We’ve all read articles suggesting that the Great Recession was a “generation-changing moment” where fast-spending consumers realized the errors of their ways. I remember reading the comment Jeff Immelt, chief executive officer of General Electric Co., made to a shareholder group, “If you think this is only a cycle, you’re just wrong. This is a permanent reset. There are going to be elements of the economy that will never be the same, ever.”
Although the recession is behind us, we are still dealing with slow economic growth, diminished investment returns, higher unemployment, tighter credit, the threat of inflation and higher taxes. These circumstances certainly will make the journey to your financial destination more difficult. But just how much has the American consumer changed to account for a new grade of difficulty? According to a recent study, not much.
“Conspicuous Consumption in a Recession: Toning it Down or Turning it Up?” forthcoming in the Journal of Consumer Psychology and co-authored by USC Marshall School of Business Associate Professor Joseph Nunes along with Xavier Drèze, Associate Professor of Marketing at UCLA’s Anderson School of Management and USC Marshall School of Business doctoral student Young Jee Han, suggests that conspicuous consumption endures.
The authors conclude consumers remain interested in logo-laden products and are willing to pay premium prices for them. Whereas before the recession, consumers used luxury brand logos as a badge signifying their fiscal strength, and during the recession, consumers clung to luxury goods to prove that they were prospering even during the economic downturn.
Utilizing data from Louis Vuitton and Gucci, the researchers found that products introduced during the recession, at a time when one would think frugality would be “in,” displayed the luxury brand logo even more prominently than in previous years. More surprising was the fact that handbag prices actually increased during the recession. Said Professor Nunes in a university press release, “These are savvy companies that really understand their customers; they understand that they cater to a certain segment that desires products used to signal their status. That desire doesn’t go away, even in hard times.”
Interesting. Study after study indicates that American workers are delaying retirement to make up for losses suffered in the recession. Could it be we are willing to work longer to ensure we don’t have to lower our standard of living? Perhaps we should be asking ourselves – Are designer handbags, and other luxury trappings, essential to our happiness?