Shamed Conspicuous Consumers Spend Less

MILAN -- The global economic crisis has generated a new phenomenon: luxury shame, or the shunning of ostentatious purchases of expensive jewelry, watches and fashion, which is largely blamed for the projected 8 percent drop in the luxury market this year.

But a Bain & Co. study released Monday indicates the phenomenon isn't durable, predicting a slight 1 percent increase in the luxury market next year, with full recovery not expected until 2011-2012.

The global luxury market is expected to be worth euro153 billion ($228.25 billion) in 2009, compared with euro167 billion in 2008. The 2009 forecast is a slight improvement over the 10 percent decline in sales Bain predicted for the year in April.

For the first time since it began tracking the sector, Bain said exchange rates had a positive impact, dulling what would have been an 11-percent drop in the worldwide luxury market.

The trend against ostentatious spending hit such luxury items as jewelry and watches especially hard. Watch sales are screeching to a halt, forecast to drop 20 percent to euro20 billion this year, Bain said, while jewelry sales are expected to drop 12 percent to euro6.8 billion.

Conversely, online sales are projected to rise 20 percent, to euro3.6 billion worldwide in 2009.

"It is much more private," Bain partner and luxury goods expert Claudia D'Arpizio said. "You just click. There isn't all the ceremony of paying for the item and making the sale at the cash register."

Women this year opted to "shop their closets" and accessorize to update their wardrobes rather than buy new clothes, precipitating an expected drop of 12.5 percent to euro20 billion in womenswear sales this year. Leather goods sales are expected to drop just 4 percent to euro18 billion with shoes dipping just half a percent to euro7.8 billion.

When they did buy new clothes, women tended not to snap up fancy pieces that could only be worn on certain occasions, but rather evergreens, D'Arpizio said

Cosmetics and fragrances -- areas that D'Arpizio expected to be durable -- actually hit hard times, dropping 5 percent and 3 percent respectively (to euro19.8 billion and euro16.9 billion) as women went down market, going for supermarket brands rather than the euro300 creams -- the so-called "Nivea effect."

"Frugality is fashionable," D'Arpizio said, even for the wealthiest consumers.

Geographically, luxury sales in America are taking the biggest hit, with Bain estimating a contraction of 16 percent to euro44 billion in sales in 2009, while Europe is expected to be down 8 percent. Asia Pacific, excluding Japan, is forecast to grow by 10 percent, boosted by China, which is expected to grow 12 percent to euro6.6 billion.

The Japanese market continues to slump, with a forecast drop of 10 percent.