While there will always be rich people, their purchasing behavior is expected to change due to the global financial crisis. According to an article in The Wall Street Journal, luxury retailers are wondering if it has become "unseemly to spend money publicly," given the crisis and whether a long period of ostentatious spending is ending.
"The answer may have a lot to do with how these consumers want to be seen," wrote Christina Binkley, author of the article. "It's not necessarily a good thing to show up at the tennis club with a new $30,000 crocodile handbag when your friends' net worth has been halved and the Federal Reserve is spending billions to keep the banking system afloat."
That view comes as Lehman CEO Richard S. Fuld Jr. was grilled by Congress early last week over his multimillion dollar bonuses, and U.S. Rep. Henry Waxman suggested a growing public outcry over high executive pay. Two AIG executives were also similarly grilled over their bonuses as well as a lavish retreat for insurance agents after the announcement of a government-backed bailout. The article stated, "The rising tide of anti-wealth sentiment could well affect how conspicuous the rich want to be."
September's sales results also saw luxury stores come under pressure.
Comps dropped 15.8 percent at Neiman Marcus Group, 10 percent at Saks, and 9.6 percent at Nordstrom. With stores in New York, both Neiman, which owns Bergdorf Goodman, and Saks were particularly affected by Wall Street's troubles and by a decline in spending by tourists taking advantage of the weak dollar.
Burt Tansky, Neiman's CEO, said that "based on our September performance and the current economic environment, we expect customer demand will remain weak for an extended period of time."
Speaking to the Journal, Francesco Trapani, chief executive of Bulgari Group, admitted he is cutting back on his own jet-setting lifestyle. The jewelry, luxury-goods and hotel magnate recently sold his 137-foot yacht, and he's holding off on buying any more homes.
"My sense is that this Christmas is not going to be a successful one," said Mr. Trapani. "The things that are happening are so big that it would be silly to assume they won't have an impact."
Discussion Question: How will the global economic crisis impact the luxury sector? Do you see a "rising tide of anti-wealth sentiment" affecting luxury spending?