Businesspeople hate uncertainty. And that is what we are
dealing with right now.
We could be on the verge of something very bad, reminiscent
of 2008 and 2009. Or we could just be seeing a bump in the road.
No one knows for sure. But, at this point, most of the
retailers I spoke to say they haven’t noticed any dip in spending in the last few
weeks, despite the very mixed economic news. As Jean-Claude Biver, CEO of Hublot, just told me: “Obviously, the stock
market is not good. But when I see the sales in our U.S. stores, there is a
real discrepancy between what I see and what is written in the newspapers.”
The key measure, for this industry in particular, is what
happens to the high-end consumer. One of the things that made the 2008–09
recession particularly vicious for this industry, and atypical as far as
downturns go, was that the rich stopped buying. As luxury expert Pam
Danziger noted at the time: “The recession is impacting affluent consumers
just as hard as ordinary consumers. It’s hitting them where their wealth is, in
their homes and their investments.”
But, in the last year or so, wealthy buyers have returned.
Sales at high-end department stores have
outpaced sales at stores like Walmart and Kohl’s. So-called “luxury
shame,” to the extent it ever existed, is over; Kim
Kardashian certainly felt no shame in flashing her 20 ct. engagement ring.
When I talk to retailers who specialize in high-end product
why affluent consumers have returned, I generally hear some variation of:
“People got tired of not buying.” And in a way,
the rise of metal prices and other jewelry materials, while it’s priced some consumers out of the market, may have helped on the high-end, as the rich now
see jewelry as a good place to park their money. Says Biver: “The more gold
goes up, the more gold watches we sell. People want to buy a gold watch today
because they think it could be more expensive tomorrow.”
Of course, some fear the recent declines in the stock market
could scare those consumers away again. As one retailer told me: “You don’t
want anything that could give people an excuse for not buying.” Consumer
confidence is another concern; when De Beers used to publicize their diamond
research, I remember one executive telling me there was an almost perfect
correlation between consumer confidence and diamond sales.
Even so, the arguments against pessimism are there, if you
look. Corporate profits remain up, and retail
sales are still growing, if slowly. A survey of economists recently predicted
a 30 percent chance of recession. Now, that’s not the same as zero percent,
and it’s twice as high as a few months ago. But it’s still 70 percent against.
And most of the measures that are down—such as the stock market and consumer
confidence—have a psychological component and could easily rebound. Remember,
this industry is usually the first to feel a recession. So far, jewelers tell
me they really haven’t felt anything, even with the drop in consumer confidence;
things are mostly going as well, or as badly, as they have been. (I think it’s
fair to say that most jewelers are also better prepared for a downturn than
they were last time, with many keeping expenses on or near recession-era
And while consumers have said they plan to cut back spending for Christmas, if you closely examine the survey results, they are almost exactly equal to last year’s—which was generally considered a strong one for the industry.
So we are at a scary moment. But it’s not a dire one.
What are you finding? What are you seeing as the mood among consumers? (Please try to avoid politics in any