Brand wars pose lifestyle choices

The view this week may be somewhat distorted, owing to the fact that a visit to my optician resulted in eye drops, which dilated the pupil in my right eye. The outcome has left me wandering around with a distinct lack of perspective and observing the world around me with a somewhat jaundiced air through two-dimensional sight.

The news that Marconi posted an operating loss of £222 million (€282 million) for the first half of the year is pretty dreadful no matter what way you look at it - even from the company's perspective, which was to point out there was a £5 million profit in the second quarter. Unfortunately most of this came from non-core business, because core business showed a 33 per cent fall.

The company also admitted it had overpaid for its recent acquisitions by about £3.5 billion. Presumably at the time the board was hailing the value of the purchases; now it just seems profligate. Oh, how a few months can change our view!

US retail sales, not surprisingly in the doldrums for the month of September, surged in October, up by 7.1 per cent. Great news and especially surprising for people like me who thought that consumers might be unwilling to go shopping just yet, although most of the sales were of cars. These were generally financed by zero-interest deals which, I suppose, is as good a way of shifting stock from the forecourt as anything else. If you exclude car sales from the equation, sales were up 1 per cent.

Some commentators have suggested that lives are returning to normal in the US, although they expect people to travel less and shop near home more. Presumably this means that the longest trip taken in those gleaming new autos will be as far as the parking lot in the nearest mall.

Travel, at least international travel, is still in difficulty. My own experience in going to Britain last week was actually one of the best I've had in years. I arrived earlier than usual at the airport, expecting massive delays as passengers were body searched for any stray pair of tweezers we might have left around our persons. But there weren't any queues and the whole thing was a breeze. The outward-bound flight was on time, and we didn't spend hours hovering over Heathrow before landing. I know the airlines probably don't think of this as a bonus but I certainly did.

Airport retailers have noticed (not unexpectedly) a downturn in business but many of them have said that it has started to pick up again. This is probably because everyone has been forced into checking in so much earlier that they've nothing better to do than to waste some money in Tie Rack.

In London itself they said that business was down but improving and that things were beginning to get busier in anticipation of Christmas. Certainly Oxford Street was as busy as ever and I saw quite a number of harassed looking adults walking around with Harry Potter merchandise stuck under their arms.

The most interesting retail phenomenon of the near future will be whether or not we'll start to see cut-price designer brands in supermarkets. The battle fought out in the courts raises the prospect of cheap Calvins alongside the ciabatta (the ciabatta, of course, once the preserve of specialist bakeries). The supermarket chains talk with zealous fervour about bringing realistically priced goods to their customers, while the branded companies complain that supermarkets don't have the right ambience to sell Armani, Nike or Ralph Lauren.

First round in the battle went to the brands this week, as Levi's won a European Court of Justice ruling against Tesco, which stated that the supermarket chain could not buy cut-price Levi's jeans in the US for sale in British stores. It appears that Tesco will comply with the letter of the ruling and remove all US-sourced Levi's from its stores but will press ahead with its plans to offer discounted goods by sourcing them in the EU.

The debate is an interesting one because it gives us such an insight into ourselves. The brand managers are saying that we are prepared to pay lots more money to buy designer brands in luxurious surroundings. They admit that they charge well over the odds to ensure that this is the case. They don't want their perfume or their T-shirts or their jeans robbed of the mystique that makes you shell out $200 instead of $20.

I listened with interest as a reporter in Britain interviewed someone from Tesco and asked what right the chain had to undermine a brand on which so much money and advertising had been lavished to make it "exclusive". Nobody was suggesting that the goods were expensive because the quality was far superior to anything else on the market or because they were made by skilled craftspeople who were extremely well paid for their talents. No, the goods were expensive because marketing the brand as a lifestyle choice was expensive and that was what people were prepared to pay over the odds for.

I know marketing is all about making you feel that you could be a different person - more successful, sexier, thinner, whatever - if only you had a certain item, but it's horrifying to think that so much money is spent in the process of simply deluding people.

Naomi Klein's best-selling book, No Logo, deals with the whole concept of global branding. Of course Naomi isn't just talking about the high-end of the market; she looks at the impact of names like Coca Cola and McDonald's too. And the bottom line is that the advertising spend of those brands has increased dramatically since the early 1990s. For example, in 1990 Disney spent around $450 million on advertising. In 1995 it was $1.3 billion.

Profits in the big brand companies are being ploughed back into more and more advertising to continue to build the brand, as though the name itself has a value. Which, of course, it does.

But it should only be in what that name can deliver. A Nike shoe being sold for $100 won't make you any better a basketball player than a shoe made at the same Asian factory retailing at $10. But will it make you feel better about yourself?

The 1990s were great for brands and advertisers alike. They were good for consumers because there were so many things to consume. They were good for company acquisitions because everyone wanted to grow. But will our priorities change in the future? Do we want something different from our lifestyle products? And, from a changed perspective, will we be prepared to spend so much on so little all over again?