May 6, 2009
Economic crisis hits global luxury market harder than expected
May 6, 2009
Paris, 29 April 2009 (AFP) – The global luxury market could shrink much more than expected in 2009. Bain & Company explained on Wednesday 29 April that the economic crisis having greatly affected the purchasing behavior of consumers of top-of-the-range products.
Louis Vuitton boutique in the Lane Crawford department store in Beijing - Photo : Emilie Kremer
“Luxury brands have to brave decreasing personal wealth, pressure on prices and the deceleration of growth in emerging countries”, the company said in a press release, which was published following the finalisation of its yearly study of the luxury market.
The consultancy, specialist in the sector, anticipates a fold in the global luxury market of 15-20% in the first half-year before the start of a “stabilisation” in the second half;
Bain & Co suggest that for the entire year the decrease should therefore reach 10%, €153 billion, whereas they had initially forecast a decline of between 3% and 7%.
"Luxury shoppers are spending less, traveling less and feeling less confident”, and their shopping habits have evolved: if clients remain faithful to large brands, they are now favouring “less expensive” items, explained Claudia d’Arpizio, associate at the consultancy.
High prices and luxury “are no longer synonymous”, revealed Joëlle de Montgolfier, director of the study: consumers no longer hesitate to hunt down bargains and wait for sales periods.
Another notable change, consumers are choosing “more discreet products”. “Ostentation is obsolete”, remarked Bain.
Consequently, luxury houses “are confronted by growing pressures regarding prices and promotions decided by retailers and upmarket department stores”, explained Ms d’Arpizio.
The accounts of the largest groups in the sector are suffering in this situation.
On Tuesday 28 April, the Italian label Prada announced a fall of 22% in its net profits in 2008. Before them, the leading group in the world of luxury, LVMH, had seen a growth in sales so small as to have been practically equal to zero in the first quarter, with a drop in its sales of wines and spirits, horology-jewellery, perfumes and cosmetics.
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