Luxury spend dented by crisis

NATIONAL: Financial analysts have offered mixed opinions on the impact the credit crisis could have on Australia's luxury goods market. In an interview with The Australian Financial Review (AFR), JP Morgan chief economist Stephen Walters said luxury consumers would be hit hard by current conditions. 

"The very market that's supposed to be supporting that kind of retail is going to suffer," he said. "I think the boom in so-called boys' toys is over. We'll see a decline in luxury cars, jewellery, furniture and electronics."

However Citigroup retail analyst Craig Woolford told AFR luxury consumers would instead opt for premium brands and products that offered "investment" value.

"In some cases, they are actually trading up to a better quality product."

A recent consumer study by US-based consultancy group Unity Marketing - which has consulted to premium powerhouses Cartier, The Gucci Group and Swarovski - indicated both arguments hold some weight.

Conducted after the stock market decline on October 3, the study found consumers were shopping less often and more strategically by making lists, comparison shopping and doing their research before entering stores.

Unity Marketing surveyed 1,200 luxury consumers with an average income of $209, 500.

"These new shopping patterns are going to put additional pressure on struggling retailers, who traditionally have looked to the upper income shoppers to bolster their revenue," the study concluded.

Unity Marketing's Luxury Tracking Study for 3Q2008 showed the average amount consumers spent on luxury remained flat from the second to third quarter.

However, director Pam Danziger said in 15 out of the 21 product and service categories studied, consumers spent more on average in the third quarter as compared to the previous quarter.

"The fact that total spending remained flat by luxury consumers spent more on average in 15 different categories indicated that affluents are buying luxuries more selectively and more carefully."

"They are splurging on fewer items overall."