One strategy retailers are trying, Consolo says: Rolling out lower-price luxury lines that will appeal to the slightly less affluent, thereby increasing their potential market. High-end designer Roberto Cavalli, for example, has launched a line called Roberto Cavalli at H&M, the hip yet far less luxe outlet than, say, Cavalli's line for Saks, where dresses range from $2,195 for a silk halter gown to $575 for a diamond-chain-print tee.
Yet, some luxury items hold up well no matter the economic climate, Consolo says: "Anything that makes them feel good or look good." A client who will no longer buy a $3,000 bag, for example, might splurge instead on a $30 lipstick.
Luxury-home builders have been hit even harder than luxe retailers. A survey by the National Association of Home Builders found that sales of homes in the $250,000 to $1 million price range declined 80% last year from 2007. Sales of homes priced more than $1 million fell 70%, says Gopal Ahluwalia, vice president of research for NAHB.
High discounts and low sales have meant financial woes for companies — and that means layoffs.
Neiman Marcus, citing a tough sales climate, said this month that it would cut 375 jobs, or 3% of its workforce. Macy's said it would close 11 stores. Gadget purveyor Sharper Image filed for Chapter 11 bankruptcy in 2008. And in Florida, two affiliates of Ginn Cos. filed for bankruptcy as two of its high-end housing developments ran into trouble.
Unemployment in luxury retail and the construction industries is soaring. The unemployment rate in the construction industry is 15.3%, vs. 9.4% in December 2007. For those in the restaurant business, unemployment has shot to 9.8% from 7.8% a year earlier.
Even casinos are feeling the pain. At the Silver Club Hotel & Casino in Sparks, Nev., 200 workers were laid off in December when banks refused to fund a buyer. The Stations Casinos in Las Vegas said in December that, as a cost-cutting measure, it would stop matching worker 401(k) contributions.
"Layoffs have been significant, and they will be even more significant in the weeks and months ahead," says Bruce Raynor, general president of Unite Here, the union that represents hotel and restaurant workers. "Las Vegas has been hit particularly hard."
Hotel workers in Hawaii and Puerto Rico have been hurt because those areas cater mainly to tourists rather than business travelers, Raynor says.
Then there's the yachting industry. The market for 450-foot ships called gigayachts is relatively unchanged, says Kristen Cavallini-Soothill, director of the American Yacht Institute, a Fort Lauderdale school for stewards and stewardesses. But sales of yachts in the 60- to 110-foot range are suffering, she says. "Even the Russians are slowing down."
Those who are hiring interior crews for yachts are being more discriminating, and those who get jobs are trimming their salary demands, Cavallini-Soothill says. Crewmembers don't demand $4,000 a month anymore.
"They're going to get paid $2,500 a month," she says, adding that crewmembers do get free board and meals prepared by a chef.