How does a luxury brand cope when luxury is seen as a stigma?

As the reality of the economy sinks even deeper into consumer consciousness, the concept of luxury has gone from a badge of honor to a private indulgence. While there are some who continue to purchase designer bags and shoes with four-digit price tags, many consumers have said it somehow feels wrong to shop—even if their wallets haven't thinned out.

The turning of the tide—no matter how long it lasts—is creating concern among industry executives. Last month, a group of senior executives from luxury brands that included Graff, Loro Piana, Ferrari, and NetJets gathered privately to discuss how to continue to promote their respective brands and break the current perception that luxury is a dirty word in times like these.

Part of the problem, according to Karl Lagerfeld, is that the meaning of luxury had become distorted.

"The word [luxury]…was used for things it was never related to," the designer said. "It became nearly obscene. Now it has to change…and go back to what it used to be about—discretion and elegance, and not bling-bling. The hint of vulgarity has to go. The luxury business will never die. Luxury is about quality, refinement, innovation, and not about price."

Lagerfeld also abhors stinginess, which he calls a terrible vice that often emerges in times of crisis among well-heeled people. "The money has to go out the window to come back through the door," he said.

Frédéric De Narp, president and chief executive officer of Cartier in North America, said there has been a crossover and confusion between trendy fashion and true luxury in the past several years among consumers and brands.

"Fashion is of-the-moment and timeless," he said, noting that communicating Cartier's quality and heritage is of utmost importance. "True luxury should be timeless. Cartier has never compromised on that. When you're talking about translating your important sentiments into objects, quality will always sell."

Paco Underhill, managing director of consultant Envirosell and author of Why We Buy: The Science of Shopping, said consumers can be divided into three groups: the downwardly mobile, those who are or know someone at fiscal risk, and those who remain wealthy but feel fashion or luxury consumption is bad manners right now.

"There's a fundamental issue here in which so many Americans have no grasp on their personal finances," said Underhill. "That whole affordable luxury category was based on people spending money where they shouldn't have. One of the fundamental issues we have in our culture is who can afford what."

Judith Ripka believes the current mind-set will have a longer, residual effect than the actual recession.

"The day will come when consumers will not worry as much about how they spend their every dollar, but they will always remember these economic challenges when contemplating a purchase," said Ripka. "Luxury will continue to be desirable, but timeless and classic pieces will undoubtedly be the focus because of their lasting value."

Roger Vivier, the upscale French footwear and accessories brand owned by Tod’s SpA, continues to produce its high-priced, ultraluxe collections designed by creative director Bruno Frisoni. While custom-made footwear comprises only a portion of Vivier's sales, shoes in the line often have five-digit price tags.

"Today, people are more careful with their buys and investments," said Vivier general manager Sabine Brunner. "So you really need to stick to your values and deliver what you promised you would and what customers expect from you."

Several luxury brands and retailers have said people are still shopping, though even the highest spenders are exerting caution.

"If a person is buying a Dolce & Gabbana dress or a Roberto Cavalli bag, they’re looking at the price tag,” said Tony Salame, CEO of Aïshti, the designer retailer that has two 50,000-square-foot Aïshti stores in Damascus and Beirut, as well as franchises of Cartier, Gucci, and Marc Jacobs in the Middle East.

"Some of our suppliers went crazy on the pricing [in previous seasons]," Salame said. "The same exact bags would be 10 and 15 percent higher every season."

Nonetheless, Aïshti is still showing increases and has the same buying budget as last year. The firm is opening 10 stores in Beirut this year.

Salame said his stores aren't so much affected by the economic quake that has riddled U.S., Russian, and European luxury houses, but there are some aftershocks.

"People here want more and more sales, even though they can afford [full price]," he said. "They hear things are 80 percent off in the U.S. and they want a bargain because of the recession."

But consumers now view value in more than simply price—and that is one reason Donna Karan is trying to bring deeper meaning to her brand.

"I took a very hard look on how I was going to address luxury," Karan said. "Once somebody wears luxury, they might buy less, but it's really hard [to turn away from it]. It has a longevity. It's not something disposable, of the moment. I think it's about a conscious luxury, not the frivolousness of it. For me, it is about the commerce and philanthropy, but it's not philanthropy in a sense that I am buying this and giving money to that. It's being about becoming a conscious consumer—that it's not just at the whim of I want and I need, and that everything you are doing has a reason and purpose."