The Luxury Goods Industry Is Changing the Way Markets it’s Businesses

June 7, 2010 - PRLog -- by: Rachel Dodes & Sam Schechner

Over the past year, many of the world’s best-known luxury labels have started to introduce ecofriendly products, snap up brands that tout their social responsibility and weave environmental themes into their advertising and marketing. In May, French luxury conglomerate LVMH Moët Hennessy Louis Vuitton took a stake in Edun, an organic-clothing company founded by the singer Bono and his wife.

French luxury goods maker PPR put EUR10 million into a high-end documentary about man’s impact on the environment, in an effort to show the company’s greener side — and pump up sales.

Other companies have begun to advertise steps they took years ago to promote resource conservation. This summer, the windows of Tiffany  & Co.’s retail stores world-wide feature images of coral reefs, publicizing Tiffany’s commitment since 2002 not to use coral in its designs.

“We want to change the way we conceive our business, socially and environmentally speaking,” said François-Henri Pinault, chief executive of French retail giant PPR SA, which has sponsored a feature-length documentary film highlighting man’s abuse of the environment.

The luxury industry’s adoption of a green message reflects the challenges facing some of the world’s most glamorous brands. Once able to win customers with the promise of fine design, craftsmanship and service, the luxury business is contending with an aging core clientele and the aftermath of a decade-long expansion that has rendered exclusive brands less so than they used to be.

Those factors have purveyors of high-end fashions scrambling to re-invent their brands, in part by catering to younger shoppers who more often consider their impact on the environment than do traditional luxury-goods buyers.

In a recent survey, the Luxury Institute, a New York research firm, found that younger and more-affluent consumers seek information about corporate social responsibility more actively than their older and less well-off counterparts. “Young consumers believe that caring about the environment is how you create a meaningful life,” said Milton Pedraza, the firm’s CEO.

Some luxury companies jumped on the green bandwagon earlier than others. In 2004, PPR rival LVMH’s Louis Vuitton brand conducted a “carbon inventory,” to gauge its impact on greenhouse-gas emissions. Afterward, it cut back on corporate travel and air shipment of goods.

In 2007, PPR created a social and environmental responsibility department that reports directly to Mr. Pinault. PPR now ties part of executives’ bonuses to achieving targets in seven areas — from reducing carbon emissions to promoting diversity, Mr. Pinault said.

Later in 2007, a study by WWF, the wildlife conservation group, singled out the luxury-goods business as out of touch with eco-conscious trends. WWF ranked the top 10 luxury brands on their environmental and social track records; the highest “grade” was a C+, given to L’Oreal SA, Hermès and LVMH.

Around the same time, LVMH’s Louis Vuitton leather-goods brand launched a “Core Values” ad campaign that has featured tennis player Andre Agassi, rocker Keith Richards and, most recently, astronaut Buzz Aldrin. The ads have emphasized the company’s support for the Climate Project, and the celebrities appearing in them have donated at least part of their modeling fees to the nonprofit group, which was founded by Al Gore.

Last month, upscale retailer Barneys New York began promoting a collection of $75 sneakers with uppers and linings made of organic material. The sneakers were designed by organic-clothing brand Loomstate in a partnership with Keds.

This fall, luxury menswear label Ermenegildo Zegna will begin selling an “Ecotech Solar” jacket under its Zegna Sport label, with solar panels on its sleeves that can be used to recharge a battery and heat up the jacket’s collar.

Whether the new tack will work remains to be seen. Increasingly, consumers and nonprofit groups are scrutinizing the validity of corporate environmental and social responsibility efforts.

For corporate alliances with nonprofit groups to succeed, companies need to disclose how much money they are donating or risk allegations of “greenwashing” — or paying lip service to environmental causes to promote their products, says Mike Lawrence, an executive vice president at Cone LLC, a Boston-based marketing agency. “Puffery, unfortunately, is legal in advertising,” he adds.

The global recession is adding challenges that defy simple solutions. Global sales of luxury goods are expected to fall 10% this year to €154 billion ($218 billion), the first decline in 15 years, according to Bain & Co. The industry isn’t expected to return to 2008 levels, €170 billion, until 2012, says Claudia D’Arpizio, a consultant at Bain’s Milan office. In response brands are slowing store expansion, lowering prices and trimming ad spending to cut costs.

Still, the economy may also accelerate the greening of luxury, industry executives say. A February survey by Cone found that 50% of Americans ages 18 to 24 said they have “higher expectations of companies to make and sell environmentally responsible products and services during the economic downturn,” compared with 35% of Americans overall.

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