As the owner of a small business, I am very concerned about how the Coronavirus COVID19 pandemic will impact, among many things, small businesses. But as the owner of a “luxury brand”, I’m rightfully concerned about my own company, Saddleback Leather. We sell expensive $400 to $900 leather briefcases, laptop backpacks and overnight duffle bags that most people can’t afford. And there are boatloads of cheaper options out there for people to choose from. Forbes estimates that the luxury market is going to take, at least, a $40 billion dollar bath because of the Coronavirus and I agree. But it will affect some luxury brands far more than others. Some will die while others will actually thrive. Let me explain.
As we sit here self quarantined at home after our recent trip to Europe and since we don’t have a TV, I’ve been reading Louis L’Amour old west novels to my son at night. Now and then, the hero will run low on bullets with the bad guys slowly closing in, sneaking from bush to boulder. The wise seasoned gunfighter doesn’t just stop shooting though. No! He just becomes more calculated because he knows that every shot must count. The young foolish cowpoke, on the other hand, just sticks his pistol over the top of the rock he’s hiding behind and starts pulling the trigger.
It’s the same with wise and foolish buyers during the Coronavirus COVID19 pandemic we’re living through now. The wise ones won’t stop buying things when they’re running low on dollars. No! They’ll just make every dollar count. They’ll buy less, but what they buy will be easily justifiable because it will last. The young foolish ones will buy pretty shiny things that are cheap but they’ll run out of bullets when they need them most.
Sure, if I were selling fur coats or strands of pearls, I would be sweating bullets right now too. During this time of financial uncertainty, because of the Coronavirus, people will stop buying opulent status symbols and start buying long lasting quality goods, which are apparently considered luxury items.
Of course, this Coronavirus COVID19 pandemic is unprecedented and nobody knows what’s going to happen. We could go out of business along with thousands of other businesses or maybe I’ll have to start selling bags out of the back of my old Land Cruiser with my dog, like back in the old days. But here’s why that’s not going to happen.
Because of the financial crisis of 2008, which was the worst economic disaster since the Stock Market Crash of 1929, our global economy fell into recession. But strangely, Saddleback Leather had the most explosive growth in our history from 2008 through 2012 and so far during this Coronavirus crisis, our sales are just fine. I have since spoken to several of the other quality brands we now manufacture for and they have the same story. And here’s why we think it happened.
You know how when a lot of people get depressed they eat “comfort foods”, or when they get stressed they smoke cigarettes? Or after a bad breakup, they start rebound dating someone wilder than the West Texas wind? It just doesn’t make sense. It’s not logical behavior. But sometimes we do things that make us feel better. And I think comfort buying will fit in with these during the age of this Coronavirus pandemic.
But here’s the difference. The businesses that will benefit the most from any economic downturn are the ones who sell quality products that are a solid value. Because those purchases are easily rationalized. Buy the best, cry once. Buy nice or buy twice and you’ll save money in the long run. I believe Forbes’ prediction will be generally accurate about the downturn in the luxury market. People will put a hold on buying opulent status symbols, but they’ll never stop buying quality.
My dad used to tell me, “You know Son, there are two kinds of businesses that will never go out of business. Graveyards and Grocery Stores”. But I believe there is a third one; businesses that sell high quality goods at a fair price.