Luxury Sales Dive as Rich Feel Pinch
Conspicuous consumption drops as even those with funds scale back spending.
Feb. 8, 2009 -- In this economy, Americans are feeling the pinch -- and it may even be effecting the wealthy.
Flashy fashion at even flashier prices was once the rule of thumb for those looking to make a social splash. As Zero Mostel said in the 1968 film "The Producers": "If you've got it, flaunt it." Clearly, fewer people have "got it" now, judging by the number of high-end boutiques closing on New York City's posh Madison Avenue.
Lori Wachs is a retail analyst who says even the luxury stores are having a tough time right now. "All bets are off in this economy. Consumers are really for the first time realizing that it is time to save and they really have just stopped shopping at these high-end luxury companies," said Wachs.
A recent study by Bain and Company projects luxury sales will drop by up to 7 percent this year. Last month alone, sales at high-end stores like Saks Fifth Avenue and Neiman Marcus plunged more than 20 percent.
"There was a big democratization of luxury in the past five years where the inspirational wealthy did a lot of shopping in the luxury sector. They have really fallen on some tough times in these last few months and that is where we are seeing big decreases," said Wachs.
But believe it or not, in the highest of high-end, business is stable. "We are talking about the real, the pure luxury that in the pyramid is the top," said Paolo Torello-Vier, chief operating officer of the U.S. division of the high-end luxury store Brioni. The big money is at the top of the pyramid, and the extremely wealthy are still spending.
Brioni sells handmade men's suits with hefty price tags. Depending on the model, suits can fall in the $40,000 range. The $43,000 Vanquish 2 suit is made of the world's rarest fabrics, including vicuna from South America and quivik from the Muscox in Alaska. The pinstripes on the suit are made of white gold. The store has sold more than 50-of the high priced suits, but even for the mega rich, something has changed." Even if they have the possibility to afford whatever they look for, they don't want to be seen at the place," said Torello-Vier.
