Make us your home page

Luxury goes underground

RALEIGH, N.C. — European vacations are not mentioned at holiday cocktail parties. Purchases of luxury automobiles and vacation lodges have been put off. The clubhouse exchange of luxury bric-a-brac, customary at the holidays, is toned down.

Across office suites, dinner parties and foundation boardrooms, inconspicuous consumption is the new recessionary etiquette.

To do otherwise at a time when neighbors and family members getting pink-slipped is considered simply poor taste. The tokens of success — a Cartier timepiece, Christian Louboutin shoes — are being worn more discreetly, or not at all.

"It's sort of crass," said Grant Yarber, chief executive of Capital Bank in Raleigh, N.C. "For a lack of a better term, it's really in-your-face, and there's really no need to do that to anyone."

Some have dubbed it luxury shame. Others say it's anxiety and fear over dwindling fortunes. Either way, many wealthy consumers are "feeling a tad defensive about luxury," noted a recent report issued by the Luxury Institute, a market research and consulting firm in New York.

But the sensitivity also underscores the sudden vulnerability that lawyers, doctors and executives feel in the wake of Wall Street's collapse.

Nearly 60 percent of the rich — defined as having a net worth of at least $1-million — plan to spend less next year, according to a fall survey for Elite Traveler, which bills itself as the private jet lifestyle magazine. The luxury consumer confidence index, as measured by Unity Marketing in Pennsylvania, has dropped by more than half its value to an all-time low.

Luxury sales fell 23 percent in the five weeks that ended Dec. 6, according to SpendingPulse, a data service of MasterCard Advisors. First-quarter sales at luxury department store Neiman Marcus fell 14.5 percent for stores open at least a year, leading declines at rivals Saks and Nordstrom.

And one of the most public statements of excess — the Lexus in the driveway topped by a giant red ribbon — may be pulled into the garage. This year, red-ribbon luxury car sales are down to 45 cars, from 60 sold last year, said Jeremy Bridges, general sales manager at Johnson Lexus of Raleigh.

Bridges said clients say they are able to afford the cars, but they're less eager to commit.

"If you're worth $10-million today, and tomorrow you're worth $7-million, it does something to your psyche," said Michael Brader-Araje, president of Durham, N.C., luxury watch distributor Louis Moinet North Carolina. "We're entering a time period right now where people don't want to show off their wealth."

But that doesn't mean they all aren't buying.

Brader-Araje's business specializes in watches that start at $7,800 and top out at $850,000 for a 14-karat Magistralis gold timepiece that contains a piece of moon rock. Brader-Araje has not sold a Magistralis since it was introduced in November but said "there are two very interested buyers at the moment."

The fear of offending someone has become more common, said Paul Pittman, managing director of Preferred Client Group, a private wealth management firm in Cary, N.C. Among clients, even a friendly holiday gesture can be fraught with unintended consequences.

"They've curtailed their gift-giving dramatically, because they don't know what the other family member can or can't afford," Pittman said.

For instance, he has one client who is putting off a long-planned purchase of a Mercedes-Benz in deference to a neighbor who lost his job.

Much of the restraint comes from a looming sense of insecurity that no one is immune from the economic vicissitudes, said Peter Scott, who recently retired as chief financial officer of Progress Energy.

"Financial distress doesn't discriminate on the basis of wealth," Scott said. "I don't know anybody, no matter what their wealth spectrum is, who hasn't been rocked by this crisis."

Luxury goes underground 12/27/08 [Last modified: Thursday, November 4, 2010 2:28pm]
Photo reprints | Article reprints

Copyright: For copyright information, please check with the distributor of this item, Tribune News Service.

Join the discussion: Click to view comments, add yours