price) – I had a few really great pieces here and there… but for my customer, it was their everyday clothing.
And yes, some of them were feeling the pinch. But they were still dropping $180 on jeans, driving their luxury cars, and hitting the Starbucks I shared a wall with every day.
My Mom’s husband at the time was a financial advisor to the very wealthy, think CEOs of banks and huge corporations. They were all doing just fine.
Products That Make People Feel Good Do Well in Poor Economic Conditions
But it’s not just luxury goods that do well during a recession.
At the start of the pandemic, I was still working my day job slinging dildos on the Internet. If you’re a first-time listener.. hello – nice to meet you. Yes, my background is in fashion and apparel, but my most recent gig was at an adult novelties company.
Anyway, when things started shutting down and we knew this was more than a two-week thing I asked my boss… what happened to the business in 2008 when the housing market crashed. He replied by saying “funny you should ask because I just looked it up” Their sales… through the roof.
There’s a quote, I have no idea who said it and I didn’t take the time to look it up, but it basically says When times are good, people drink. When times are bad, people drink. And the data shows that’s probably true for any vice.
If you sell something that makes people feel good, you’ve likely got a leg up.
Small Businesses May See a Dip; Here's How to Deal With It
This isn’t to say that many eCommerce business owners are seeing a dip right now. It’s not to say that people aren’t tightening their purse strings in times of uncertainty. We’re also coming up on an election year which has a tendency to affect consumer spending so don’t be surprised if things continue to be wonky next year…
But here is your reminder that there are almost 8 billion people on the planet… and over 300 million in the US. There are people out there to buy your stuff.
Try New Things
Sure, it’s possible what worked in the past doesn’t work now. But that doesn’t mean your business is doomed. It doesn’t mean there isn’t still opportunity out there for you.
It just means that you have to pivot and try something new. Maybe you have to try something that didn’t work in the past to see if it works now!
My husband just recently did this in his business. He does media for real estate agents and their listings. With the increase in interest rates, the market has slowed considerably in southern California. Since they’re not doing as many jobs, they had to focus on increasing their AOV so they created revamped their offerings and created preset packages that include non-listing specific content that the agents can use for their marketing.
Do Something That Didn't Work in the Past but Might Work Now
They had tried packages in the past but abandoned them because everyone would try and say well how much would it be if we just took away this deliverable, or this one. It was a huge headache so they just went to custom jobs instead of packages. Pick from the menu of services and we’ll put it together for you.
However many years later… and they decided to try it again and guess what, people are into it. Part of it is because those realtors realize they had to pivot too. The last few years in southern California they’ve been coasting, they all had more listings than they could handle. Seriously, one of my husband's clients averaged out to more than 2 listings per week at one point. But now, those listings aren’t just falling in their laps. they have to get out and market themselves. They need more social media content, and agent on camera… they’ve got to build their brand.
Be Open-minded & Willing to Try Something Different
They could have easily said eh, our clients don’t like packages, they want custom stuff, they don’t want to pay for things they don’t need. But they said fuck it, let’s try it and see what happens, and this time, it’s working great. Clients who previously would just get photos and video are now going all in on a package that includes agent on camera, headshots, and social media content. They were also very smart in that they named it the agent’s best friend package… it really speaks to what the agent needs, what’s in it for them. I’d like to think after 9 years of being together some of my marketing chops rubbed off on him.
There is a lot to take away from today’s episode. If you sell a luxury good or a vice… recessions or uncertain financial times shouldn’t hurt you quite as much. But even if you don’t… there are plenty oof people in the world who want what you sell – you just have to get in front of them.
But I think the biggest takeaway is that we have a lot more control over what happens in our business than we give ourselves credit for. Don’t be afraid to try new things… or old things even if they haven’t proven fruitful in the past. Except for maybe Pinterest… actually, I did just meet an eCommerce business owner recently who says Pinterest works well for them, so hey – maybe it can work. But take control and do the damn thing.