Fri, February 13, 2009
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Luxury out of style?

2009-02-13 02:46:07 GMT2009-02-13 10:46:07 (Beijing Time)  Reuters

INTRO: Luxury retailers are finding themselves out of vogue in the recession.

MOREINFO: Half of all consumers who make more than $200,000 a year think luxury brands are becoming commodities. That mentality is wreaking havoc with luxury retailers who find themselves struggling to cope with the recession. Bobbi Rebell reports.

SCRIPT:

Across the luxury retail world ..prices are falling, and nerves are tense.

Consumers with deep pockets once drawn to fancy storefronts and designer labels, are now resetting those values.

Milton Pedraza is CEO of the independent research firm the Luxury Institute:

SOUNDBITE: Milton Pedraza, CEO, The Luxury Institute, saying (English):

" Many wealthy consumers told us that at this time they are rethinking their priorities. They are not spending as much on luxury they don't see luxury as the necessity that it once was. they are really focusing on true needs"

With investments shrinking, they are becoming more budget conscious, and feel that flaunting wealth these days is insensitive.

Pedraza says dramatic sales at stores like Saks Fifth Avenue- which slashed some prices 70 percent over the holidays- have contributed to the devaluing of luxury :

SOUNDBITE: Milton Pedraza, CEO, The Luxury Institute, saying (English):

"It changes the perception dramatically and what wealthy people are saying is "you fooled me" I used to pay $2000 for that item. now you have it on sale for $500. clearly you were overpricing before and you are not delivering luxury."

Retailers are going into survival mode - hoping to win back disillusioned consumers, but analysts say many may not be coming back:

Retail Consultant Howard Davidowitz:

SOUNDBITE: Howard Davidowitz, CEO, Davidowitz and Associates, saying (English)

" I think there is a permanent change for the American consumer and the reason is living standards will never be the same so that this is not a temporary change."

Which means those pricey luxury brands - already under pressure - will now be competing for a shrinking pool of buyers.

Bobbi Rebell, Reuters, New York.

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