Luxury Goods Have Lost Their Shine

High income shoppers in the U.S. have had their confidence shaken in recent months. Between Britain’s vote to leave the E.U. and economic uncertainty in China, coupled with global stock market and currency swings, luxury brands are suffering.

China is attempting to drive down conspicuous consumption amid a slowing economy, and Chinese tourism growth has ground to halt around the world, meaning fewer visits to U.S. Department stores such as Neiman Marcus and Bloomingdale’s. Luxury retailers have every reason to be concerned.

A slowdown in the U.S., the world’s biggest luxury market could send luxury sellers into a tailspin. Big spenders in the U.S. are holding back due to economic uncertainty at home and abroad. Over the past three years, Americans have contributed significantly to the growth of luxury goods, second only to the Chinese. But for now, both are pulling back. And, some luxury brands are concerned that the uncertainty surrounding the upcoming U.S. election will dampen the market further.

With the U.S. stumbling, there are few other places for luxury sellers to find growth. With the pound’s weakness against the U.S. dollar and the euro, it’s possible that Britain could offer an opportunity. But the U.K. represents just 6 percent of the global luxury market so the opportunity is relatively small.

Some brands, like Accelerated Analytics’ customer LVMH, are weathering the storm due to their diverse set of businesses. And, affordable luxury brands, such as Kate Sade and Stuart Weitzman, may benefit from shoppers trading down to more affordable luxury brands.

Source: www.bloomberg.com

LUXURY GOODS SALES ARE UP, BUT DESIGNER FLASH IS DOWN

Within the designer luxury brands market, some brands have seen increased sales while others showed decreases. While the overall market for luxury goods has grown steadily since the end of the recession, the trend for wealthy shoppers is to purchase their products in a subtle way, steering away from flashy logos.  Gucci sales were down 1.1% in 2014, Prada saw sales decrease 1.5%. Louis Vuitton/LVMH also saw sales slow in their fashion and leather goods division.

The current trend for luxury goods shoppers is to continue to purchase these goods, but show sophistication by not flaunting their wealth. Social media is also affecting the luxury brands market, as new items are becoming exposed quickly, desensitizing luxury goods shoppers to things that used to feel special to own. Smaller luxury brands like Yves Saint Laurent and Miu Miu saw 2014 gains of 27% and 4%, respectively. A professor at New York University, who teaches luxury marketing, stated, “These are brands that really control the supply, and therefore they manipulate the market and the desire for their products.”

Experts also say that high-end consumers are increasingly diverting their dollars to experiences, such as lavish vacations or extravagant dinners. To adjust to this, Louis Vuitton added a rooftop champagne bar to their Rodeo Drive store. Gucci and Prada have similar locations in Los Angeles and Las Vegas.

Source: Washington Post