The American economy may still be struggling, but things are looking up in the luxury sector. Luxury goods have begun to fly off the racks as America’s wealthy shoppers return to their heavy spending ways. High-end shoppers are once again flocking to luxury outlets in the United States, picking up Chanel jewelry, Gucci handbags and more. As the rich increase their spending on luxury items, the high-end sector is looking to benefit. The average American may still be struggling with his bills, thinking twice even before buying a supersized roll of toilet paper, but the increase in sales in the luxury goods sector should be good news for the economy as a whole.
Several luxury brands and luxury retailers including Nordstrom and Neiman Marcus are benefitting as the rich begin spending again. Even Mercedes-Benz sold more luxury cars in the US last July, than in any July over the last five years. Luxury brands and retailers may have suffered the most during the recession, but the sector appears to be on a quick road to recovery.
One of the recession trends that offered sure evidence of an ailing luxury sector was the availability of heavily discounted designer gear. However, that era of big discounts on designer duds may well be over. Rather, we could soon be looking at higher prices as luxury brands begin marking up their products once again. The buyers of luxury products, however, are not terribly bothered by increases in prices. Even now, they continue to associate price with quality.
Over the last 10 months, sales in the luxury sector has witnessed month on month increases. In July alone, the sector managed an 11.6 percent increase over June. The recovery of the luxury goods market becomes all the more interesting given that other sectors such as electronics and furniture continue to be largely depressed.
An improved stock market may be persuading affluent Americans to spend on luxury items. The focus may be on less showy products, but the likes of Yves Saint Laurent, Louis Vuitton and Givenchy are attracting top-end shoppers once again. While LVMH reported a sales growth of 13 percent ($14.9 billion) in the first half of 2011, PPR (the parent company of Gucci, YSL and other brands) reported a gain of 23 percent. Things are looking up for other luxury brands as well.
In the luxury car sector, Porsche reported first-half profits of 59 percent while BMW doubled its second-quarter profits of 2010. Meanwhile, there has been a 14 percent increase in the sales of luxury S-Class sedans from Mercedes-Benz.
This increased spending by affluent Americans should be good news for the American economy. In the pre-recession days, the richest 5 percent accounted for a third of the total spending within the United States. According to Mark Zendi of Moody’s Analytics, America experienced a bad recession largely because this top 5 percent curbed their spending.
But the years of decline seem to be coming to a close with buyers stocking up on luxury brands once again. Classic pieces are the flavor of the season, and high prices are no longer a deterrent for wealthy buyers. The luxury sector is back to its winning ways.
Via: The New York Times