Luxury Goods Market Prospects
- By Viktoria Klimova, Business Development
- Jul. 07 2009 00:00
The U.S. retail networks that specialize in selling luxury brands, such as Neiman Marcus and Saks, were the first to become affected by problems on the luxury goods market. In March 2008, they announced the initial reductions in their financial performance following several years of steady growth. There was a real panic at the end of the year — Christmas discounts in luxury goods stores reached as high as 70 percent. These kinds of discounts on luxury goods had been heretofore unknown to the market.
Senior luxury executives, business leaders and financiers from around the world got together in mid-June at the FT Business of Luxury Conference in Monte Carlo to discuss key trends and issues facing the luxury industry in light of the current economic environment. Top manufacturers of luxury goods such as Burberry, Jimmy Choo, Chopard and financial corporations such as MasterCard were among the forum’s speakers.
Conference participants agreed that the American economic crisis has become a global recession, which is threatening the luxury products segment. Jorn Lambert, Group Head of Core Products for Europe, MasterCard Worldwide, noted that the latest Spending Pulse report published by MasterCard Advisors saw sales in luxury products in America decreasing by 17.1% compared to May last year.
At the conference, new up-to-date statistical data on the premium segment was demonstrated. In one of the sessions, MasterCard showed research of affluent (liquid assets of more than 100,000 euro per year) and high net worth (liquid assets of more than1 million euros per year) consumer preferences in Great Britain and Russia. Only 8 percent of affluent consumers from both countries said they had not been affected by the economic downturn, while 56 percent of high net worth respondents answered that they are spending “the same or more” on luxury brands. Russian high-net worth individuals, however, are more reluctant to give up their luxury lifestyle or compromise on their preferred brands.
Data provided by the Russian Association of Fashion Industry Enterprises (APIM) show that well-to-do consumers are noted for expedient spending. According to APIM Director General Maria Sorchkova, after winter sell-outs luxury boutique stores received 25 percent to 30 percent less goods from new collections than they did a year before.
This trend, however, is unlikely to please manufacturers of premium clothing brands. Burt Tansky, president and CEO of Neiman Marcus, who posted a 25.1 percent reduction in sales for the 3rd quarter, noted that “breaking time psychology seems to be the most difficult thing in the current situation.”
“It will be difficult for sellers to make buyers pay 100 percent of the cost of luxury goods again, which were devalued in unprecedented proportions on Christmas Eve,” he said.