Luxury shoppers are making a comeback
Picking up a gift at Tiffany & Co. can easily set you back a month’s rent, but here it is on a Wednesday afternoon and more than two dozen customers are packed around the jewelry cases at the South Coast Plaza store, eyeing $8,000 watches and $5,000 diamond earrings.
There’s another crowd gathered at the Louis Vuitton boutique nearby, where popular handbags like the $690 Speedy 30 are sold out. Over at Christian Louboutin, Lefty and Cindy Novotny of Coto de Caza are walking out with a pair of black leather pumps for their daughter. Price: $630.
“People are sick of saving — it’s not fun,†said Cindy Novotny, 54, who co-owns a consulting firm with her husband. “2009 I shopped in my closet, and I said I’m over that.â€
After snapping shut their designer wallets during the recession, luxury shoppers are making a big comeback. Gone are the drastic cost-cutting measures by high-end retailers, who are now reporting renewed fervor for handbags, shoes, jewelry and other indulgences at full price.
U.S. retail sales overall are expected to rise about 3.5% this year, but the trend is even stronger at the high end, with a projected 7% jump over 2009.
That’s an encouraging sign for the overall economy because affluent shoppers wield outsized spending power. The richest 20% of households account for nearly 40% of total consumer spending in the U.S., said Michael Niemira, chief economist at the International Council of Shopping Centers.
Their pent-up desire to spend money is being abetted by the stock market rally, a more stable jobs picture for those who are still employed, and expectations that the economy will continue to show steady, if slow, improvement.
In recent weeks, some of the nation’s best-known luxury retailers, including Neiman Marcus, Saks and Nordstrom, have reported a surge in traffic and sales.
Wall Street likes what it sees. Shares of Tiffany, Coach, Hermes and LVMH, Louis Vuitton’s parent company, are all up more than 45% this year, compared with 11% for the broad Standard & Poor’s 500 index.
Junior Okoro, 40, is certainly in the mood to shop. The owner of a medical supplies company was out on Rodeo Drive in Beverly Hills recently, wearing custom-made jeans, a Gucci belt, a Versace watch and Cartier glasses (a $7,000 outfit, in case you were wondering).
Okoro says business is good, leading him to boost his budget on holiday gifts this year — to $20,000, to be exact.
In addition to buying more for friends and family, the West L.A. resident is splurging on himself.
“I just bought shoes from Cesare Paciotti; now I’m going to Louis Vuitton and then to Versace,†Okoro said. “It makes life interesting, being able to get what you want.â€
With luxury spending on the rise, the Beverly Center in Los Angeles has been adding to its high-end offerings, opening Prada, Fendi and Omega stores in recent weeks; expanding its Dolce & Gabbana boutique; and putting the final touches on a Tiffany location set to open Friday.
“At certain points throughout the recession, we certainly heard talk of ‘Oh, there’s the death of luxury and shouldn’t you lease to some of these less impressive, less luxury brands?’†said the mall’s general manager, Jeff Brown. “We stuck to our guns, and I think at the end of the day those are the benefits that we’re now reaping.â€
Jenni Rivera, 41, recently spent $6,000 on luxury goods from Salvatore Ferragamo and Louis Vuitton at the Beverly Center. The recording artist from Encino said she was spending more this year “because we can†and was surprised at how busy the malls were.
“At Prada, it just takes them longer to check sizes. It happened at Louis Vuitton too,†said Rivera, who had come to the Beverly Center from Westfield Topanga, where she said she couldn’t find any parking.
Because luxury shoppers are recovering faster than other people, it has led to a “tale of two consumers,†said Doug Hart, a partner in the retail and consumer product practice at BDO.
Although affluent customers are spending more freely, many lower- and middle-income Americans are “still very pessimistic and still trying to do everything they can to stretch a dollar,†Hart said.
Luxury sellers also have noticed the vast differences in shopper behavior. Mark L. Aaron, vice president of investor relations at Tiffany, recently said the famed jeweler had had large sales increases in higher-priced categories but declines in sales and transactions below $500.
No one, of course, is saying that improvement at the high end means the economic downturn is over, especially with unemployment at 12.4% in California and 9.8% nationally. Economists say a recovery will hinge on improvement at more than luxury stores and needs to be spread more evenly across the whole economy.
And although they are pleased with this year’s turnabout in sales, many luxury merchants caution that they have not returned to pre-recession levels.
At David Orgell, a Rodeo Drive seller of expensive watches, jewelry and specialty gifts, Thanksgiving weekend sales were up 12% over last year, and businesses are buying corporate gifts again.
But many shoppers who used to buy four or five pieces at once are now limiting themselves to just one item, and businesses are spending less on their employees — opting for $40 gifts instead of $150 ones, Managing Director Korosh Soltani said. And the store’s exorbitantly high-priced items, such as watches costing hundreds of thousands of dollars, are not as in demand as they once were.
Still, Soltani said, “it’s nice to see them coming back and buying.â€
Price wasn’t a concern for Anush Movsesian, who dropped $550 on a Louis Vuitton belt on Rodeo Drive recently.
“I overspend — I have an addiction. I think I’m classified as a shopaholic,†she said, adding that she was going to spend more on the holidays “for sure.â€
But for the 26-year-old Burbank resident, who doesn’t work, the extra spending money has little to do with the economy and more with a way of life.
“This year I’m married, so my budget is a lot bigger,†she said as she got into her white Mercedes-Benz C350, tipped the valet and sped off.
