Declarations that ''luxury is dead'' were premature, as high-priced, must-have items sell out before they're even available.
Take a stroll down Madison Avenue past glittering store windows where $5,000 ostrich handbags and $150,000 drop diamond earrings are on display. If you're like me, you may find yourself wondering if people--men, women, anyone--are really buying this stuff. Apparently they are.
While most consumers aren't returning to their pre-recession shopping patterns, there has been a rebound in luxury spending lately. Ultra affluent shoppers, who were never really affected by the downturn to begin with, have started to come out of hiding. Other well-heeled shoppers have started to gain confidence because of their rebounding stock portfolios and the return of the fat bonus check.
According to a MasterCard Advisors' SpendingPulse, a monthly report that tracks consumer spending, the luxury category saw a 15% increase in sales in February over the same period in 2009. This built on the momentum from January when there was an 8% increase on luxury spending over January 2009. Buyers are coming back, albeit with the battle scars of the recession and perhaps, a little more subdued than before: Today's luxury shopper is discreet, expects her purchases to be unique and is only splurging on particularly special items. And the price tags? Think big. Think really big!
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Take luxury sunglass chain Ilori, which is owned by Luxottica Group. Last month a woman on vacation from San Diego walked into Ilori's Las Vegas CityCenter store and plunked down $25,000 on a pair of Sama diamond-encrusted gold sunglasses. Just two weeks later a similar diamond-encrusted pair at the same price was sold in the same store.
Michael Hansen, Ilori's vice president and general manager credits the rebound in sales to maintaining what he refers to as the retailer's "hour glass positioning." Hansen says, "We have an entry price point that allows the aspirational consumer to have something to buy, yet we've still maintained a more extreme price point for the true luxury consumer." Only 1% of Ilori's sales last year were over $900. This year to date that percentage has jumped to 9% according to Hansen.
Clothing designer Carolina Herrera is starting to see the rebound in her namesake label as well at the high end. One of her resort 2010 beaded grey gowns flew out of stores. Its price: a staggering $7,990. Herrera says, "The women who used to buy three dresses in a day, they don't buy that anymore. But they do buy the one that they really want." Herrera along with expanding her lower-priced CH label, continues to aim for high-end shoppers. Her fall 2010 collection, which she showed last month in New York, was chock full of sable fur, coats with crocodile detailing and embroidered tulle evening gowns (all of which will likely have price tags that live up to their luxe appeal).
Certainly, this slight rebound in luxury spending doesn't mean the tough times are over. Luxury powerhouse Yohji Yamamoto filed for bankruptcy last year; meanwhile, Christian Lacroix has closed the door on its stores, ready-to-wear and couture and is just rolling out licensed products. Retailers are still struggling with the consumer mantra of 'I will never pay full price.' And for the most part designers and retailers are still playing defense against their large losses from the past few years.
Nevertheless, Andrea Hansen, CEO of Ivanka Trump Fine Jewelry sees this as a great time for brands with a strong point of view to stand out. "There was a time in the past six or seven years when there was so much to choose from and so much money was going around that [a designer] could be average, and in some cases very mediocre, and [it was] probably still selling because people were just throwing money around," says Hansen. "Whether it was you as a brand, or you as a retailer or you as a department store you really didn't have to be that good. Now you do," she says.
Hansen credits social media with keeping her in touch with the desires of her customers and giving entry to aspirational consumers who aren't quite ready to spend on pricey jewelry today--but might be tomorrow. Hansen has also tapped into the women self-purchaser market. Ninety percent of her customers are women buying for themselves, she says. That's not surprising given that women now hold more than 50% of all jobs in the U.S. and, with more of their own income to spend, can choose what they want to buy.
It has become more important than ever for luxury brands to stay in touch with the consumer whose tastes have changed. Bling and garish logos, for example, are out these days. Quiet luxury is in.
Lana Marks, known for making pricy alligator handbags that can easily run up to $30,000 says her handbags have continued to sell well during the downturn at Harvey Nichols in London and Dubai and at her brand's outposts in New York and Palm Beach because of their 'no-logo' appeal.
"[It is] the most exclusive collection of handbags in the world, in the most fabulous exotic leathers that exist such as alligator, crocodile and ostrich, made by the most accomplished Italian artisans," says Marks. "My customers know these things, but aren't looking to show off."
This season Roger Vivier launched a new ladylike handbag called the Miss Viv' inspired by Carla Bruni-Sarkozy (a fitting muse for the new quiet luxury movement). The crocodile version runs $13,000. It's one of the new 'it' bags of the season. And Hermès and Tod's have found success offering custom luggage and shoes in exotic leathers that will be completely unique for purchasers.
Even the days of must-have seasonal items selling out before they even hit the sales floor might be returning. Interested in Prada's Lucite jewel-encrusted sandals from the spring 2010 runway, priced at nearly $1,800? Too late, they're sold out.
(Leah Bourne, Forbes.com)