(By Larry D. Spears
) If the rich truly have gotten richer during the current financial
unpleasantness - as some pundits allege - members of the moneyed set
have been smart enough to avoid flaunting their new wealth with a rash
of high-end purchases.
Lately, however, this seems to be changing: The luxury markets led a
January surge in the retail sector - a surge that could mean new
opportunities for investors astute enough to grab for the golden ring.
When the economic downturn approached full speed in the fall of 2008,
consumers responded by snapping their pocketbooks shut. The entire
retail sector quickly went in the tank, and luxury-goods sales dropped
in line with those of everyday wares. Holiday receipts fell sharply,
dragging retail-sales totals for all of 2008 down by 0.5% - the first
annual decline since the U.S. Department of Commerce
began tracking retail numbers.
Luxury purchases dropped even harder, prompting ABC World News
to headline a February 2009 story, "Luxury Sales Dive as Rich Feel Pinch - Conspicuous Consumption Drops..." In that article, Bain & Company
, a top business consulting firm, predicted that luxury sales would fall
as much as 7.0% in 2009.
That prediction appeared justified in the ensuing months as such
luxury-sector lynchpins as fine watchmaker Movado Group Inc. (NYSE: MOV
) and Harry Winston Diamond Corp. (NYSE: HWD
reported sharply lower results. Movado's revenue for the quarter ended
April 30, 2009 plummeted 28.0% from the prior period. Harry Winston
recorded three straight quarters of declining sales, with its
third-quarter 2009 results for its retail segment falling 7.0% year
over year. Other high-end retailers - from specialty fashion boutiques
like Christian Dior SA
to high-end department stores like Nordstrom Inc. (NYSE: JWN
) - experienced similar weakness.
The slide might have continued, but for one thing - after bottoming out
in early March 2009, the stock market turned higher and rallied through
most of the rest of the year. While that didn't help the folks on Main
Street all that much, leaving overall retails sales in a sizeable
slump, it did pump up the value of Wall Street portfolios, prompting
higher-end consumers to begin loosening their purse strings. Sales of
luxury items - from fashions and perfumes to jewelry and autos - picked
up, as did both revenue and profits for many of the favored luxury
merchants (although most still continue to lag their performance in the
boom years of 2003 to 2007).
Creative and out-of-character marketing efforts also helped turn the tide for some top-end retailers. The New York Times
reported in August that Bloomingdale's
in Manhattan was holding "private sales," with individual shoppers being discreetly offered special, unpublicized discounts
on items salespeople saw them considering.
A similar strategy was undertaken by Neiman Marcus Inc.,
which sent out e-mail alerts to select clients just hours before what
they called "Midday Dash" sales, which offered discounts up to 50% on
luxury items. One week's sale featured a $1,395 Burberry
handbag marked down to $697 and a Carmen Marc Valvo
chiffon gown reduced from $1,150 to just $575.
Like Neiman, many other high-end brands and stores also began utilizing Internet promotions targeting select customers.
"Not so long ago, many of the luxury brands saw [the Internet] as a
vehicle for the masses," said Gregory Furman, founder and chairman of
the Luxury Marketing Council
, a high-end industry group.
That viewpoint has changed, Furman said. More and more of today's
upper-end retailers now see the Internet as a valuable marketing tool.
"The key is to design the message so it feels like personalized,
one-to-one, customized marketing that demonstrates understanding of
their needs, wants and values," Furman says.
The second-half upturn in luxury sales was sufficient to trim the
sector's decline for 2009 to just 0.2% compared to 2008 - admittedly,
also a bad year - but it couldn't save the retail sector as a whole.
The Department of Commerce reported Jan. 14 that U.S. retail sales fell a seasonally adjusted 0.3% in December alone
led by an 0.8% decline in auto sales (in dollar terms, not units sold).
That capped off a dismal year, as total 2009 sales tumbled to $4.14
trillion, down 6.2% from 2008 and the largest decline on record.