Oh Dior: Luxury brands dragging recovery chain
Tourism reliance slowing sector’s Covid rebound, says retail boss
While overall retail sales are picking up, one category i s feeling the pinch of the Covid- 19 pandemic much harder. Marketview data shows sales in the luxury retailing segment of the market were down 41.1 per cent in the five months from April to August.
Spending in the category has almost halved to $ 28.7 million in the period, down from $ 48.7m over the same period in 2019. These figures do not include cash transactions.
In August, which included a period of Auckland’s return to level 3 lockdown, sales in the luxury segment decreased by 42 per cent on activity in July. Spending in July was down 2.6 per cent on the same time a year earlier.
With Kiwis grounded in New Zealand, and international travel off the cards over the past six months, New Zealanders have had more money in their pockets and have been willing to spend more domestically on discretionary goods. But perhaps not so much at the high- end tier of the market.
The Marketview data, which canvasses activity among luxury brands including Louis Vuitton, Prada, Gucci and Tiffany & Co, among others, shows July was the best month for spending since January, however July levels were still down on the same time last year.
Sales of luxury cars, art and collectables have touched new highs in recent months, but this has not been the case for the likes of a pricey handbag or apparel.
There has, however, been a trend towards more being spent on jewellery.
Retail NZ figures show retail spending since the nationwide lockdown in April has been up in the months of June, July, August and September, despite a second, Auckland- wide, lockdown at the end of August.
Economists put this down to a combination of low interest rates, a strong housing market underpinning spending and consumers spending more domestically as the
borders remain shut indefinitely.
The encouraging spending trends, however, are not expected to last as the increase in domestic expenditure i s not expected to cover shortfalls in purchases by international visitors over the peak summer months.
And despite monthly increases, collective spending over the past six months is down almost 3 per cent.
October to January is typically the most lucrative period for luxury goods retailers, likely due to the higher number of international visitors. But with the borders still closed for tourists and a transtasman bubble still not in place, declines are expected to continue.
Auckland’s lower Queen St in recent years has been evolving into a luxury retailing precinct. It is now home to Prada, Dior, Gucci, Louis Vuitton — and typically queues of eager international shoppers — and will soon welcome the country’s first Bulgari store, operated by French multinational LVMH.
Fashion brand Moncler i s also expected to take up a tenancy in the area, on the corner of Queen St and Customs St.
Greg Harford, chief executive of Retail NZ, said the drop in spending among luxury goods retailers could be attributed to fewer international students and next to no visitors in the country, groups which typically frequented this type of stores.
“They are mostly big international firms so they’re not going to disappear any time soon. But what we might see . . . is some assessing about whether they can survive in the New Zealand market,” Harford told the Weekend Herald.
“There is still clearly a market for those high- end products, where these retailers will be impacted is by the tourist i ssue. They are there often, though, to support the inbound tourist market and visitors to New Zealand and there are lots of uncertainties around when or if visitors will resume.”
Harford said luxury retailers’ sales had not bounced back as quickly as those of other more affordable chains as its core demographic was missing from the market
Retail expert Ben Goodale, chief executive of Auckland- based marketing agency Quantum Jump, said it was not surprising that luxury apparel sales were down. New Zealand was generally not a brandconscious society, he said.
“Handbags, shoes and jewellery from high- end global retailers like Gucci and Louis Vuitton tend to appeal to high- net- worth visitors and a much smaller subset of the local market so it’s not a huge surprise their sales are down,” Goodale said.
“By contrast, sales of luxury cars, art, high- end hi- fi and electronics, kitchens and other home luxuries are doing really well, fuelled by better- off Kiwis who have spare disposable cash because they can’t go overseas this year.
“The domestic market is spending here some of what they might have spent overseas, whereas retailers reliant on visitors are likely to continue to experience reduced sales until the tourists return,” said Goodale.
Many Kiwis, ironically, included shopping at luxury brands as part of their overseas travel, which could be another reason why some Kiwis were not splurging on luxury apparel and handbags, Goodale said.
Kiwis’ readiness to spend unused travel budgets domestically hasn’t extended to luxury brands.