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Rich consumers shop for bargains, hunker down

A man stops to look at a Saks Fifth Avenue window display in New York. Wealthy Americans are slashing their spending at a rate unseen in decades. Luxury sales overall dropped 34.5 percent in the first week of December.Associated Press photos (Associated Press photos / The Spokesman-Review)
A man stops to look at a Saks Fifth Avenue window display in New York. Wealthy Americans are slashing their spending at a rate unseen in decades. Luxury sales overall dropped 34.5 percent in the first week of December.Associated Press photos (Associated Press photos / The Spokesman-Review)
By ANNE D’INNOCENZIO Associated Press

NEW YORK – The rich are tightening their belts, too. Even if it’s still a Gucci.

Faced with the sharpest decline in net worth in nearly 50 years, wealthy Americans are slashing their spending at a rate unseen in decades – a move that could have dire consequences for the economy, luxury stores and high-end brands.

In response to the increasingly subdued shopping mood that began late last year, luxury brands are cutting their inventory, changing the assortment of products they offer and tweaking their advertising message.

“Fewer, better things,” suggests diamond jewelry giant De Beers Group in an ad campaign.

Sure, many of the ultrarich aren’t exactly scrimping. Some are still dropping $100,000 on a fur coat or $600 for a pair of shoes – but increasing numbers who were never bargain-hunters are picking through mounds of discounted designer goods to save money in an uncertain time.

And why not? Deep discounts are making it a great time to stock up on high-end clothes and accessories, whether it’s a Chanel suit, a Prada bag or a $1,000 pair of Christian Louboutin shoes with their bright red soles.

Luxury sales overall dropped 34.5 percent in the first week of December from the same period a year ago, according to SpendingPulse, a data service provided by MasterCard Advisors, and were down 23 percent in the five weeks ending Dec. 6.

Such behavior differs dramatically from even just a year ago, when luxury stores couldn’t keep up with the wealthy’s appetite for extravagance. A-listers wanted $5,000 handbags, not the $500 versions they bought in the past.

But the financial meltdown has deflated the demand that reigned for much of this decade, resulting in plummeting sales for many luxury purveyors. That has forced high-end stores like Saks Fifth Avenue and Neiman Marcus to offer discounts of up to 70 percent before the traditional start of the holiday shopping season – akin to their downscale competitors.

The aspirational luxury shoppers, those whose average annual salary is about $150,000, began cutting back a year ago, according to Milton Pedraza, chief executive of the Luxury Institute, a research firm. That spiraled up the economic scale after the economy worsened.