June 12, 2009
Luxury merchants shouldn’t expect affluent shoppers to go back to splurging anytime soon, says Claudia D’Arpizio, partner and luxury goods expert at consulting company Bain & Co., who anticipates that the global luxury business will not fully rebound until 2012.
That means a wave of consolidation in the luxury industry over the next year or so as companies try to survive, she said. Luxury chains continued to be the weakest retail sector in May with Saks Inc., for example, reporting same-store sales 26.6 percent lower than a year earlier.
D’Arpizio told a group of journalists Tuesday that she forecasts a 10 percent decline in luxury spending worldwide for this year, after spending was flat in 2008. She foresees sales remaining at 2009 levels in 2010 and then rising 4 percent in 2011 and gaining 7 percent to 8 percent for 2012.
While big global brands have more muscle to endure the slowdown, D’Arpizio said, “everyone is experiencing a reduction,” and merchants need to come up with a better store experience and to target younger shoppers and working women to stay viable.
Luxury retailers —confronting a persistent falloff in spending on luxury goods since the financial meltdown ballooned last September — are starting to offer more merchandise at entry-level designer price points.
But shoppers who enjoyed discounts up to 80 percent last fall and during the holiday shopping season, aren’t likely to see promotions that grand later this year, D’Arpizio noted. That’s because upscale stores have cut their orders by 10 percent to 15 percent for the holiday season and next spring.
Clothing sales are expected to continue to suffer bigger sales declines than the shoe category: Shoppers are buying fewer pairs but are unwilling to switch to cheaper options, D’Arpizio said. Among the hardest hit geographical areas are Europe, Japan and the Americas, while China is expected to show a 7 percent gain in luxury sales this year, according to the report, to be formally released later this week.
Luxury shoppers from the ultra rich to the aspirational have cut back, just in different ways, D’Arpizio said. Shoppers at the highest end are buying less ostentatious and more “classic, more durable” pieces, while aspirational consumers are trading down to the more affordable secondary lines of designer collections.
D’Arpizio said that when the economy recovers, shoppers’ focus on the best quality for the money will linger.
Excluding retail giant Wal-Mart Stores Inc., May marked the 10th straight month that same-store sales have fallen industry-wide compared with a year earlier, according to a tally released last week by Goldman Sachs and the International Council of Shopping Centers. Same-store sales — sales at stores open at least a year — are considered a key indicator of a retailer’s health.
For further information, visit: http://www.topix.com/business/retail/2009/06/luxury-sales-not-likely-to-show-full-rebound-until-2012-bain-co-luxury-analyst-predicts