“The global economic crisis has generated a new phenomenon: Luxury shame. This translates into shunning ostentatious purchases of expensive jewelry, watches and fashion, which is largely blamed for the projected 8 percent drop in the luxury market this year. But a Bain & Co. study released Monday indicates the phenomenon isn't durable, predicting a slight 1 percent increase in the luxury market next year, with full recovery not expected until 2011 to 2012”, says www.diamonds.net citing Associated Press.
The global luxury market is expected to be worth $228.25 billion in 2009, which is an 8.4 percent drop from 2008. The 2009 forecast is a slight improvement from the 10 percent decline in sales Bain predicted earlier in the year. For the first time since it began tracking the sector, Bain said exchange rates had a positive impact, dulling what would have been an 11 percent drop in the worldwide luxury market.
The trend against ostentatious spending hit such luxury items as jewelry and watches especially hard. Watch sales are screeching to a halt, forecast to drop 20 percent, Bain said, while jewelry sales are expected to drop 12 percent. Conversely, online sales are projected to rise 20 percent worldwide in 2009.
"It is much more private," Bain partner and luxury goods expert Claudia D'Arpizio said. "You just click. There isn't all the ceremony of paying for the item and making the sale at the cash register."
Women this year opted to "shop their closets" and accessorize to update their wardrobes rather than buy new clothes, precipitating an expected drop of 12.5 percent in womenswear sales this year. Leather goods sales are expected to drop just 4 percent, with shoes dipping just half a percent.
When they did buy new clothes, women tended not to snap up fancy pieces that could only be worn on certain occasions, but rather evergreens, D'Arpizio said. Cosmetics and fragrances, areas that D'Arpizio expected to be durable, actually hit hard times, dropping 5 percent and 3 percent, respectively, as women went down-market, going for supermarket brands rather than $500 creams. "Frugality is fashionable," D'Arpizio said, even for the wealthiest consumers.
Geographically, luxury sales in the U.S. are taking the biggest hit, with Bain estimating a contraction of 16 percent in 2009, while Europe is expected to be down 8 percent. Asia Pacific, excluding Japan, is forecast to grow by 10 percent, boosted by China, which is expected to grow 12 percent. The Japanese market continues to slump, with a forecasted drop of 10 percent.
On this background, the Internet among other things is acquiring an important psychological aspect helping those ashamed of their luxury spending to buy in a more private manner. On their part, online retailers as if trying to meet halfway this phenomenon stress free shipping and social media this holiday season, according to www.israelidiamond.co.il.
According to the results of Shop.org’s eHoliday study, conducted by BIGresearch, the economy is not only impacting shoppers, it is also affecting online retailers. Shoppers will witness changes in retail marketing and promotions this holiday season stemming from the economic uncertainty.
As the result of the understanding that many of today’s shoppers use Facebook and Twitter regularly, and due to the fact that these tools are more cost-effective than traditional advertising, 47.1% of the surveyed retailers will increase their use of social media this holiday season. More than half of the retailers stated they have added or improved their Facebook page (60.3%) and Twitter pages (58.7%) this year, while 65.6% have added or enhanced blogs and RSS feeds. One third of the retailers (34.3%) stated that they will offer holiday deals earlier this year.
As another way to promote sales, free shipping offers will be offered across the board this holiday season. Four out of five online retailers (79.4%) will offer free shipping with conditions at some point during the holiday season, while more than half (57.4%) also plan to offer free shipping without conditions.
Scott Silverman, Executive Director of Shop.org, stated: “Retailers know that times are tough so they have created promotions and incentives to help Americans save money this holiday season. From free shipping to Facebook, online retailers are combining new initiatives with tried-and-true tactics to make their companies stand out.”
Online retailers are also introducing operational changes to help protect their profits. According to the survey, 41.4% of retailers have scaled back on inventory levels and 22.9% have hired fewer staff.
According to the survey, 45.8% of online retailers expect their holiday sales to increase at least 15% in comparison to last year, while 33.9% expect sales to grow up to 14%. Testifying to the maturity of online retail, only one in five online retailers (20.3%) expects sales to be flat or decline.
Many online retailers have revamped their websites this holiday season to make it easier for people to shop. According to the survey, many retailers have added or revamped their sites’ shopping cart (45.2%), search capabilities (44.3%), suggested items (42.9%), customer ratings and reviews (40.6%), and featured sale pages (37.1%).
