Asia’s Luxury Infatuation under Pressure during Economic Woes
HONG KONG ~ During a recent trip to her “expensive” Hong Kong hairdresser, luxury brand consultant Radha Chadha asked her stylist if recent turmoil in the world’s stock markets had affected business.
“I am now offering people shorter haircuts. It’s so they will last longer,” the stylist told Chadha, author of The Cult of the Luxury Brand: Inside Asia’s Love Affair with Luxury.
The question of whether the Asian market for branded handbags, watches, jewelry and fashion will be snipped or scalped by the likely global economic slowdown is dominating retailers’ minds.
Over the past five years, Asia has provided extremely strong profits growth for luxury names such as Louis Vuitton, Gucci and Rolex, Chadha said.
“Asia has been very helpful… in keeping the luxury industry boasting a decent rate of growth,” she said.
High streets are packed with the heavily designed “brand experience” stores, even in second and third tier Chinese cities, highlighting the crucial role the country plays in the luxury companies’ growth strategy.
Glossy magazines heave under the weight of high-end adverts, with a recent 808-page edition of Hong Kong-based lifestyle monthly Prestige tipping the scales at a handbag strap-ripping three kilograms.
But there are creeping signs that the region’s tumbling stock markets could stifle the previously insatiable appetite for the correct brand name.
Japan’s retail sector has been in the doldrums for a while. Sales at department stores dropped 3.1 percent in August from the same month a year earlier, the sixth consecutive monthly decline, the Japan Department Stores Association said.
Staff at one of Singapore’s prime shopping districts said sales of luxury goods had slipped in recent days because of fewer tourists. Customers are buying less and some just browse, they said.
The number of visitors to the city state fell 7.7 percent in August compared to a year earlier.
“We are located in a tourist area and there are fewer tourists now,” said one member of the sales staff in a store selling Prada handbags.
A Japanese tourist coming out of a nearby Gucci store said she had planned to spend S$3,000 (US$2,000) during her trip on branded goods, but recent events had cut her budget.
“It makes me feel guilty to spend more because of the economic crisis,” she said.
Chadha, who is based in Hong Kong, said such behavior was not unusual.
“There is a lot of spending which needs that feel-good factor,” she said.
“When things are going really well, that is when a lot of people go and spend. People are not going to splurge on a bag if they have lost money during the day.”
Despite the negative signs, some top-end brands believe it is too early to tell if the global slowdown has stopped people buying.
“So far there has been no effect in regards to traffic or a decline in sales compared to last year,” a spokesman for the jewelry brand Cartier said.
“The effects of the economic slowdown on the luxury goods sector in Asia remains to be seen. Christmas will be a better indicator in regards to whether the industry will be affected.”
Swiss luxury goods giant Richemont recently said the company enjoyed sales growth of 19 percent in the region during the five months to the end of August, although Japan dropped eight percent.
And the outlets, many long-planned, keep coming.
The Emporio shopping centre in New Delhi was given the go-ahead two years ago and became one of the country’s first dedicated luxury malls when it opened recently, Chadha said.
“Staff there were very positive,” said Chadha, who has visited. Only around half of the plots were filled, Chadha added, although such a situation is not unusual for a new mall.
Whether the Emporio is bustling in six months could be a crucial test of whether the region will overcome the gloomy economy to remain a brand-selling powerhouse.