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‘The world is a strange place right now. It’s off its axis.’ With this simple statement, a salesman on the floor of New York’s Bergdorf Goodman succinctly yet accurately summed up the turmoil that is wrecking havoc across the luxury fashion world. Marc Jacobs cancelled his infamous annual holiday party this year, whilst retail giants across Manhattan, from Saks to Barneys, have been frantically slashing prices on everything from Valentino evening gowns to Loro Piana cashmere sweaters in an attempt to revive sales.

But it’s not just in the United States that luxury goods have started feeling the pinch of the dreaded r-word. Over in China, at a recent luxury fair in Shanghai, a diamond necklace worth over $1 million was left unsold–in previous years, something of this value would have sashayed out of the room in the flutter of an eyelash. Over in Hong Kong, luxury retailer Lane Crawford fired over 10% of its employees, whilst in Singapore, second-hand watch shops are being flooded with Rolexs and Patek Philippes as falling high-fliers are selling their luxury timepieces in an attempt to cope with the country’s recession.

Of course, there are pockets of exception to this bleak picture–Brazil, for example, is experiencing a luxury boom, with brands such as Gucci and Tod’s reporting earnings for the first half of 2008 that have exceeded market expectations. Nevertheless, what remains certain is that the word ‘luxury’ is being shaken and turned inside out. And whilst this is causing many in the luxury industry to shudder in fear, this revolution is to be embraced with positivity.

The current recession has in fact only served to highlight the subtle changes that were already taking place in the past year within the luxury world. Imperceptible, gradual shifts in consumers’ perceptions were occurring that signaled a change in preferences, as cravings for ostentatiousness began to give way to desire for simplicity. Earlier this year, De Beers reported a 3% decline in diamond sales whilst in the last 12 months, the yacht and boat industry has been suffering a sharp decrease in sales.

The luxury fashion world has certainly not been spared. Its foundations were rocked by shocking revelations earlier this year made by an Italian documentary aired by Report, which enjoyed a record number of viewers across the country. The programme revealed how Prada and Dolce & Gabbana bags were being stitched by clandestine Chinese workers in workshops in central Prato and southern Naples–costing a mere €20 to produce, they were being sold for over €400 in the boutiques lining Milan’s infamous Via Montenapoleone.

When asked in a recent poll whether this marked the loss of the true meaning of luxury, 54% of the over 1,550 Chictoday.com readers who participated answered positively.

So what does this mean for luxury? Will we be condemned to a frugal life of plain clothes, no diamonds and rowing boats? Not quite. As Bain and Company noted in a recent report, ‘absolute’ luxury brands will remain protected, whilst ‘accessible’ brands will be directly affected by the current economic climate. In other words, those brands that focus on quality (read fine craftsmanship, limited production and refined materials) will weather the storm. In essence, it appears that consumers are no longer blindly accepting the assumption that high price equals high quality. Rather, consumers are starting to become evermore aware and are starting to ask questions. Luxury brands can longer hide behind a name and exorbitant price tags. If there is anything positive about this global recession, it is that luxury is finally returning to its original roots. And for that, we can’t help but rejoice.