Luxury Outlook 2008 | Slowdown hits London retail

The one word that would describe the state of the global economy today is uncertainty. With the financial markets in free fall one day and then bouncing back the next day, it's not surprising that people are confused. The same can be said for the fashion industry where record profit announcements one day are followed by reports of same-store sales declines the next day.

Back in January, we argued that the luxury industry was not immune to a slowdown, as some observers might have hoped. This weekend, we decided to go straight to the front lines of the business to assess the mood on the street and in the boardrooms of fashion and retail companies in the UK. While this is an admittedly unscientific approach, it is still useful to hear things from the proverbial horse's mouth.

As it turns out, the horse did not provide much encouragement or optimism for the year ahead.  Our anecdotal research suggests that retailers from the high-end to the high-street are bracing themselves for a serious slowdown as evidence of the 2008 recession in the UK has started to show up in lower footfall and declining sales figures.

Anecdote 1 - Major high-street chain
A senior buyer at a major high-street retailer said to us that sales are definitely trending downwards. But, to make matters worse, they are having a hard time seeing patterns in the numbers to ascertain the best strategic path to take in the months to come. Numbers are inconsistent and areas of weakness differ from store to store. The business appears is engulfed by uncertainty and spirits are low.

Anecdote 2 - Luxury fashion boutique
Sales are down about 5% from last year at one of London's luxury fashion boutiques. Shoppers are coming in and saying that they will only be making one visit this season as compared to 3-4 visits in seasons past. That said, strong products offering value to the customer are still doing well: Herve Leger dresses ("sold out in less than a week"), Stella McCartney prints ("she got the floral trend down best"), Balenciaga bags ("always do well"), and Louboutin shoes ("the appeal of the red sole persists"). But Prada dresses ("don't fit well"), McQueen shoes ("look cheap") and just about everything Chloé ("What were they thinking with that designer -- the pre-collection was horrible") is not moving. The most extravagant spenders are women from the Middle East.

Anecdote 3 - UK Luxury brand
Despite rapid growth of its leather goods business in recent years, word on the street is that Mulberry's Westbourne Grove boutique (which opened in late 2004) is scheduled to be shut down this year. Closing down so quickly has not been uncommon for the independent boutiques along this tony boulevard, but Mulberry is the first major luxury brand to retreat from Notting Hill. Though Mulberry may have kept the boutique open up until now for image reasons, brands are finding it harder to justify  having image stores that don't turn a profit. This does not bode well for other fashion retailers that have recently set up shop on Westbourne Grove, including Ralph Lauren and Zadig & Voltaire.

--

For all BoF readers from around the world who are fashion brand CEOs, luxury retailers or boutique owners, we'd like to hear how things are going for you in 2008. Do you have a more upbeat story to tell?

Comments

[Caricouture]

I'm a multi-brand online boutique owner and my figures are only going up - go figure!

It's definitely true that the retail mood in general is subdued though, but is this entirely down to the economic forecast? A lot of buyers are pointing to the lack of clear trends emerging on the runway, meaning that fashionistas are not being "forced" to update their wardrobes.

Also, a lot of the buzz right now is around labels that most "ordinary" rich people simply will not feel comfortable wearing - Balenciaga, Lanvin, Givenchy, Marni etc. And for all the talk about "it shoes", they simply don't sell the way "it bags" do.

Furthermore, I'm convinced the whole green/eco thing is having an impact as well. People simply have too much stuff and are reluctant to buy more non-essentials because they feel they are destroying the planet and/or exploiting underpaid workers somewhere. The feelgood factor is gone.

[d]

wow,
2 great new articles to come back to.