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Wed, 10 Feb 2010 | 05:45 GMT
Wed, Feb 10, 2010, 05:45 GMT
 

Shoppers vie to make a little go a long way

 Emirates Business 24/7
 
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Emirates Business 24-7, 13 October 2009

With cash flows tight, luxury buyers are becoming more choosy and demanding more value for money.

Those with deep pockets are avoiding conspicuous consumption and there is increasing stress on making luxury items affordable to a larger number of consumers.

The trends have been outlined on the eve of Leaders in Luxury Middle East Conference by industry leaders in a discussion with Emirates Business.

Desiree Tung, Executive Director, Asia Pacific and Middle East, Worldwide Business Research, said: "Affluent consumers are much more discerning about what they choose to purchase. While they still have an appreciation for luxury, the economic crisis has placed a greater emphasis on quality and exclusivity. High net worth consumers are especially savvy in the Middle East and are well aware of the interplay between price and value."

Worldwide Business Research is organising Leaders in Luxury Middle East conference in Dubai from November 2 at Park Hyatt. Executives of top luxury brands as well as business development experts will share their insights as to how luxury brands can remain relevant in the region amidst the ongoing economic turmoil.

Talking about the hottest trends in luxury in the Middle East and globally, Joseph Wan, CEO, Harvey Nichols, said: "Exotic skins and readily identifiable brands über luxury continues to do well in the region, although buyers are now slightly more cautious than ever before. There has been a big return to true luxury, the most luxurious/extravagant pieces from the brands. Craftsmanship is key. Logo luxury which is appealing to a more mass market audience is no longer a trend."

Tung said: "The financial crisis did change the perception of luxury in the eyes of consumers. According to reports from the US, for example, many high net worth individuals feel guilty buying luxury items when the country is in recession. This is perhaps what has increased the important of quality and indeed moved the trend towards more understated luxury."

According to the experts, now customers are demanding more quality than ever before.

Wan said: "While the trend is not towards conspicuous consumption, it is the traditional desire for quality and timeless elegance that only the really wealthy can afford in the current economic climate. Wealthy consumers are looking for future classics. If you can afford it, you are set apart from the mainstream by being able to buy the best of the best. There has been a noticeable return to individualism. People are prepared to spend money and want to be exclusive (in a subtle way). Today's luxury customers are looking for advertorial pieces rather than editorial items."

Tung said: "Luxury consumers buy from brands they trust and part of that trust is authenticity. Part of the reason why consumers buy from a particular brand is because the brand's heritage and history resonates with them. These have always been important to the luxury consumer and I doubt this will change all. Also what will not change is their demand for quality, value and exclusivity. For luxury brands, the importance of fostering long-term relationships with luxury consumers and continually ensuring their brand resonates with them cannot be understated."

Discussing future trends, Wan said: "The green movement will become increasingly important in the future. I suspect over the next five years especially if given monetary government support. Fashion and luxury are more about outward appearance than conscience."

Tung said: "As luxury is about the appreciation of craftsmanship and quality of materials and as the materials and skills used to craft true luxury products are finite, it is only natural that sustainability are fast moving up the corporate and consumer agenda."

Those in the know have been pointing to a trend towards 'mass luxury', making luxury items more affordable to a greater number of consumers. This was evident during the luxury boom over the last few years with the prevalence of logos within brands such as Burberry, Louis Vuitton and Gucci, to name a few.

Commenting on this trend, Wan said: "At a less identifiable level the brands are all very price conscious and are addressing the issue through lower priced signature pieces in the collections. For example Lanvin 22 rue du Faubourg, Givenchy and Balenciaga. As long as there is the stamp of luxury, I see no problem with lower prices but to actively seek the mass market would be counter-productive."

Talking about how luxury companies can weather the crisis better Maurizio Castello, Head of Fashion and Luxury Practice in Italy at KPMG International, said: "You have to resist the temptation to cut quality which is intrinsic to the whole concept of luxury, and there can be no compromise on that. What companies can do is cut out useless product accessories or aesthetic details that cannot be perceived even by an experienced client but which may be very expensive to produce."

Tung said: "This is going to be a challenging year, but is also a good time to re-assess the strategies that have largely been successful for luxury brands in the pre-crisis era."

According to a report Luxury Goods Worldwide Market Study that was recently released by Bain&Company, apparel will be the hardest hit among the major luxury product categories, with sales declining by 15 per cent. This will be followed by jewellery and watches with sales falling by 12 per cent and leather goods, shoes and accessories by 10 per cent. The bright spots will come from the luxury cosmetics and fragrances categories, with worldwide sales expected to reach Dh128 billion and Dh96bn, respectively.

Explaining how the crisis has affected Harvey Nichols' business, Wan said: "They are two separate segments of customers and for us both continue to co-exist, as ever before. The region is one that has traditionally enjoyed all things good and beautiful as well as seeing a steady rise in impulse purchases across categories. However, recent times are seeing lesser numbers indulging in very high value impulse buys as opposed to more focused purchases.

"Our sales are in line with our expectations for the current year. Peak summer months have traditionally been slower from a sales perspective when compared to the rest of the year and summer 2009 has been no exception. Sales performance has varied by category, location and brand but overall, they have corresponded to, and in certain cases, exceeded the forecasts for the quarter."

Tung said: "Although the Bain &Company study shows luxury companies will face increased pressures in 2009, it also points to a long-term trend of continued growth in the number of luxury customers coming from newly affluent consumers in emerging markets. These are men who are more willing to pamper themselves, younger generations with new tastes and styles, and the continued growth in the number of high net worth individuals."

Philippe Charriol, President and CEO Philippe Charriol Group, said: "The greater challenge is to remain visible in each market and to grasp the opportunity to rebound as soon as the crisis evaporates."

According to the report, only the Middle East market is expected to grow a modest two per cent this year, defying global slowdown.

By Reena Amos Dyes

© Emirates Business 24/7 2009

 
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