Being part of the international fashion media, I shouldn't be saying this but perhaps the game is up for the luxury goods business (long reputed to be the next bubble after China and dotcoms).
Witness the empty shops in most financial and shopping capitals (not to mention numerous brand name store closures in Russia) and you will feel that the stratospheric prices and certain brands' questionable quality are going to have to come down. SOON. Like this season's sales, perhaps?
(Meanwhile, my retail sources tell me business in poorer economies like Indonesia, the Philippines and Malaysia are bouyant thanks to an established niche market of the wealthy, powerful and perhaps corrupt and un-chic. But who cares as long as there is a market!)
With Lacroix filing for creditor protection, dahling, and Veronique Branquinho zipping up, the outlook is not looking much better for revered fashion houses. Throw into that the boardroom squabbles (Dontallela's shade of tan? Dark orange, darker tangerine?) at Versace with its own image and not to mention business management problems. LV has also halted the construction of yet another Tokyo flagship.
Of course, as an editor and a brand PR manager and I discussed over lunch last week, it's not that people will not spend. They will just be more cautious of what they are purchasing. The public will always want to buy SOMETHING. (Usually something cheap that's why Uniqlo of Japan is reporting profits and stealthily bracing itself for world domination)
The question is, how much longer will this love affair with luxury last and who will be the winners?
Just as I was thinking about the state of global luxury retail, I find this in today's FT: (I have enlarged key sections for the internet-generation's reading impaired):
Japanese fall out of love with luxury
By Michiyo Nakamoto in Tokyo
Published: June 2 2009 19:17 Last updated: June 2 2009 19:17
Japan’s trend-chasing office workers and ladies who lunch are giving up Louis Vuitton handbags and Chanel jackets for Zara dresses and Gap jeans, making what was a favourite market for luxury manufacturers into one of their biggest headaches.
The downturn is forcing customers in Japan to scale back purchases of luxury goods, accelerating a long-term shift in consumer attitudes, according to a report by McKinsey, the consultants.
“This is not a blip. This is a long-term shift in the market,” said Brian Salsberg, the author of a McKinsey report on the Japanese luxury goods market, the world’s second largest.
Sales of imported luxury goods suffered a 10 per cent drop last year to Y1,064bn ($11.1bn), according to a study published on Tuesday by Yano Research, a Japanese market research group.
Yano Research forecast that the market would shrink further this year, falling below Y1,000bn to nearly half the peak of Y1,897bn in 1996 and then shrinking to levels last seen 20 years ago before it entered its era of strong growth.
LVMH, the group with brands ranging from Moët to Louis Vuitton, reported an 18 per cent drop in sales in Japan in yen terms in the first quarter.
While luxury sales throughout the world are being hit by the recession, Mr Salsberg said that the implications of the latest slump for Japan were likely to be more serious and long-lasting.
Japan became the world’s “only mass luxury market” in the 1980s and early 1990s, when Japanese consumers saw ownership of a Louis Vuitton bag or Hermes scarf as a middle-class rite of passage.
But the growing confidence of shoppers in mixing and matching cheap and expensive products, coupled with competition from a growing array of luxury services such as spas and expensive restaurants, have robbed the brands of their hold on such spending.
Mr Salsberg said the brand makers, which created “a luxury bubble” with “a ridiculous number of store build-outs”, bore some blame for their predicament. He warned that they risked repeating the mistake in China.
China was the “growth story” for luxury but if makers flooded the market with stores as in Japan and people were able to buy such goods on every street corner, “the industry is going to destroy itself” there, he said.
Copyright The Financial Times Limited 2009