Versace
Recently announced it was closing all thirty (30) of its stores in Japan.

New World
A new world is likely to emerge in which designers rebel against long lead times and where they take their collections directly to the consumer through their own boutiques, trunk shows, and over the web.

Web Sales
Web sales are projected to reach $156 billion in 2009, representing 6% of the total U.S. retail pie

The Web Fashion Consumer
Consumers have come to expect new merchandise more frequently, thanks to the web and fast fashion retailers such as H & M. Many cannot understand why they have to wait 6 months to see the fashions seen on the runways. Buyers at department stores generally base their orders on the past, while fashion editors gravitate to the most photogenic and future looking styles, leaving the consumer stuck in the middle. This results in one facet of the fashion industry looking forward and the other looking backwards. The consequence: a consumer on one hand is told what to buy but on the other, not where to buy it.

In response, a new generation of fashion retailers is emerging on the web where news is freely given and fashion is sold. Net-a-porter with average sales of $820.00 per transaction and customers from 170 countries is one example of this new generation of merchants. The company has successfully merged its web retail site with a fashion news site catering to a new consumer who wants credible news over magazine advertisements and the most up to date fashion now.

Entertainment
Families spent 5.1% more on entertainment in 2008 than in 2009, something that has surprised many economists. As consumers tightened their pocket books and wallets one would expect entertainment to be one of the first categories to see significant decreases. But the 5.1% increase in spending equated to 16.5 billion more dollars spent in the category over 2007.

Household debt
The American family is trying to put money into savings and reduce their overall debt, but they are clearly not faring as well as one might expect in this recession. Household debt now amounts to about 125% of after tax income.

High Net Worth Individuals
Luxury retailers are faced with a significant decline in Americans with a high net worth defined as having $1,000,000 of assets available for investment. In 2008 the assets of these individuals dropped by as much as 22%. The result is a major decrease in sales at retailers such as Neiman Marcus where sales have decreased by over 20% in 2009 over 2008.

Consumers preoccupied by loss of job security, depleted retirement accounts, and lower home values are not in a buying mood unless it is for necessities like food and the basics with an occasional splurge on experiences and dining out.  This new commitment to frugality is profound and not likely to go away even after a full recovery is under way.  Frugal, practical, bargain hunting will be the operative words when describing the new consumer.

As signs of a recovery increase, store performances over the next several months are going to be very telling for a number of reasons.  First of all, back to school sales have always been an indicator of the upcoming holiday season where retailers typically generate over 30% of their sales and as much as 60% of their profits.  Secondly, we are only about 75 days out from the one year anniversary where we began to see sharp decline in sales last year.  If sales continue to decline throughout the balance of 2009 you will then have a layering of sales decreases over sales decreases.

Typically, when a store has consecutive monthly decreases in comp stores sales, the decreases become less and less as they reach the anniversary of the beginning of the decline.  As an example, Abercrombie & Fitch started off last year’s back to school sales period with flat to marginal sales increases.  Then everything hit the fan last November when many retailers, Abercrombie included, experienced 20%+ decreases.  Now, as they approach the back to school period again one could expect that sales decreases would slow and then modest increases could be expected since they are going up against such dismal sales from 2008.  But retailers are not going to risk another holiday season with steep mark-downs.  They are therefore being very cautious and not stocking their stores with goods that will only need to be marked down to move off of the shelves.  But, the consumer may demand sales and big discounts on the limited merchandise.  If this is the case, this Christmas may turn out to be a disaster for many retailers.

• Consumers are proving that there is a market for small dollar amounts for on-line content.   Ring tones, cheap internet calls through Skype, iTunes and more are ringing up big dollar amounts on micro-transactions.  It was once believed that consumers would not pay for on-line content and the only way to profit was through on-line advertising and monthly subscription services.  Now advertising revenue for the time being is not as profitable as once thought and consumers expect information to be free.

Home accessories, a luxury in a down market

• Little luxuries in depressed times cheer people up.  In the down market designers of big ticket furniture items are facing a major challenge.  A few smart ones are adding well designed home accessory collections to their offerings.  But this is not just about pure design; consumers also want functional products that are long lasting, something that the discounters do not provide. Consumers of high quality furniture are attracted to premium materials and finishes and high levels of craftsmanship.
• Home gift and table top retailer recently engaged famed British Architect Zaha Hadid to design a collection for the company.
• Unlike big ticket furniture, home accessories can change by the season to better reflect both design and fashion trends.

Aspirational and luxury retail taking a hit

• Luxury brands in the recent economic boom of 2003-2007 focused on their existing trade with a greater variety of high priced goods, but often with perceptible reductions in quality.   The luxury brands also sought to expand their empire by attracting new aspirational consumers by opening more points of purchase to reach a larger market and by developing new products at lower price points for those who aspired to step up to the brand.  This resulted in more consumers paying more for premium goods.  But just a few years later, the consumer at all levels has traded down and perhaps to never return to the same level of consumption, in this generation.

Cinemas – New Affordable Indulgences

• Affordable indulgences such as cinema sales are doing very well in today’s economy.  With cut-back dollars in the pocket from consumers trading down, saving more, eating out less or at lower priced cafes, and deferring of large purchases a night at the cinema is considered to be a just reward for all of the hard work.

Consumers rethinking green

• The public no doubt has a real concern for the environment but may not be as committed to paying for green and ethical as one may expect.  Recent studies indicate that less than 50% of the market would only pay 10% more for social conscious products.  This brings into question the viability of ethical shopping for green, and organic, fair trade in depressed economic times.  Apparently, it is easier to take the moral high road in good times.

Decade of Decadence

• The decade that offered affordable luxuries, premium upgrades, and aspirational obtainment is over and may not ever return.  Our research indicates that consumers are leaving high end trendy and flashy brands for more classic looks.
• Luxury brands are rethinking their business models and no longer will brands have the latitude to support the lavish excess of the industry.  Logic and business sense will preside over the more creative aspects of the industry.  New luxury brand strategies for success in the past boom economy include:  first, the number of collections are going to be reduced which will decrease design costs; second, established brands are going to move away from lavish print advertising and focus more on in store events; third, the number of flagship and anchor stores in a chain will be reduced; fourth, brands will open and control their own outlets as opposed to selling their goods in department stores;  and finally, the luxury business is going to find a way to do business without the lavish excesses of the past consisting of fashion shows; celebrity designers; and other similar expenses.

Off-Target

• Consumers at all levels are trading down, including shoppers of Target who are trading down within the store, which caught the chain off guard while sales at Wal-Mart continue to increase.  Sales at Target, the more upscale of the two discounters continue to show little life.  It has been reported that the Target upscale shopper has now moved to more downscale and lower margin items within the store, thus reducing higher profits from better margin goods required to support a lower price structure on other more basic items.  Non-discretionary items such as healthcare and baby products and food have been the best sellers, while apparel and home products have been weaker.

Form Follows Beauty?

• Luxury consumers want more than function and form and look for products with meaning:  Smart brands are positioning their products as sources of serenity, well being, beauty and harmony.

Shopping Less for the Best

• High end shoppers are still shopping, in part for recreation or something to do, but instead of buying multiple products or shopping numerous stores they are tending to make fewer high dollar purchases at a limited number of stores.  This trend of consuming by looking needs to be carefully followed.

End of the diamond myth

• High quality, certified and graded diamonds are now being sold at 70% discounts, by the online discount Retailer Brand Alley.  Supplied by the same laboratory that supplies De Beer’s diamonds, consumers now have a new access to the luxury of precious stones.

Teen market shift

• Leading teen retailers Abercrombie and American Eagle are consistently reporting significantly lower sales in same store sales over last year while the Buckle is report strong sales.  Sales for Abercrombie have been down 20% and more while American Eagle has seen rent sales decreases in the 7% range.  Conversely, the Buckle offering a combination of national brands and pricing is seeing sales increases of +20% and more.  The reason:  The teen market may be changing to one which is seeking a little more diversity than the simple jean and Abercrombie T-shirt.  Additionally, Abercrombie has kept prices high despite competitors’ markdowns.  In regards to American Eagle, in recent years the company has increased its price points and decreased the percentage of national brands in favor of its own brand.  On paper it looked like an accountant’s dream strategy to improve margins, but the consumer has not bought it.

Like-for-like sales, which do not include sales from new shops, fell 1.2% – the ninth fall in sales in the past 10 months.

The BRC said continued economic uncertainty was leading consumers to tighten their belts.

The fall was exacerbated by the fact that Easter fell in April this year but in March last year.

As a result, March’s figures did not include the traditional boost from Easter sales.

Expensive items suffered the the most pronounced drop last month, with furniture sales falling to their lowest level in at least nine years.

‘Tight control’

Meaningful year-on-year comparisons were also made more difficult by the unusually cold weather in March last year, the BRC added.

“Customers are still worried about jobs and their own finances, so they are keeping spending under tight control,” said Stephen Robertson, director general of the consortium, which compiled the figures along with consultancy firm KPMG.

But there were some sectors that saw sales increase.

Non-food internet, phone and mail-order sales, for example, jumped by 10.8%.

Food, clothing and footwear sales also rose slightly.

Total sales in March – which includes new store space – were up 0.6% from a year go.

“A slight air of pre-spring optimism tempted customers to buy new season clothing and women’s footwear,” said Mr Robertson.

“But this is unlikely to be the basis of any sustained improvement,” he cautioned.