Luxury taking the long route to recovery

Isaac Mostovicz writes that luxury consumers should beware of 'false dawns' in the industry ahead of economic recovery...

For the luxury industry, it will be a long, hard road out of recession, according to the Wall Street Journal:

The luxury-goods industry likely won’t fully recover from the downturn until 2011 or 2012, consulting firm Bain & Co. said in a forecast released Monday. This year’s decline in sales of luxury goods, including apparel, jewelry and fashion accessories, will be steep, off 8% to about $227 billion, Bain predicts.

Facing such a steep cliff, the industry has begun exploring alternative markets. I wrote previously that in Asia, luxury brands are making a play for unconventional luxury markets such as Mongolia.

The article in Wall Street Journal touches on the subject of shoppers restricting themselves from purchasing high-end items, which delivers a double-blow to the industry:

Many of America’s key high-end merchants have continued to suffer in recent months, as shoppers restrict themselves to practical purchases and forgo pricey designer clothing and accessories that may go out of fashion quickly. They have slashed the number of brands they sell in an effort to limit their inventory and avoid the deep discounting seen at this time last year.

What this means is, in essence, Lambda personalities have gone underground so to not give the appearance that they’re spending lavishly while those around them suffer. For Thetas there is less of an internal conflict because there are brands that offer a customized experience and toe the line between ‘masstige’ and luxury.

The Associate Press expounds on the trend of feeling ashamed of spending on luxury items:

The global economic crisis has generated a new phenomenon: luxury shame, or the shunning of ostentatious purchases of expensive jewelry, watches and fashion, which is largely blamed for the projected 8 percent drop in the luxury market this year.

I suspect that once a return to ‘ostentatious purchases’ by both Lambds and Thetas happens, the luxury market will officially begin its recovery. There’s talk of a 1 per cent uptick in the luxury market next year, but once should always beware of false dawns.

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