Luxury Brands Brace For A Chilly Winter

Coach perfume and handbagWhen it comes to economic anxiety, it turns out that the rich are no different than the rest of us: They are shopping more than 50% less, and not heading back to the mall anytime soon.

Unity Marketing says its latest Luxury Consumption Index--which surveys more than 1,100 high-income consumers--is in a freefall, dropping to the lowest point since it launched in 2003. The survey, fielded just after the bailout hubbub, reports that 56% of these shoppers--with a median income of around $210,000--are spending less on luxury now than they were a year ago. And in a chilling prediction for luxury brands, 54% say they also plan to spend less for the next 12 months.

All this economic upheaval, the company says in its analysis, shows that affluent consumers' "negative feelings about the economic situation are translating into changes in their shopping behavior"-- including trading down in brands, shopping sales, choosing lower-end restaurants and staying home more: "They are still indulging in luxuries, but they are being more selective in what they choose to indulge."

For the upcoming holiday season, Unity predicts these shoppers will be prowling the aisles of Target and outlets, just like the rest of America.

As if on cue, luxury leather retailer Coach lowered its previous estimates of sales, based on weaker store traffic and ongoing economic upheaval. For its fiscal first quarter, the company says its sales gained 11% to $753 million, while net income fell 6% to $146 million.

"We experienced a moderation in our top-line growth this quarter as the retail environment in North America continued to deteriorate," the company says, noting that same-store sales rose 0.6%. "While we're excited about the strength of the product we're introducing for the holiday season, our enthusiasm is tempered by the weak traffic trends in our North American retail stores and department store locations."

As a result, it cut its sales forecast to 10% growth--about $3.5 billion in sales for the year, instead of 13%.

In a conference call, the company outlined the ways it is pursuing these "Do-I-really-need-a-new-handbag?" shoppers, saying it is beefing up its product assortment--including fragrances and jewelry-- even as it is reducing the number of handbags it offers. In addition to promoting its new Madison line, which it describes as a "softer, drapier look," all its stores will look more festive and colorful for the upcoming holiday, with gift selections at multiple price points, including small leather goods.

Supported by a print and online campaign themed "Holiday by Coach," Coach executives say, the stepped-up selections and merchandise mean "when she enters the Coach store, she will clearly see newness."

Tags: retail
Recommend (2) Print RSS