Mass consumers in the United States and European Union countries are forced to trim their spending due to economic problems, the Expert Magazine states. Growing unemployment, inflation and a lack of confidence in the future – all these factors contributed to a more careful treatment of cash. Thus, according to a sociological survey performed by the Harris Agency, 51% of the population in the EU countries and 44% of the U.S. population started to buy cheap things more often during the last 12 months; 57% of the Europeans and 61% of the Americans abandoned expensive foodstuffs. They also save on restaurants, bars and cinema – 71% in the European Union and 75% in the United States.
Though until recently, analysts believed that premium segment sales would not be affected by the financial crisis since the wealthiest as a rule did not feel its impact too much. But today, an ever growing number of companies operating in the segment of expensive goods and services are reporting about cooled-off consumer demand. There are alarm signs of a sag in sales in London’s Savile Row and Bond Street as well as at the Royal Exchange Trade Mall catering to affluent consumers. Stores trading in designer-brand clothes, watches and jewelry inform that their customers were lately more in favor of cheaper trademarks than one or two years ago. It is revealing, for instance, that export of Swiss watches to Britain decreased by 8.3% in the past year.
In the opinion of Lukey Salk, an analyst of Bernstein Research, the theory saying the luxury market is immune to economic cycles is wrong. The incomes of the most affluent consumers depend on the stock market and it was falling during the last year. Besides, a sharp drop in bonuses and premiums in the financial sector followed after the liquidity crisis and writing-off of hundreds of billions of dollars by banks played an important role in London and New York. Presently, the luxury market is being saved by buyers from the developing countries. Tourists from the Middle East visiting Great Britain, according to the Global Refund Agency, which is engaged in tax reimbursements to foreign buyers, spent by 77% more this July compared to the last July; Russian tourists were up 22% and Chinese 49% in their spending. This was what allowed balancing the drop in demand on the part of other tourists, first of all Americans, says the Financial Times in an article translated by the Vedomosty daily.
According to the data furnished by the Center of Strategic Research at Rosgosstrakh, the middle class stratum expanded by 10-12% embracing more Russian inhabitants early in the year only. The number of “dollar” millionaires has added a total of 60%. The researchers are sure this pace of income growth will continue.
As the Izvestia daily says, to perform this survey the experts relied on the already known data related to the Russian inhabitants’ spending on tourists trips, new cars, flats, household appliances, jewelry and Internet access. The obtained results were divided into groups. Rosgosstrakh believes that families having a monthly income of about 15,000 roubles per capita may be attributed to the middle class. They are able to afford high-quality foodstuffs, household appliances, cars, fee-based education and medical service and go abroad for vacations. Families having a monthly income of approximately 240,000 roubles per capita may be called “rich.” They can afford buying luxury goods. The survey results turned out to be of great interest. Firstly, Moscow’s middle class accounts already for almost one half of the city’s population (44%). Russian provinces are lagging behind, but not too much: there are 28% of such people there. Just in the last six months this well fixed stratum grew by 10-12%.
The rich ones were even luckier. The number of families, whose income exceeded $1 million a year, increased by as much as 58%. However, the moneybags remain a very thin interlayer accounting for a total of mere 0.8% from 40 million Russian families. Yet they too have where to move to become even richer – the practice of economically developed nations allows for 2% of such millionaires. In other words, the rich have both abilities and perspectives, the Izvestia says, and what about those betwixt and between?
Even despite the expanding world economic crisis, there is nothing to threaten to the so far young and immature domestic middle class, Alexey Zubets, heading the Rosgosstrakh Center of Strategic Research, believes:
- On average, the Russians expect this year that their real income will go up 11%. According to our data, the fair real annual growth rate of the GDP in Russia is no less than 5.5% excluding possible market fluctuations. Such a growth rate can be maintained by our economy in any case. That is, the large share and fast growth of the middle class stipulate a steady development of this country in the future.
The above tendencies are quite apparent in the jewelry industry too. As was already reported earlier, some Russian companies were planning to move into the premium segment. However, there are instances of backward movement. A new network of jewelry boutiques, Very Gavello, is to appear in Petersburg. Shareholders of the Gold Union Jewelry House Evgeny Gurevich and Yuri Grebtsov (co-owner and financial director of the Adamant Holding) and Maxim Fishbein, a co-owner of some restaurant projects, are to invest €1.5 million into the network. They plan to open four or five jewelry boutiques on a 25-50 m2 floor-space at trade malls with further expansion to other Russian cities and the Ukraine.
Currently, Gold Union represents mono-brand boutiques of Gavello, Korloff and Boucheron. In addition, unlike the classic premium offering of Gavello, the new network will be catering to a democratic segment.
It is noteworthy, the Expert Severo-Zapad Magazine writes, that the idea of promoting lower-priced collections belongs to Rinaldo Gavello, the founder and permanent main designer of Gavello. As it was stressed by Irina Bogomolova, Director of Saint Petersburg’s Gavello boutique, the development of a democratic network targeted at a broader consumer audience, will spread all over the world. “The first three boutiques have already been opened in Greece and we can take readings from the way they are promoted,” Ms. Bogomolova emphasized.
The trend of making premium-brand collections within the mid-price segment of the jewelry market reproduces the situation on the clothing market. “It is not the first year that designers come to the conclusion it is impossible to keep afloat sticking only to luxury segment buyers. The market’s imperative is to cater to other groups of customers who also got attracted by products made by famous brands. In Saint Petersburg, which is very sensitive to West European tendencies, the demand for offered adornments (in particular among well-heeled youth) is evident,” Irina Bogomolova believes.
In her opinion, there are no immediate competitors to this network today. “We shall highlight silver jewelry of an off-beat design keeping in mind there is no one offering branded silver in this city today,” Ms. Bogomolova remarks.
Currently, according to expert estimates, premium jewelry sales account for no more than 15% of the Saint Petersburg market (its total capacity being RUR 10 billion). On the other hand, the medium segment rose by up to 50%. Taking into account the brisk development of this market (20-30% annually) and increased attention to designer-made jewelry collections on the middle class part noted by experts, Very Gavello has a fair chance to lure away this audience.
