The Premium Crunch
every half baked publication jumping on the 'it's the end of
the world' recession/depression bandwagon (having recently
alighted from the 'it's the end of the world' global warming
one), I have been reluctant to write about the current
economic malaise in my column. The world has steered its way
through worse crises before, and will inevitably steer its
way through worse crises in the future, and adding my own
voice to the growing noise on the subject has seemed to be a
largely pointless endeavour.
However, there is one topic that is of sufficient interest
for me to sidestep this rule - namely, the fate of premium
brands in these turbulent economic times.
During the last decade there has been an increasing trend
towards premium product fetishism - a notion in which the
consumer directly correlates value and pricing, on an ever
increasing scale. The value may be imagined, or so detached
from the material aspects of the product that it is not far
removed from being imagined, but this does not seem to
matter. What matters is that the product is perceived as a
premium one - perception is king.
This has brought us all sorts of tat dressed up as diamonds:
Volkswagens disguised as Bentleys, 'designer' jeans, and
perhaps worst of all, premium vodkas. The whole concept of a
spirit that is, by design, free of flavour, being promoted
as a luxury good neatly summarises the vacant idiocy and
accompanied the rising prosperity of the pre-credit crunch West.
This does not mean, of course, that all high end brands are
guilty of deception; it is only when the true value of an
item is a fraction of the perceived value that the premium
magic trick can be said to have taken place.
Determining true value might seem to be a somewhat abstract
concept, but, like value investing, it is a good way to
separate the winners from the pretenders; something that is
especially important during an economic downturn. Simply ask
the following questions of an item:
- Does it do something significantly better than cheaper
competitors, (if there are any)?
- Is it a classic, or is it inextricably linked to a
- Does it display real craftsmanship?
To take a real life example, a bottle of Dom Perignon may
seem like the sort of extravagantly overpriced item that
should meet the same end as fashion house
sunglasses, but, further investigation shows that this is
far from the truth. In fact it gives the correct answers to
all of the above questions: better than cheaper champagnes -
yes; a classic - most definitely; craftsmanship - grapes
from only Grand Cru vineyards, so another yes.
Conversely, items such as the higher end pręt a porter
Italian designer suit fares less well: better than cheaper
suits - probably not, when a bespoke or tailor-made suit
from a good provincial tailor can usually be had for
significantly less; a classic - rarely, as these items often
slavishly adhere to the current week's trend; real
craftsmanship - sometimes, although the quality varies from
brand to brand. Result - forget it.
So, whilst the credit crunch may have a negative effect on
certain aspects of our lives, I do hope that it will
encourage the public to be more discerning about which
premium products they purchase. Only then may we see an end
to the sort of ridiculous behaviour that has given us Diva
Premium Vodka and Porsche Cayennes.