11:07 a.m.
Live by the sword, die by the sword:
Souring economy causes luxury items to lose luster
“While few analysts see the ultra-rich trimming their spending dramatically, there is concern that middle-class shoppers, who helped create the boom in high-end brands from Gucci to Burberry, might be cutting back as skyrocketing gas prices and the declining housing market continue to eat away at consumers’ discretionary spending.”
Over the years, I’ve read countless op-eds bemoaning the “democratization” of luxury brands (i.e. watering down the quality to gain quantity sales from the expanding middle market buyers), but the luxury corporations made a determined push for the mass market, ringing up massive profits in the process.
In 2004, Luxury retail sales were up over 9.6% while the overall retail market registered just under 4% in growth, but middle class shoppers are fair-weather friends: when times are good, their wallets are open; when the economy slows, all that new merchandise collects dust on the store shelves and corporate profits evaporate.
“This season’s sluggish consumer spending means retailers in Southern California are going to unheard-of lengths to make the hassle worth our while. Suddenly, super-deep storewide sales — 50% to 70% off — have become as common as Pinkberry outposts, encompassing every tier of retail, from Old Navy to Gucci.”
There’s the argument that luxury retailers have a client base that is less dependent upon the vagaries of a shifting economy, but the rapid and dramatic expansion of the Luxury Retail presence worldwide might just turn out to be its own Achilles Heel — now that the once independent, family-owned luxury manufacturers have mostly been snapped up by huge corporations such as LVMH and PPR, has luxury retail lost its immunity to economic downturns?
