Holiday Shopping Forecast. Luxury Brands to Woo the Sure Thing This Holiday Season. Second City Style Fashion Blog

November 9, 2007 • Shopping


In a nutshell, the super rich are going to spend up a storm this holiday season and the moderatley rich are going to cut back. In an article in today’s Wall Street Journal it’s the "affordable luxury’ market or the lower end that will not fair as well. Only the most elite brands and the retailers catering to the
richest customers are likely to escape unscathed.

Yesterday Nordstrom Inc. reported a rare 2.4% drop in October same-store sales, steeper
than the 1% decline many analysts had expected. On Wednesday, Polo Ralph Lauren Corp. lowered its profit forecast, citing a "more conservative view of
discretionary spending among U.S. consumers."

Wall Street is concerned. Nordstrom’s share price has
fallen more than 35% in the past three months, while Coach is down
nearly 30%; Saks Inc. is down about 4% and Polo is down around 19%.

For some luxury brands, their strategy for the past few years involved going slightly
more down-market, tempting mid-income consumers with relatively
affordable entry-level luxury products like Chanel sunglasses, Coach
wrist purses or silver jewelry at Tiffany & Co. — while still
selling "extreme" luxury products such as designer watches and handbags
costing thousands of dollars.


Since the new less-affluent customers are now
proving vulnerable to a variety of economic factors that don’t appear
to faze the very rich…many of these luxury brands are saying "to hell with them" and may soon retreat from the
affordable-luxury strategy. They will put their efforts in pushing their more elite or
customized products as a way to reach the wealthier consumers, predicts
Pat Conroy, a managing principal of the consumer business at Deloitte
& Touche USA.

Some top-tier brands already appear to be trying
harder than usual to turn their backs and distance themselves from the masses. Robb Report,
a magazine for the super rich, is joining with Rolls-Royce, Audemars
Piguet, Louis XIII de Rémy Martin and Wynn Las Vegas, among others, to
market a series of ultra-custom products and experiences — among them,
a $1.5 million Wynn Las Vegas vacation package that includes a round of
golf with course designer Tom Fazio, $150,000 in jewelry and a Ferrari
599 GTB Fiorano.

Audemarspiguet_2 Audemars

"The top end of the market has a ton of vitality,"
says Frann Vettor-Gray, senior vice president, multimedia at Robb
Report publisher CurtCo Media Labs LLC in California.

a poll of 1,000 luxury consumers, only those in the least affluent
group — with household incomes averaging $75,000 to $149,000 — said
they cut back spending in the third quarter.

Consultant Bain & Company divides the global
luxury market into three layers, each with its own dynamics. At the top
tier, brands such as Hermès, Loro Piana, Van Cleef & Arpels and
Harry Winston, targeted to the super-wealthy, account for nearly a
quarter of luxury spending. The next tier, representing 36% of
spending, is the aspirational market, which blossomed during the late
’80s and early ’90s as brands like Gucci and Louis Vuitton expanded
around the globe and introduced smaller, more affordable leather goods
that became status symbols. Bain defines the remaining 40% as
"accessible" luxury — brands such as Coach, Burberry, Hugo Boss and
Tiffany, which specialize in luxury accessories for the affluent

Alison Santighian says she and her husband, managers
for a federal contractor in Washington, are contemplating reducing
spending after several years of buying gifts at Saks and Nordstrom. "We
might take the money we would normally spend on each other, and put it
in savings," she says.

Source: WSJ

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