Even the rich are feeling the pinch of this downturn a bit. Some of it is that even the wealthy cut back in bad times (if nothing else, conspicuous consumption becomes a tad unseemly), but in addition, the rich are more levered generally speaking than heretofore, so some may also have good reason for caution.
From the Financial Times:
Inflation in luxury goods and services has dropped sharply in the past year, suggesting even the wealthy are feeling the effects of the downturn.
The Stonehage Affluent Luxury Living Index ….has almost halved to 3.3 per cent in the year to April.
Its London index was running at 6 per cent in 2006-07…. the figure is now more in line with the traditional Consumer Price Index which stands at 3.8 per cent.
Stonehage, the wealth management group which compiles the index, said even ultra-high net worth families appeared to be cutting their discretionary spending on luxury goods and services as the global economy slows.
Deflation was notable in some of the index’s items, including cars and watches…
John Selvadorai of Grange Aston Martin, a car dealer in Brentwood, Essex, said: “We’ve had to sharpen our pencil because we’ve had less people walking through the door.”
Customers “don’t want to be perceived to be spending the money when they’re having to lay people off or not pay people bonuses”.
Darren Street, sales manager at RSJ Sports Cars in Slough, Berkshire, which specialises in Porsches, said: “We get a lot of City customers and people who own their own businesses and I think everyone is affected.”
Property rental prices have also been flat compared with the previous five years which saw luxury rentals rise by 25 per cent.
Robby Hilkowitz, executive director of Stonehage, said: “At the top end, it is a money-oriented population that is well attuned to the markets and so they do tighten their belts even earlier than average consumers.”
However, items in limited supply continued to exhibit big price rises. A case of Lafite Rothschild 2000 wine was up 45 per cent to £13,415, while the global art price index was up 37.6 per cent….
Standing between the egg-shaped Alexander McQueen Empire Bag, retailing at £29,350, and the £43,000 one-off Steiff bear, made of cashmere and gold lamé, is a surprisingly relaxed Paul Kelly.
The credit crunch may be biting at the heels of some of Selfridges’ competitors, but it has yet to make its presence felt in Mr Kelly’s shopping halls…
Meanwhile, Myla, the lingerie maker, says it is still enjoying underlying sales growth in the double digits and is planning on its biggest Christmas yet after opening its fifth standalone store in London this year.
The lower end of the luxury market, however, does appear to have begun feeling the pinch.
“Just in the last few weeks we can see it slightly fraying at the edges,” says Robert Ettinger of the eponymously named leather goods designer and manufacturer, whose wallets typically sell for about £120. “Up to that point I was very optimistic.”