Holiday Shopping Forecast. Luxury Brands to Woo the Sure Thing This Holiday Season. Second City Style Fashion Blog


In a nutshell, the super rich are going to spend up a storm this holiday season and the moderatley rich are going to cut back. In an article in today’s Wall Street Journal it’s the "affordable luxury’ market or the lower end that will not fair as well. Only the most elite brands and the retailers catering to the richest customers are likely to escape unscathed.

Yesterday Nordstrom Inc. reported a rare 2.4% drop in October same-store sales, steeper than the 1% decline many analysts had expected. On Wednesday, Polo Ralph Lauren Corp. lowered its profit forecast, citing a "more conservative view of discretionary spending among U.S. consumers."


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Wall Street is concerned. Nordstrom’s share price has fallen more than 35% in the past three months, while Coach is down nearly 30%; Saks Inc. is down about 4% and Polo is down around 19%.

For some luxury brands, their strategy for the past few years involved going slightly more down-market, tempting mid-income consumers with relatively affordable entry-level luxury products like Chanel sunglasses, Coach wrist purses or silver jewelry at Tiffany & Co. — while still selling "extreme" luxury products such as designer watches and handbags costing thousands of dollars.


Since the new less-affluent customers are now proving vulnerable to a variety of economic factors that don’t appear to faze the very rich…many of these luxury brands are saying "to hell with them" and may soon retreat from the affordable-luxury strategy. They will put their efforts in pushing their more elite or customized products as a way to reach the wealthier consumers, predicts Pat Conroy, a managing principal of the consumer business at Deloitte & Touche USA.

Some top-tier brands already appear to be trying harder than usual to turn their backs and distance themselves from the masses. Robb Report, a magazine for the super rich, is joining with Rolls-Royce, Audemars Piguet, Louis XIII de Rémy Martin and Wynn Las Vegas, among others, to market a series of ultra-custom products and experiences — among them, a $1.5 million Wynn Las Vegas vacation package that includes a round of golf with course designer Tom Fazio, $150,000 in jewelry and a Ferrari 599 GTB Fiorano.

Audemarspiguet_2 Audemars Piguet

"The top end of the market has a ton of vitality," says Frann Vettor-Gray, senior vice president, multimedia at Robb Report publisher CurtCo Media Labs LLC in California.

In a poll of 1,000 luxury consumers, only those in the least affluent group — with household incomes averaging $75,000 to $149,000 — said they cut back spending in the third quarter.

Birkin Consultant Bain & Company divides the global luxury market into three layers, each with its own dynamics. At the top tier, brands such as Hermès, Loro Piana, Van Cleef & Arpels and Harry Winston, targeted to the super-wealthy, account for nearly a quarter of luxury spending. The next tier, representing 36% of spending, is the aspirational market, which blossomed during the late ’80s and early ’90s as brands like Gucci and Louis Vuitton expanded around the globe and introduced smaller, more affordable leather goods that became status symbols. Bain defines the remaining 40% as "accessible" luxury — brands such as Coach, Burberry, Hugo Boss and Tiffany, which specialize in luxury accessories for the affluent middle-class.

Alison Santighian says she and her husband, managers for a federal contractor in Washington, are contemplating reducing spending after several years of buying gifts at Saks and Nordstrom. "We might take the money we would normally spend on each other, and put it in savings," she says.

Source: WSJ

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