Jun 12, 2009
You may never have it so good again
Jun 12, 2009
By Mark Potter
LONDON (Reuters) - You've "never had it so good," British Prime Minister Harold Macmillan told the first generation of mass-market consumers in 1957.
"You may never have it so good again," appeared to be the message of many of executives and analysts at the Reuters luxury goods and retail summits this week.
Conspicuous consumption has been dealt a mortal blow by an unprecedented global economic downturn, and is being replaced by caution and thrift, with consumers also planning to spend more time at home and anxious to protect the environment, they said.
"There is a change in the zeitgeist," said Ian Cheshire, chief executive of Kingfisher (KGF.L), Europe's biggest home improvements retailer. "There is almost a theoretical rejection of flat-out consumerism and I think that's related to the loss of confidence with markets."
In business terms, this means consumer spending could take years to recover to pre-recession levels, even when economic growth picks up.
"They were unprecedented times," said Pippa Wicks, a retail turnaround specialist at consultants AlixPartners, of the credit boom years of earlier this decade.
"2007 (spending) levels were a historic high."
William McComb, chief executive of U.S. fashion company Liz Claiborne (LIZ.N), said retailers need to adjust to the "new normal" of lower demand and shoppers focused more on what they can get for their money than what they can afford to spend.
This may involve selling more affordable goods, as U.S. cosmetics group Estee Lauder (EL.N) said it was planning to do for the year-end holiday season.
It may also involve managing stocks more tightly in a bid to wean consumers off the heavy discounting to which they have become accustomed as retailers have rushed to cut inventories.
This could be a challenge. U.S. jeweller Tiffany (TIF.N) said it was having to deal with a growing number of customers trying to haggle down prices.
Luxury brands in particular will have to work harder to justify their premium prices.
VALUE IS THE NEW VALUE
"More than ever when someone buys something of a certain value, they want to feel like a king," said Italian jewelry designer Roberto Coin, whose new Capri Plus range offers pieces of identical design but with different materials that allow price tags to reach down from $50,000 to $2,500.
But the need to assert value for money is increasingly important for all retailers, said Edgar Hubert, president of fashion brand Juicy Couture.
Before the downturn, "the more expensive, the better it was," he said. "I think there's a real rightsizing now happening of what the justified price-value relationship should be."
There will be winners from the new consumer psychology, particularly among retailers offering the cheapest prices.
McBride (MCB.L), Europe's biggest maker of retailer own-brand household and personal care goods, sees a "structural change" in demand as shoppers switch out of more expensive brands, chief executive Miles Roberts said.
Retailers that can tap into consumers' concerns about the environment -- without charging significantly higher prices -- and those focused on the home -- whether selling entertainment products, food or do-it-yourself goods -- may also do well.
"We're seeing something between a thriftier and greener consumer...(and) we're seeing this big shift toward a more home-centred consumer," said Kingfisher's Cheshire.
And there will still be room for luxury brands to thrive, provided they offer other qualities -- like durability and a style that won't quickly go out of fashion -- as well.
"The era of the 'it' handbag has probably gone," said Burberry (BRBY.L) Chief Executive Angela Ahrendts.
But "they're (consumers) still buying handbags ... They want them to last. They want to be able to psychologically know they can carry for them the next couple of years and no one will know how old it is," she said.
(For summit blog: blogs.reuters.com/summits/)
(Editing by Sitaraman Shankar)
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