Luxury Fever
Consumers are buying up everything from diamond-encrusted handbags and private jets to souped-up trash cans and designer toilets. How long will the boom last?
By Kate Betts

Fall 2004 Style & Design
Michael Kors is a pro at selling expensive clothes to very rich women. At personal appearances in department stores, he has been known to move $85,000 worth of merchandise in just one hour. But this year has been different. This year Kors says his wealthy clientele is out of control—they're spending like it's 1999. One New Yorker ordered two pairs of gold-beaded pants for $8,900 each. At a trunk show in Short Hills, N.J., Kors sold five purple mink ponchos for $7,825 each. Like many purveyors of luxury goods, Kors has seen his business increase 40% in the past year. And that's not because he's selling a lot of T shirts and jeans. "Even younger people are buying more luxury items," he says. "Teenagers are buying our shoes and bags."

Despite rising interest rates, staggering energy prices (gasoline has climbed 30% in the U.S. in the past year) and the general state of unrest in the world, conspicuous consumption is back. According to a study by the Italian association Altagamma, U.S. sales of high-end goods grew 27.7% in the first five months of this year, and consumer confidence is way up, hitting a two-year high in July.

	PHOTO ESSAYS The New Androgyny The A List Bring on the Bling Feast Your Eyes Everything is Illuminated

"Luxury is so prevalent now," says Carol Brodie, spokeswoman for jewelry company Harry Winston. "You see so much heavy-duty cashmere and fur in the stores. It hasn't been like this since the 1980s." Indeed, the fall collections are among the most extravagant in recent history, with fur trim and crystal beading showing up on every tweed coat and charmeuse evening dress. Thanks to the weak dollar against the euro, prices for these clothes are up a whopping 20%, but so are sales. Houses like Hermes, Louis Vuitton, Christian Dior and Gucci have all reported double-digit increases in the second quarter.

"The winds are definitely back in the luxury business," says John Idol, CEO of Michael Kors LLC. "Department stores are doing well again because they are trading up. They know they can't compete with Kohl's and Target." Stores like Neiman Marcus—famous for selling everything from $20 million submarines to $400,000 his-and-hers robots in its over-the-top Christmas catalog—are leveraging the luxury sector by appealing to that 1% of the U.S. that controls more than 30% of the country's wealth. Apparently it's working. According to Neiman Marcus president and CEO Karen Katz, the luxury-goods retailer has sold more alligator shoes this year than in the past three years combined.

It's a pretty stark contrast to a year ago when luxury players were desperately searching for signs of recovery after months of falling stock markets and lackluster consumer confidence brought on by the Sept. 11 attacks. "What's happened is there is a necessity for a feel-good factor for luxury," says Dana Telsey, luxury-goods analyst for Bear Stearns. "With the improvement in the environment, especially after SARS and the war in Iraq, the demand for better products is expanding to all different levels—from the superpremium, like private jets and resort residences, to the accessible Coach."

Awareness of the luxury market has also played a part in the growth. "There is definitely a thirst for higher-end brands because consumers know what quality is, and that's because retailers have taught them how to recognize it," says Telsey. "Now it's about lifestyle—the aesthetic look of the store, the advertising. Everyone wants to be able to live the dream."

That dream extends far beyond fashion. Technology is increasingly one of the places where luxury spenders splurge, from mobile phones to giant flat-screen televisions. Mobile-phone makers are introducing luxury models, such as the $19,450 platinum Vertu, in order to increase sales. And in Japan, because of the change to digital signals there, sales of big-screen LCD TVs have jumped 62%, prompting companies like Sharp to release the $9,000 45-in. LCD Aquos.

According to a recent American Express Platinum Luxury survey, 59% of affluent Americans (those with incomes of $100,000 or higher) would rather spend on experiential luxuries—restaurants, travel and entertainment—than on gadgets and goods. Pam Danziger, president of Unity Marketing, which conducted the survey, says the rise in experiential luxury is directly proportional to the wealth of the baby-boomer generation, which will be profoundly influential on the economy through 2010.

Page 1 of 2   1  |  2   Next > >

BACK TO TOP

Premium Content