Fashion and Luxury Goods Trademark Activity Bounces Back After Recessions
Before the outbreak of Covid-19, fashion and luxury sales had enjoyed a decade of growth. The value of the global personal luxury goods market over the last decade rose by 91%. It soared from some $147 billion in 2009 to more than $281 billion in 2019. But both sectors are now braced for a hard landing in 2020 due to these unprecedented times. In spite of a strong online presence, innovation and consumer brand loyalty, the fashion industry is still expected to contract by a third this year. And the global luxury goods sector, including jewellery, watches, and beauty products, is also set to shrink by 35 to 39 percent in 2020.
This seems to be a sign of recessionary times. Over the last decade, when analyzing USPTO data for our new trademark report “Trademarks in Times of Recession”, we saw overall trademark application volumes in Classes 14 (jewelry), 18 (leather goods) and 25 (clothing) decline during the last two economic recessions of 2001 and 2008/2009 - with Class 25 being listed in the top ten most adversely affected classes during 2001 and 2009. All three classes were quick to bounce back after these two recessionary periods ended however!
Real time virus impact on fashion and luxury goods
Any recession brings consumer caution and a drop in discretionary spend. The challenges now facing all non-essential goods and services, which includes the fashion and luxury goods sector, are greater than those of the 2008 recession. Sarah Willersdorf, head of luxury at the Boston Consulting Group told the Financial Times that as well as a drop in demand:
“…. you have this added uncertainty in the market about the crisis, prolonged store closures which you didn’t have in ‘08, and disruptions to manufacturing.”
In China, where the virus was first recorded, sales are already recovering rapidly, after hitting rock bottom (down 75 to 85 percent) in February 2020 at the peak of the crisis. Since lockdown was lifted in China and high street stores have reopened, it is widely reported that consumers are splurging on well-known luxury brands and the market for high-end goods is rebounding. Now, according to the Financial Times, “Revenues are expected to be down by only 5 to 10 percent compared with 2019”. It is reported that Gucci parent company Kering is already “observing encouraging signs in mainland China”, with declines in store traffic and sales “narrowing”. The French conglomerate is expecting a like-for-like sales fall of 15 per cent in the first quarter compared with last year.
Due to the size and strength of the US economy, a recovery is expected to balance out any fall in earnings by the fashion and luxury goods market this Spring, resulting in a net drop of around 10 percent by year’s end.
Rebelling against fast fashion
Like many industries, fashion, especially fast fashion (inexpensive designs that move quickly from the catwalk to stores to meet new trends) had come under intense scrutiny before Covid-19 due to its links to environmental damage. Many consumers were already moving to more sustainable brands, prefering to invest their income in a heritage brand that produces longer-lasting and higher quality items. Although they might cost more they are typically manufactured using sustainable and natural components. Additionally many luxury items also hold their value and can even bring investment gains to the consumer, like the iconic Hermès Birkin handbag or Chanel sunglasses.
The effect of recessions on fashion and luxury goods trademarks
When looking at solely at Nice Classes 14 (jewelry), 18 (leather goods) and 25 (clothing) using data extracted from our platform with our preliminary trademark search tool, ExaMatch, we saw the following drop in volumes of trademark applications in the USPTO for this sector during the dotcom bubble recession of 2001 and the financial crisis recession of 2008/2009.
During the 2008/2009 recession, Burt Tansky, Neiman Marcus’s president at the time, stated confidently, “Remember, when our customer tightens their belt, it’s generally ostrich or alligator". However, luxury goods did suffer during both recent economic recessions of 2001 and 2008/2009. Then, as in now, department store sales took a tumble.
We can see however, by analyzing data using our new business intelligence tool, Portfolio Analyzer, that heritage brands like Cartier, Van Cleef & Arpels and Chloé (owned by company Cie Financiere Richemont SA) and privately held brands like Hermès International (owned by the Dumas family) and Chanel (owned by Alain Wertheimer and Gérard Wertheimer), retained and even improved upon their brand management during challenging times. These savvy brand owners also moved towards a more defensive position and employed stronger brand protection measures during the dot.com bubble recession of 2001.
Our Portfolio Analyzer tool extracts and analyzes trademark activity data from 180 territories worldwide and oppositions data from the trademark offices of three main territories, the USPTO, EUIPO and the UKIPO.
Cie Financiere Richemont SA
In 1999 Cie Financiere Richemont SA had 430 live marks and had filed 15 oppositions - up from just 4 oppositions in 1998. During 2000 the company ramped up the volume of live marks to 730 - and filed a further 12 oppositions. 2001 saw the company hold 610 live marks, with the number of oppositions filed at 6.
In 1999 Hermès International owned 100 live marks. By 2001 the volume had increased by some 69% to 170. In 1996 the company filed no oppositions - by 1999 and 2000 the number had increased to 5 in both years - with a further 2 oppositions filed in 2001.
Chanel SA owned 80 live marks in 1999 and by 2001 the volume had grown by 300% to a whopping 330. In 1999 the company filed 6 oppositions. By the end of 2000 the number had nearly doubled to 11 oppositions, with a further 9 oppositions filed in 2001.
The promising sign is how fast fashion and luxury sectors recovered, mostly due to a considerable increase in demand from China in following years. By 2013, Asia-Pacific had overtaken Europe as the largest market for luxury goods.
Sarah Willersdorf, this time speaking to Vogue, stated:
“Recessions damage consumer confidence, can damage retailers and suffocate brands who often struggle to make payroll and cover working capital. However, it is important to realise that there can also be substantial opportunities. Brands and retailers that survive a recession may emerge with a more engaged and loyal set of customers, fewer competitors, and additional assets and opportunities.”
One area ripe for growth is sustainable fashion, especially in America. The global eco fiber market size was estimated at USD37.24 billion in 2018, and is expected to grow 9.2 percent between 2019 and 2025. Not only is there a demand from consumers, regulations also favor manufacturing bio-based products whilst increasingly penalizing synthetic polymers.
The luxury goods market and consumer behaviour is also likely to change following the biggest challenge mankind has faced since the Second World War. Many players in the fashion industry have now increased their online presence through utilizing digital marketing and social media channels everyday to communicate safely with their customers, while encouraging and retaining brand loyalty. And, the luxury goods and fashion industry with its emphasis on bespoke, craft work will continue to rail against mass production. The industry may also continue to be innovative and move towards more licence agreements with technology firms to implement new digital features to their products.
It will be interesting to note whether this global pandemic will spark the creation of any brand new products in the fashion and luxury goods industry. The product search feature in our preliminary trademark search ExaMatch tool will help us to keep a close eye on any product developments and we will be sure to report on any new trends here!
E-commerce will be a big winner, with more people becoming used to purchasing many more goods and services from the comfort of their home. The luxury goods and fashion industries had already begun to pivot away from just offering an in-store experience and to cash in on e-commerce trends and this shift will likely continue as consumers look online to speed, convenience and health and safety when shopping for all of their needs.
And that is a winning outcome for everyone.
Who were the winners (and losers) during the last recessions?
Take a look back at the world’s biggest economy and its trademark (USPTO) activity during the last two economic recessions of 2001 and 2008-2009.
Travel back 20 years in trademark time with us (from January 1st, 2000 until December 31st, 2019) and get answers to the following four questions (and much more!):
- Which Nice Classes were affected the least and the most?
- Which kind of companies were affected the least and most?
- Who the top filers were during both recessions?
- How did the recessions influence both opposition and success rates?
Get your copy of our new report “Trademarks in Times of Recession” today and find out what tomorrow may bring for trademark activity in the USPTO.