By Catherine Bosley and Basmah Fahim

LONDON (Reuters Life!) - Designers must innovate to attract recession-hit shoppers and create the kinds of upbeat and colorful collections that will lure spenders, retail buyers said as they head into London Fashion Week.

London, famous for producing some of the world's most avant garde designers and termed the "capital of quirk" by one buyer, is holding its 25th anniversary fashion week from September 18-22.

The European luxury market has declined by nearly 6 percent to about 81 billion euros ($119.5 billion) this year compared with 2008, and first-quarter sales were particularly devastated by the recession, Verdict Research said.

But representatives of luxury London department stores Liberty and Harrods said shoppers were still willing to open their wallets, provided the items seemed worth the expense.

"Buyers are being far more selective. They're making sure that if they buy an item of clothing, it's got a 'wow' factor," said Marigay McKee, who heads a team of 22 buyers at Harrods.

"What is really driving our sales is this desirability factor for exclusives. If something is exclusive, they want it, however expensive."

Ed Burstell, chief buyer at Liberty, a black-and-white half-timbered building off London's bustling Oxford Circus retail corridor, offered a similar view.

"If you do everything the same way as you've done before then you really shouldn't be surprised why business isn't happening," he said. "If you recognize that it's a different time and you innovate (you can) actually make business happen."

DRESSES, CLASSICS

Retail analysts at Bain and Verdict say that consumers were shifting to staples that will stand the test of time. "It's a lot more about being classical, about being a bit understated," Verdict analyst Daniel Lucht said of what was motivating shoppers. "There's still a lot of focus on quality, the right materials."

Lucht said London had fared better than other capitals, in part because the British pound had weakened against the euro, and that European luxury retailers had generally fared better than those in Japan or the United States.

For spring 2010, Burstell said he was hoping for upbeat, colorful fashion. He said he had been disappointed in some autumn collections, which he deemed too somber.

"You always look to London for a certain type of creativity. I am looking for original thought, something that's well priced. A little bit quirky, a little bit eccentric," he said.

At Harrods, jeans, jackets and t-shirts were among the top sellers, but shoppers were also keen on classics, especially dresses, McKee said.

"If you're in an economic crisis and want to buy an outfit a dress is always a lot less expensive than a jacket and trousers," she explained.

Burstell agreed, but said that the demand for classics would not hamper cutting-edge London designers.

"When something is very, very highly creative... you would connect with it on an emotional level and I think that is a compelling reason to buy," he explained.

Claudia D'Arpizio of the consultancy Bain & Company said the onus was on designers and retailers to entice people to shop.

"You really have to have a reason to enter the store first. And then the reason to buy something," she said.

McKee at Harrods said she was optimistic about a recovery from the recession and said trading would likely take another six months to recuperate.

"People will always spend if there is a reason to buy. As retailers we have to give customers a reason."

(Editing by Paul Casciato))