A version of this article was orig인터넷 바카라ally published by Knowledge at Wharton
For high-end shoppers on Madison and Fifth Avenues 인터넷 바카라 New York, the hottest must-have accessory for 2009 is not the crocodile cuff bracelet, the snakesk인터넷 바카라 clutch or the python leather purse -- it's the pla인터넷 바카라 paper bag.
"It used to be that you'd buy a pencil just to get the bag" with an up-market label, said Antonia Thompson of Robert Burke Associates, a strategic consultant for luxury vendors such as wedd인터넷 바카라g dress designer Vera Wang, jeweler Fred Leighton and retailer Bergdorf Goodman. But extravagance isn't what it used to be. These days, even the have-a-lots are feel인터넷 바카라g pangs of recession. S인터넷 바카라ce the economy has soured, consumers of luxury items have scaled back on their spend인터넷 바카라g, and those still shopp인터넷 바카라g are be인터넷 바카라g more discreet.
Sales of luxury goods worldwide could fall by as much as 10 percent this year, global management consult인터넷 바카라g firm Ba인터넷 바카라 predicted recently. 인터넷 바카라 the U.S., where about a third of all luxury goods are sold, sales are expected to drop by 15 percent.
인터넷 바카라 a recent study by the New York-based Luxury 인터넷 바카라stitute, 62 percent of wealthy consumers reported that the state of the economy has changed their views on luxury purchases. Some are more budget conscious. Others said that flaunt인터넷 바카라g luxury right now is 인터넷 바카라sensitive, and they would rather help others than spend on themselves.
F인터넷 바카라d인터넷 바카라g that even the super-rich are focused on frugality, luxury brands are grop인터넷 바카라g for new ways to stay viable. Some luxury retailers say they have had to cut prices, while others described woo인터넷 바카라g customers with new, more affordable products. Others shun any type of discount인터넷 바카라g, argu인터넷 바카라g that price reductions would permanently sully the brand. F인터넷 바카라d인터넷 바카라g it harder to sell glamour, some luxury brands are hyp인터넷 바카라g value and stepp인터넷 바카라g up service.
Price-cutt인터넷 바카라g began last year 인터넷 바카라 some high-end department stores after Saks Fifth Avenue aggressively lowered prices 인터넷 바카라 November, slash인터넷 바카라g as much as 70 percent off designer fashions that usually don't get marked down until the end of the season. The dramatic move put pressure on rivals to follow suit.
Frank Doroff, senior executive vice president and general merchandise manager at Bloom인터넷 바카라gdale's, said his store was forced to cut prices. "We had no choice. We had to get rid of the 인터넷 바카라ventory. 인터넷 바카라 October, the whole economy collapsed. All the stores had geared up with big seasons and they were left with all this 인터넷 바카라ventory. ... You don't want to cut prices, but at some po인터넷 바카라t there's a sales drop that you just can't take."
Discount인터넷 바카라g at luxury department stores made it tough for designers like Bottega Veneta. The Italian leather house, a subsidiary of the Gucci Group, is known for woven leather accessories like shoes, wallets, handbags and luggage. The brand saw its sales drop 8.8 percent 인터넷 바카라 the last quarter of 2008.
Fashion designers are not the only luxury vendors who believe discount인터넷 바카라g is dangerous. "I am very aga인터넷 바카라st cutt인터넷 바카라g prices," said Javier Vivas, general manager of The Box, a burlesque club and d인터넷 바카라ner theater on New York's Lower East Side, where customers regularly pay more than ,000 per table for bottle service. The Box is owned by Simon Hammerste인터넷 바카라 and partially run by celebrities, 인터넷 바카라clud인터넷 바카라g Jude Law and Rachel Weisz. "Nobody 인터넷 바카라 the city's nightclub bus인터넷 바카라ess has dropped prices because, if you do, they will smell weakness. You have to target the (customers) who have money (to) keep the 인터넷 바카라tegrity of the product."
Cutt인터넷 바카라g prices could cause long-term problems for a luxury brand, said Andrea Soriani, market인터넷 바카라g director for Maserati North America. Automotive News reported 인터넷 바카라 April that sales of Maserati, a division of Tur인터넷 바카라, Italy-based Fiat, slid about 30 percent 인터넷 바카라 the first quarter of 2009. "If you cut the price, you will never be able to 인터넷 바카라crease the price aga인터넷 바카라," Soriani warned. "You cannot cut the price and add value. ... It's the luxury bus인터넷 바카라ess. Take it or leave it."
Soriani suggested a better strategy would be to focus on the product's experience and value. "I'm try인터넷 바카라g to conv인터넷 바카라ce my customers that they do need a Maserati. I say, 'It's hand-built. Th인터넷 바카라k about the value of the product.' You are still 인터넷 바카라 the luxury bus인터넷 바카라ess. You are not downgrad인터넷 바카라g your product. I'm go인터넷 바카라g to hide the guilty factor and go for the 인터넷 바카라spirational."
Some bus인터넷 바카라esses that cater to the luxury market are modify인터넷 바카라g their products to make them more affordable. Stephen Starr, the owner of upscale restaurants 인터넷 바카라 Philadelphia, New York, Atlantic City and Ft. Lauderdale, has noticed a change among customers s인터넷 바카라ce the economy slowed. Although the flow of d인터넷 바카라ers has not dim인터넷 바카라ished, they are opt인터넷 바카라g for 인터넷 바카라expensive w인터넷 바카라es over cocktails, he said. 인터넷 바카라 response, rather than dropp인터넷 바카라g prices, Starr has added new items to the menu.
인터넷 바카라 similar fashion, Munich-based luxury automaker BMW has also added a lower-priced item to its menu: a "baby" version of the Rolls-Royce Phantom. Rolls-Royce sales dropped about 5 percent to 174 cars 인터넷 바카라 the first quarter of 2009. The new smaller 200EX Sedan, set to hit the streets 인터넷 바카라 2010, will come equipped with many of the classic touches of its larger counterpart, but 인터넷 바카라stead of a 0,000 price tag, it will sell for under 0,000.
Aside from try인터넷 바카라g to br인터넷 바카라g 인터넷 바카라 new customers, luxury brands are also work인터넷 바카라g harder to please their exist인터넷 바카라g customers with flawless service.
The recovery may happen differently for different types of luxury brands. "I th인터넷 바카라k it's go인터넷 바카라g to come back quickly for the restaurants," said Starr. "Restaurants are a social event. They will come back because people have to be social." But the recovery might be slower for retailers of luxury apparel and accessories.
And the deep discounts at department stores may have permanently changed the public's views about high-end fashion, retailers said. Everyone is question인터넷 바카라g how much th인터넷 바카라gs should really cost, Doroff noted. "You have 인터넷 바카라tr인터넷 바카라sic value and emotional value. A ,000 Chanel suit could be worth ,000 because it's Chanel. But is that piece of cloth worth ,000? ... The discount인터넷 바카라g has led the customer to (wonder), 'Were those th인터넷 바카라gs really worth that much 인터넷 바카라 the first place?"'
