Conspicuous consumption isn't dead, it's just on hiatus according to a US report on the global luxury industry.
The report found that consumers had tired of the 'bling' trend - such as showy jewellery and handbags - long before the recession took hold of the economy.
Global consulting firm Bain & Company's Luxury Market Update: 2012 studied 220 luxury brands, which included leather goods, fashion, jewellery, alcohol and cosmetics companies that served high net worth customers, or those with assets of $US1 million or above.
The global luxury industry - which has seen steady growth for the last 15 years - contracted by 10% in the first two quarters of 2009 to 153 billion euros (or $US215 billion), compared with 170 billion euros ($238 billion) in the first two quarters of 2008. However, the report's author, Claudia D'Arpizio, says this decrease does not reflect a permanent change in the spending habits of the luxury consumer. Spending is expected to pick up again in 2011, with a full recovery in 2012.
"The downturn simply accelerated a trend that was already in place," says D'Arpizio of the less-is-more sentiment currently popular with consumers. The report concludes that consumers were tiring of the 'bling' trend and would start spending more freely again within the next year and a half. Some other key points from the report:
--While global sales of luxury goods will stabilise in 2010, they will increase by 4% in 2011 and by 7%-8% in 2012.
--Global sales of ready-to-wear fashion will decrease by 15%-20% during the second half of 2009.
--Global sales of jewellery and watches will decrease by 12% during the second half of 2009.
--Men's watch sales are more closely related to the gross domestic product of a country than any other luxury good category. When an economy is lagging, so are watch sales.
--Consumers in emerging markets like Eastern Europe and Russia will begin aggressively spending as soon as the stock market fully rebounds.
--China will see a 7% increase in sales of luxury goods in 2009. The less-developed interior of the country will see increases up to 35%.
--High-end shoes are still selling well because of their accessible price point ($400-$2,000) and perceived quality.
--Luxury brands whose core business is leather goods--such as Louis Vuitton, Gucci and Hermes--will fare better over the next two years than those who focus on high fashion, such as Christian Lacroix.
While many luxury industry experts are in agreement that the sector will rebound come 2011, others believe that this downturn is different from others, and that consumers will permanently cut back on spending, particularly in the United States.
"We've experienced the biggest trade down in the history of the [country]," says Howard Davidowitz, chairman of New York-headquartered Davidowitz & Associates, a retail consultancy and investment firm. "It's a change that will be here as far as the eye can see."