Monday, February 9, 2009

High end retail pricing power collapses

Supposedly it started when Saks Fith Avenue started price cuts:

When Saks Fifth Avenue slashed prices by 70% on designer clothes before the holiday season even began, shoppers stampeded. "It was like the running of the bulls," says Kathryn Finney, who says she was knocked to the floor in New York's flagship store by someone lunging for a pair of $535 Manolo Blahnik shoes going for $160.

Saks' deep, mid-November markdowns were the first tug on a thread that's now unraveling long-established rules of the luxury-goods industry. The changes are bankrupting some firms, toppling longstanding agreements on pricing and distribution, and destroying the very air of exclusivity that designers are trying to sell.

People want to blame Saks, but Saks really just recognized what the other high end retailers didn't. Spending money on overpriced clothing is so last year. Frugality is in; by choice and by necessity, and those retailers that don't recognize the changing mores are doomed to fail. The consumer is not going back to paying full price for designer clothing. They should get used to it, or they will be out of business.

In Beverly Hills they've even coined a name for it "luxury shame."

BEVERLY HILLS — Throwing your money around is so pre-recession.

As the economy weakens, the wealthy and the businesses that cater to them say it’s more common — even chic — to scale back extravagant spending and play down affluence. Retailing experts call it luxury shame, or stealth wealth.

From Rodeo Drive to Fifth Avenue, that means one thing: hide the labels.

Some shoppers are asking cashiers at high-end stores to put their purchases in plain white paper bags. Others want their expensive clothes and jewelry shipped home so they can walk out of the store without any bags at all.

“There’s a sense of there being a gaucheness in spending in excess and coming home with a Louis Vuitton or Chanel bag,” said Lucyann Barry, a personal shopper and stylist for New York’s ultrarich.

For one self-conscious client, Barry recently delivered a $1,200 Gucci handbag disguised as a gift so the rest of her family wouldn’t know she had bought it herself.

Of course, plenty of rich people have become decidedly less so as stocks, homes and businesses have declined in value during the recession. And they’re cutting back. Holiday sales were down at Neiman Marcus, Tiffany & Co. and Saks Fifth Avenue.

In West Palm Beach, you have invitation only events, held at some of the Island's finest homes, where the designer intermingles with guests at private fashion shows. That's what's needed to sell some of the latest couture.

So it wasn't Saks that caused the high end retailing to fall off the cliff. The high end retailer suffered when the public's attitude changed to designer goods, when the economy went down the drain, along with the value of their home and 401K's. And then we had the discretionary buyer, the banker, who kept his mistress happy with high end shopping sprees, had to pull back from these indulgences and then go back to his wife.

The fashionista is now a recessionista.

It's just that Saks only recognized it first.

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