Times are Tough in the Luxury Market

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During the darkest days of the Great Recession, the one segment of the retail world that seemed to be immune to hard times was the luxury market. The ultra rich still had money to spend and were happy to spend it on Swiss watches, designer handbags and other symbols of their wealth and status. Now it looks like those days are over as some of the world’s most famous names in luxury goods are facing some difficult decisions and unexpected competition.

Apple is China’s Top Luxury Gift

Apple-Store-China-

The Chinese market is of utmost importance to any luxury brand as the country’s wealthiest people love their fine watches, bags, electronics and other pricey items. Unfortunately, the crackdown on luxury gifts by the Chinese government has put a crimp in the buying habits of the superrich.

A new report from the China-based luxury publishing group Hurun Research holds ominous news for some makers of luxury products as an unlikely name tops the list of most-wanted gifts among the well-heeled: Apple. It seems that the country’s wealthiest folks would prefer receiving an iPhone or iPad to a Gucci bag. Here’s how Hurun sees it: “The upcoming Chinese New Year would be the peak of gift giving in China…..Apple has become the most eye-catching gift brand this year.”

Apple tops the list of most-desired gifts for both men and women, followed by Louis Vuitton, Gucci, Chanel, Montblanc, Moutai, Hermes, Cartier, Bulgari and Samsung for the guys and Chanel, Louis Vuitton, Dior, Hermes, Cartier, Tiffany, Giorgio Armani, Samsung and Gucci for the ladies.

These legendary makers of luxury items can take solace in the fact that the Apple Watch will not go on sale until after this year’s Chinese New Year, which happens on February 19. That means they have one more holiday to sell their wares to the wealthy citizens of China before going up against Apple’s first wearable device.

 

Look for Mergers in the Luxury Market

 luxury watch

China is not the only world market where luxury brands are facing challenging times. After many boom years, they are dealing with falling demand and the recent rise in the value of the Swiss franc. The latter is likely to cause a sharp increase in the prices of fine Swiss made watches.

Wall Street analyst Mario Ortelli of Bernstein believes that the smaller privately held brands like watchmaker Audemars Piguet and fashion line Giorgio Armani may be ripe for takeover by large conglomerates that are flush with cash. Other famous names that Ortelli named as likely takeover targets include Chanel, Chopard, Versace, Patek Philippe and Rolex.

Why are these revered brands now facing hard times? According to Ortelli, they “cannot stretch the brand,” because they “have to maintain that allure and exclusivity.” At the same time, they “have to be in markets like China, where subdued demand [recently] makes the market more challenging.”

Those most likely to acquire some of these troubled brands are conglomerates like LVMH, Kering, Richemont and Swatch Group. It’s a jungle out there for the longtime rulers of the world of luxury goods and only the strongest are likely to make it out alive without getting swallowed up by a bigger fish.

 

 

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