Apr 7, 2009
For luxury goods sellers, red is the new black
Apr 7, 2009
NEW DELHI, April 7, 2009 (AFP) - Bling is out and fine craftsmanship is in -- that's the latest message from the luxury goods industry as it struggles to survive the global economic downturn.
Italian brand Ermenegildo Zegna (www.zegna.com)
Luxury goods houses and retailers think they have come up with a new pitch as they try to keep their businesses alive in the face of slumping sales.
For many high-end retailers, red is the new black for their balance sheets.
Worldwide luxury good sales are expected to fall this year by 10-15 percent, from around 234 billion dollars, says US consultancy Bain.
Bain analyst Claudia D'Arpizi said 2009 "is probably the worst year for luxury goods consumption in recent memory".
For the quarter to January, US retailer Saks reported a net loss of 98.8 million dollars while department store Neiman Marcus posted a loss of 509.2 million dollars.
The trend in Europe is much the same, according to Anna Zegna, of Italian menswear brand Ermenegildo Zegna. "We're facing crisis times," she said.
At a recent conference in New Delhi, the catch-cry was quality, as delegates decided that stressing craftsmanship over fad could be the key to their long-term viability.
"People want a return to genuine values like timelessness," Francois-Henri Pinault, chairman of French luxury giant PPR, told the annual conference.
Manufacturers of expensive high-end goods must emphasise craftsmanship and durability if they are going to draw in customers spooked by economic reality and shying away from frivolous spending, the conference heard.
"The financial cataclysm that has taken place over the past six months has made us all think about true worth and lasting values," said Suzy Menkes, fashion editor of the International Herald Tribune newspaper.
Bling is out, she said, referring to flashy, transient fashions, adding that luxury consumers are looking for designer attire and accessories "that can be passed on to the next generation".
That will mean designing and producing luxury goods -- clothing, shoes, accessories, jewellery, handbags, luggage, watches -- that last for more than one short season.
For the world's luxury sector, Menkes said, the "mad ride of consumerism" that has driven profits in recent decades is over.
Global ratings agency Moody's has warned the triple whammy of recession, market turmoil and plunging personal wealth could result in a longer-term "fundamental shift in consumer shopping habits".
But chasing consumers with huge discounts was not the answer as it diluted brand value and would undermine brand integrity, the conference heard.
"This is not a time for panic," said Scott Malkin, head of the US Value Retail chain which sells designer brands globally.
"The brands that will survive will champion craftsmen and innovation," he said.by Penny MacRae
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