Holiday 2022 is right around the corner, and many brands and retailers have already warned investors that their inventory levels are too high which will necessitate significant markdowns. Some luxury brands are right to worry about how this season will shape up, with many believing it will be better than 2019 but perhaps not as strong as 2021. Some have even debated whether this holiday season will mirror the one we saw in 2008, when the bankruptcy of Lehman Brothers jump started a meltdown in the global financial markets along with a nearly instantaneous contraction in luxury spending. High end department stores responded by slashing the prices of everything, just to get rid of the inventory.

Fortunately, many circumstances today are vastly different than they were in 2008. The ultra-wealthy consumer remains in a position of strength coming out of Covid. Their stock portfolios have likely taken a hit over the past few months, but the residential real estate market is still strong, and their buying power—and luxury demand—remains robust despite inflation.

Equally important is the fact that luxury brands learned their lesson in 2008. They now maintain a much tighter control over their inventories and pricing strategies. Products from the top luxury brands—Cartier, Dior, Chanel, Hermès—appear to have nearly inelastic prices with very little demand drop off even at higher price points. Chanel, for instance, has raised its prices multiple times since the onset of the pandemic, reporting in May that revenues had increased by 50% in 2021, 23% higher than 2019. But the more surprising part of that announcement is that, despite the price increases, demand is still so high for Chanel products that the company feels the need to open private stores so that its VIP customers will not be inconvenienced by shopping in over-crowded stores.

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While the ultra-luxury brands are dealing with greater demand, it’s a different story in the mid-luxury market. Mid-luxury targets an aspirational consumer that has been much more profoundly affected by inflation. The same inventory that was selling out this time last year languishes on shelves today. Even though discounting is one of the fastest paths to brand dilution, many mid-luxury brands will nonetheless start to mark this product down soon so that they can recoup as much margin as possible.

However, rejecting the typical markdown strategy can serve mid-luxury brands well by creating an aura of exclusivity, leading to greater brand equity. One major brand taking this approach is Coach. Just as New York Fashion Week kicked off, Coach’s parent, Tapestry, Inc. (NYSE: TPR) announced that it was repositioning Coach from accessible luxury to “expressive luxury.” The company revealed that the new strategy is designed to grow Coach’s revenue to $5.7 billion. According to Vogue Business, this strategic shift is intended to court the Gen Z consumer with a greater emphasis on sustainability as well as embracing a “more cautious approach to discounting….” Positioning their handbags as a lifetime investment makes a lot of sense for Coach, which has an authentic American heritage and craftsmanship story to tell. Furthermore, it opens the door to a more circular business model by supporting higher prices for its accessories in the secondary resale market.

It will be interesting to see if more mid-luxury brands adopt this approach. Taking a page from the ultra-luxury pricing playbook can help mid-luxury brands emerge from uncertain economic times with higher brand perception as well as healthier margins. Holding steady on pricing is a very effective way to give consumers the confidence they need to spend in a down market, signaling that they are purchasing an item of lasting value and not simply a commodity which value will have greatly depreciated next season.

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