The global financial and economic crisis has not skirted the world’s luxury industry, although avoiding hitting it immediately and as hard as its other segments.
According to the estimates given by the experts of Bain & Company, an international consulting firm, in 2009 sales on the world’s luxury market will decrease 2-7 percent. The downturn will be accompanied by layoffs, a slump in investments and abandoning business development projects.
European enterprises engaged in production of exclusive and single-piece products account for 200 000 employees.
The news that Bentley, the British company producing same-name luxury cars, is going to halt its factory assembly lines for seven weeks in March and April due to decreased demand for their vehicles is one of the striking instances proving that the “blast wave” of the crisis rolled to reach de luxe manufacturers.
The United States, which turned to be the ground zero of the crisis are the main market for Bentley cars, the price of which may reach 265 thousand euros per vehicle.
Jaguar Land Rover, another British luxury car manufacturer, which recently announced a 3-percent personnel reduction, does not expect sales recovery to the pre-crisis level any time soon.
According to European mass media, the list of casualties suffered from the global downturn also includes Richemont, a group of luxury trading companies, De Beers, the biggest diamond producer, and exclusive fashion clothing suppliers Burberry, Saks, Jean-Louis Scherrer, Lamarthe, Chanel, LVMH as well as L'Oréal, a perfumes company.
British Burberry, in particular, intends to lay off up to 540 employees engaged in its factories in Great Britain and Spain.
In its turn, a drop in demand forced the management of Saks, a U.S. department store chain, to reduce their personnel by 1100 employees, which is almost 9 percent of their total staff. Meanwhile, their 2009 investment package is to be halved down to $60 million (€46 million).
Large-scale layoffs due to diminished sales were announced by De Beers, which is going to reduce one thousand employees out of three and a half thousand engaged at its South African facilities. The corporation also plans to reduce jobs at its mines in Botswana, Namibia, Canada and even in its London headquarters.
Meanwhile, L'Oréal, the world’s leader in cosmetics production, for the first time in many years announced shutdown of two factories, in Wales and Monaco, as well as imminent retrenchment of five hundred jobs in the United States before mid-May (4.8 percent of their total overseas workforce).
LVMH, the French luxury manufacturer, on its part postponed opening of a Louis Vuitton boutique in Tokyo.
French jewelry company Cartier, a subsidiary of the Richemont Group, had to temporarily decline the services of two hundred workers engaged at its facility in Switzerland starting from early February and pay only 80 percent of their salaries to the workers making signature boxes for wrist watches.
It is noteworthy that the famous international watch show in Geneva this year, according to the press, passed in an “icy” atmosphere due to a significantly thinned out visitor traffic.
“Demand for luxury goods fell dramatically and Richemont is now in the most difficult conditions from its establishment 20 years ago,” Le Mond quoted the company’s representative as saying.
As a result of the global crisis, French fashion house Jean-Louis Scherrer had to close its last boutique in the end of last December, whereas Chanel refused to extend labor contracts to its workers and froze the projects to open new signature stores in 2009 due to “a slow-down in its activity.”
Alex Shishlo, Rough&Polished European Bureau Editor in Brussels
