Recession Fears Bring "Mass Luxury Movement" To An End

The aspirational upper-middle-class customer who helped companies like Coach and Saks post double-digit growth in the past few years has disappeared due to the current rotten economy, writes BusinessWeek. The result: luxury goods companies that expanded their product lines to appeal to the not-quite-rich now have $150 purses and nobody to buy them. Coach went so far as to offer coupons recently “to drum up sales.”

Take Tricia Ehrlich, a 38-year-old mother of three in East Setauket, N.Y., who runs her own online boutique. Ehrlich has a soft spot for classy jackets and matching shoes; in November, she spent $300 on a Perry Ellis black shearling textured jacket and bought a black suede Coach bag for $250. But Ehrlich has shelved plans to make a purchase this winter. “I’ll probably hold off until spring. We spent a lot on refurbishing our house last year, and I know we’re not going to reap the benefit of that, so the last thing I need right now is another jacket,” says Ehrlich.

“The Death of Mass Luxury” [BusinessWeek]
(Photo: Getty)

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  1. Kounji says:

    Coach handing out Coupons. What’s next dogs and cats getting along?

  2. AlisonAshleigh says:

    …and where were these coach coupons? I bought my boyfriends sister a bag, wallet, scarf & keychain for her Bday and that kinda would have come in handy.

  3. trujunglist says:

    Must buy new and incredibly expensive jacket in spring! Must make up for lost time consuming brand name merchandise asap…

  4. UpsetPanda says:

    Luxury is relative to income, I think. I crave Dooney & Burke’s hayden bag…am I going to run out and spend $500 on it? No, but I can. It’s in my realm of affordability.
    [www.dooney.com]

    To someone who makes $300K a year, this might be spare change. For someone making $13K a year, not so much. Yet many people making $13K a year go into debt because society wants to tell everyone that they too, can afford that $250 “luxury” purse. It’s all about status, and how companies have created the idea that if you’re not wearing a gigantic C on your pure, no one will know it is a Coach bag, and no one will see how wonderful and rich you are. No thanks. Give me the discreet logo anytime. Luxury is about subtlety.

  5. crescentia says:

    I think anybody who spends a ton of money on a pruse ought to really rethink their priorities.

  6. m4ximusprim3 says:

    I quite enjoy these stories about how people who were pretending to be rich are now realizing that it’s not a good financial strategy. The start of a recession is always vindicating for those of us who preach consumer responsibility.

    Then our stuff devalues as well, and we cry like the rest. But man, this first year feels goooood.

  7. karlrove says:

    You know you live in a rich country when “cutting back” means holding off on that $300 jacket.

  8. UpsetPanda says:

    @JD: Typo demons strike again! “purse” not “pure”

  9. lightaugust says:

    If I could name 10 trends I’m glad to see go, I think this luxurious crap trend would be about 8 them.

  10. Imaginary_Friend says:

    What? No way!

    Whatever happened to that old chestnut that boasts these types of customers are “not price sensitive”? Come on, Richies! Shop, shop, shop! America needs you! Trickle down economics works, y’all.

  11. B says:

    @crescentia: Yea. For that much money you could get a Wii.

  12. Starfury says:

    Why spend $500 on a purse. Get something worthwhile like the Lego Millennium Falcon…5000 pieces for $500.

    [shop.lego.com]

  13. Pithlit says:

    Well, if this puts a damper on the high end brand fetish that our culture seems to have, maybe that’s a silver lining. I know that fashion has always been about the high end labels, but it seems that it’s really crept into the mainstream pop culture lately. Sure, I’d take our country not going into a recession any day. But it is sort of refreshing to hear that maybe people are getting a little more sensible about how they spend their money, and realizing those ludicrously over-priced red soled shoes really aren’t necessary for a full life and sense of wellbeing.

  14. MyCokesBiggerThanYours says:

    I hate this recession talk. The mortgage and real estate industries had an adjustment coming. It was obvious and talked about for at least 5 years.

    I think the media is doing us a disservice by hyping the recession talk and scaring people in to making a recession a reality.

  15. ManicPanic says:

    @AlisonAshleigh: These coupons are showing up in the most random of places–my boyfriend got sent one (he is on the mailing list) and so did my mom–don’t know if she is on the mailing list. They are for 25% off which is pretty substantial on many of their items.

    @JD: I concur with your sentiment.

    HOWEVER I don’t see an issue with having a nicer bag to take to work functions where you meet and network with people. That is the same as saying cheap suits are okay for business.

  16. TWSS says:

    Yet more evidence that an economy based on citizens’ consumer spending growing exponentially is unsustainable.

  17. ManicPanic says:

    PS and by nicer bag I mean something in the coach realm, not louis. Thought I should clarify!

  18. MyCokesBiggerThanYours says:

    @Imaginary_Friend: Trickle down economics creates jobs. Employment is not the issue in this so called coming recession. This recession is caused by the subprime loan fallout – the people that trickle the money down.

  19. ChrisC1234 says:

    I don’t know… to me, it seems like you should not spend more for a purse than you’d actually carry in it. But then again, what do I know; I’m a guy and would never carry a purse. My wallet cost a grand total of $30.

  20. crescentia says:

    @B:
    I bought a PS3 instead. At least it’s multi-purpose, I can watch movies on it AND play Oblivion.

  21. MyCokesBiggerThanYours says:

    @TWSS: Without consumerism there in’t an economy. The only way money is exchanged is buy selling stuff. The only reason to employ people is to make stuff to sell. I don’t think you understand what the word “economy” means.

  22. Geekybiker says:

    @Starfury:
    The 3ft star destroyer is a better buy at $269….

  23. MyCokesBiggerThanYours says:

    @crescentia: I can play movies on the Wii. I am not sure what you are getting at.

  24. Murph1908 says:

    @m4ximusprim3:

    LOL

    I felt the same way about the gas prices. The first year, I was laughing at the Hummers and Expeditions. Now, I am all out of joviality.

  25. boxjockey68 says:

    500 bucks on a bag? That’s half our house payment.

  26. UpsetPanda says:

    @ManicPanic: I totally endorse treating yourself once in a while to something expensive or indulging in a bit of a shopping spree. I guess I’m more talking about people who treat it as more of an obsession, and they just keep on buying $250 bags and it adds up.

  27. Murph1908 says:

    Though, I really have noticed fewer of the ridiculous Hummers on the street. Funny thing about those pieces of junk, they were just an Expedition chassis with a square body. It’s the biggest sham in the industry.

    Then, every time Mike and Mike would say, “And that’s what we call the Hummer Press Pass.” on their sports talk show, I would chuckle at the irony. The Hummer Press Pass was supposed to be “the backstage pass to the sports events” and billed as something special. But every time, it was just the everyday talk with the claim staked on the end.

    Just like the Hummer itself, it was the same old vehicle, marketed up look like something special.

  28. youwantedahero says:

    @Pithlit: oh, honey, the people that can afford louboutins are going to keep buying them… we’re not talking $800-plus shoes here… we’re talking about a slightly different breed of consumer – i like to call them the “aspirational rich”.

  29. UpsetPanda says:

    @boxjockey68: Yeah $500 is kind of nuts for a purse but I really, really like that purse. :) But the logical person in me is saying “but you need to eat.” But I’m sticking to my $11.99 (whoo! sale!) NY & Company purse. No tacky “NY” logos everywhere, just two discreet “NY&C” logos on the metal buckle accents.

  30. youwantedahero says:

    @Murph1908: hummers aren’t on an expedition chassis! those are fords, hummers are gm. I think it’s a tahoe chassis, but yeah, we get the point.

  31. UpsetPanda says:

    @youwantedahero: I also love louboutins…I love them from a distance, since I won’t spend $800 on a pair of shoes. But, I’ve found that Bakers makes shoes (or sells shoes from a company which makes these) with the red sole, like louboutins…call them louboutin wannabe but they’re still gorgeous shoes and it’s the red sole that makes louboutins distinct anyhow.

  32. ARP says:

    YOUWANTEDAHERO: Agree with the “Aspirational Rich” comment. That’s what these companies market to: those who are not wealthy, but are obsessed with status and will attempt to buy there way into a higher income bracket by spending on purses, shoes, etc. With the credit crunch, a big source of their income is gone (credit cards and home equity). Some will sacrifice other things to maintain their appearance. However, some will simply be unable to do so. Hence, the decline in “Aspirational Rich” brands like coach, LV, Diesel, D&B, Cole Haan (borderline), etc.

  33. TWSS says:

    @MyCokesBiggerThanYours: And I don’t think you bothered reading my comment. Or did you decide to skip the word “exponentially” because you had to look it up?

  34. youbastid says:

    @boxjockey68: I wish I could find a house where $500 is half the payment!

  35. Pithlit says:

    @youwantedahero: I realize this. I was referring to our cultural obsession with the stuff that’s on that level. I just saw a commercial today where the pair of shoes the woman took off at airport security had red soles, which is why I thought of that. And it seems every celebrity photographed has them. Someone on one of those fashion makeover shoes claimed every woman should treat herself to a piar. For something that few can afford, they sure are ubiquitous nowadays. I just made a quip about the red sole because it is so distinctive and easily identifiable. I also think they’re included in the high end luxury category, so if the whole industry is suffering, they may at least feel a pinch. But, mainly, my point was maybe this will effect an overall attitude change toward such luxury items, not that rich people will stop buying them.

  36. Pithlit says:

    @youwantedahero: And it’s not like I’m anti-Loboutains. They are beautiful shoes, and if I were uber-rich and lived a lifestyle that entailed wearing those kinds of shoes I’d probably buy a pair. I’m not anti-quality and design, I just wish society didn’t place so much value on the ability to afford these things. I think that’s why the aspirational rich buy the status symbol stuff they really can’t afford. They hear the constant reference to those things. They hear “Every woman should treat themselves to these 800 shoes” and feel “I’m not worthy because I can’t afford them”. We’re bombarded with these images and many people are affected by it. I’m aware it’s probably wishful thinking that it will ever change, regardless of the condition of the economy.

  37. bohemian says:

    This article brought up a question. If you buy something in a real high end luxury store do they demand your phone number and a bunch of other personal info in order to buy something like all the regular retailers do?

    “Can we start with your phone number…”

  38. Notsewfast says:

    @Imaginary_Friend:
    Aspirational luxury stores are typically very price sensitive, it’s the true luxury retailers that tend to be more insulated. A decent example (although not perfect) is Tiffany & Co. Vs. Cartier. Most people can go in to Tiffany’s and drop $100-300 and walk out with a decent gift with an expensive-sounding brand name. That same chunk of cash at Cartier will maybe get you a keychain.

    Tiffany’s bread and butter is these less expensive, high-margin items. The middle (aspirational) class will go back to Zales while the Yacht club member will continue to buy Cartier watches.

  39. m4ximusprim3 says:

    @youwantedahero: I always thought it was quite humorous (in an sad way) that the rich get richer by convincing the middle class that, by spending a little more money, they too can be rich.

    It reminds me of the roadrunner cartoons where the roadrunner (rich people) runs down the road and the coyote (the middle class) trys to follow him and flattens himself into the road painting.

  40. bohemian says:

    I’m waiting until spring when all of the aspirational rich start dumping their designer duds at the consignment shops so they can pay their credit card bills and house payments. Maybe I can get a good deal on a leather purse, minus some big tacky label please.

  41. Sudonum says:

    @MyCokesBiggerThanYours:
    I hate this recession talk too, but blaming it on the media? You do realize that the only thing that’s been driving the economy the last few years is the fact that a lot of people have been using their house like an ATM? Well the ATM account is overdrawn now and the bills are coming due. Real wages haven’t kept pace with inflation. Where are people supposed to get the money from to buy stuff now and keep the economy growing if they can’t get it from their house equity and they are making less now than they were a few years ago?

    Here’s a link to the Boston Globe article from 2006 [boston.com] describing how despite productivity increasing median wage growth has fallen when adjusted for inflation.
    “One analysis by the Economic Policy Institute, a Washington think tank, found productivity grew 17 percent nationally from 2000 to 2005, but median family income, adjusted for inflation, fell 3 percent.”
    Yep, great way to grow an economy there GW.

  42. Mojosan says:

    >>>>>>>>
    I always thought it was quite humorous (in an sad way) that the rich get richer by convincing the middle class that, by spending a little more money, they too can be rich.
    >>>>>>>>

    Really?

    I’m by most accounts “rich” and I was unaware that I got this way was by convincing middle class people to buy more stuff. Thanks for enlightening me.

    Also, luxury good are all relevant.

    There are many people in the world to whom computers and high speed internet are almost unimagineable luxuries that cost a few years income.

  43. UpsetPanda says:

    I’ve been browsing sites like Pottery Barn and Williams Sonoma home…I can’t believe the cost of a lot of these items. It’s one thing to spend a lot to get quality, but some of these items look as if they came from the back of a truck at a flea market, and people are willing to splurge and spend $1,000 on it!

  44. KJones says:

    Come on, folks! Let’s party like it’s 1929!

    Spend, spend, spend your way into wealth!

  45. clickable says:

    * Actually, Coach used to send out coupons back in the day, then stopped when they got lightheaded by the pace of rising sales. And yup, they started the coupons up again recently.
    * The worst furniture buying nightmare I ever experienced was straightening out the problems when my mother bought a “home office suite” from Pottery Barn, the various components of which were finally all gathered in the house after three months of delays, replacement of damaged pieces, shipment of missing parts, etc. Took another few weeks until they sent someone out to assemble it. And the kicker: The drawer joints of this almost-$1000 unit (made of MDF, not wood) are glued. No dovetail, no mortise-and-tenon, nothing you would expect in quality furniture. Just a dab of glue. The “suite” – a corner desk, consisting of a desktop supported by two filing cabinets – was finally finished four months after the original delivery date.
    Pottery Barn sent a $50 gift certificate to compensate us for our troubles. I told my mother, if I would have known she was doing this, I could have gotten her practically the same thing from Office Depot for 1/4 the price, with next-day delivery.

  46. ElizabethD says:

    I’m pretty frugal (was brought up by Depression-baby parents), but I see my teenaged daughter and her age-group peers getting big-time into that aspirational/designer label mindset. Ugg boots, Coach and Dooney & Bourke purses, J Crew cashmere sweaters, etc. Can’t buy Cover Girl makeup at CVS like Mom does; have to go to the Clinique counter at Nordstrom. They earn money to buy these things and shop the sales and outlets, but still — it’s all about the branding. Oy! For me, a big splurge is buying something from Lands End that is not on sale. :-)

  47. csdiego says:

    It’s about time. Stupidest trend EVER.

  48. ahwannabe says:

    @bohemian: My plan exactly.

  49. Mr.Purple says:

    @csdiego: I would not say that. If the economy does have a recession, we are all screwed. These trends are bad, but the last thing we want is to wish for the economy to tank. Of course, if you have a multitude of savings, and are out of debt, enjoy the ride. But for most this is not the case and a recession will bring more problems. At least the economy is unable to crash (Thanks FDR!) like in the 1930s.

  50. kittenfoo says:

    “many people making $13K a year go into debt because society wants to tell everyone that they too, can afford that $250 “luxury” purse.” i’m one of those making $13K in a good year, but no way is someone going to convince me to drop that kind of money on a purse. i’m a freelancer, and i work at home every day except for fridays, so purses aren’t even that relevant, except to the extent that they carry enough money to buy a bag of cat food and maybe a carton of milk when i need to go out for essentials. i divorced a man who made enough money that i could have the expensive handbags, but there’s no way i’d go back to that. i may be poor, but i’m sooooo much happier being a thrift store fashion hacker who runs her own life.

  51. brennie says:

    JD, I look at the Hayden bag and see an oversized vinyl monstrosity. The oversized bag thing must end soon. Then I look at the suede hobo bags and see something I can get online for $45 (still overpriced, but not $300). What do you see that i don’t????????

  52. csdiego says:

    @Mr.Purple: I’m not cheering for recession, I’m saying the end of the mass luxury trend is a silver lining. I’m hoping that this means the end of listening to my dippy coworker go on about what she’s buying herself and her spoiled daughter from Coach, Dooney & Burke, and Tiffany.

  53. poodlepoodle says:

    I don’t know. I’d rather pay $400 for a great pair of boots made in Italy (under 1st world conditions) than pay $100 for the same pair of boots made in China. I think think you’re paying in part of the conditions the boots were made under.

    The thing that surprises me about the “mass luxury” movement is that it doesn’t support quality. We all have local goldsmiths (most of us anyway) are much better than Tiffany, support him/her, support your local markets, they can even make something that’s one of a kind for you — many times for far less than what you’d spend at Tiffany. Don’t shop at Williams-Sonoma go to your local potter (there are tones of glass/pottery shops everywhere) and see what they have for sale.

  54. @crescentia: The thing is, when the brand is really QUALITY, and not just buying for name, a $150 bag will last 10 times as long as a $25 jobber from Target.

    I swapped out my Gucci purse for one from Target for a change of pace and to have something big enough to carry a paperback in, and the difference in quality and speed of wear is REMARKABLE.

    (But then, my sister was working at trade shows in college and used to buy samples from the show booths … she got my Gucci, a “floor model” that had lost the pull tab on the zipper, for $12. I replaced the pull tab myself for $1.50. Even knowing that Gucci is sooooooo much better than the Target bag, I’d personally would be hard-pressed to drop $150 on it!)

  55. @youbastid: I’m in Peoria, my mortgage payment is about $650. :D (Comes in at just under $1000/mo with insurance and escrow and all.)

  56. lovelygirl says:

    Where are those Coach coupons?! Heck, I’ll take some of those any day if the wealthy don’t want it!

  57. FMulder says:

    Again, WHERE are those Coach Coupons??

  58. ahwannabe says:

    @Eyebrows McGee: Agreed, and that’s what burns me up about Coach. They used to be a company that made a high-quality, low-status product that was worth investing in. Then they suddenly decided to jump on the luxury-logo bandwagon, next thing you know the prices shoot up, quality took a dive, and designs went to hell. I don’t care if Louis Vuitton crashes and burns, but it’s sad to see Coach go.

  59. loueloui says:

    People are so stupid. If any of you have significant assets in the bank, and can pay cash for one of these ‘luxury’ purses, then go ahead. My problem is with the fools who go out and buy one of these on a credit card, because they need it, and they deserve it, and they just absolutely have to have it no matter what.

    The problem is not having enough money. I have friends who make $300,000 plus per year, and they live paycheck to paycheck. The problem is willpower, and saying enough is enough. Screw those marketing losers. They won’t pay for your expenses when you’re retired.

  60. katewrath says:

    I am in love with this article on Slate: [www.slate.com], which offers a delightful overview of a new study entitled “Conspicuous Consumption and Race.”

    It turns out that we are, all of us, powerless to resist the lure of status signals. Just because some of us have status signals that can’t be bought in a Coach store doesn’t mean we’re not just as subject to the urge to impress our peers.

    In some circles, an Ivy League education is just as coveted — and of equally suspect value — as a pair of Zoom LeBron IVs. Summer houses, Volvo station wagons, frequent vacations, dinner at Cipriani, iPhones — we all have our status signals and we’re all nearly incapable of resisting them.

    It’s idiotic to condemn someone for lacking will power b/c you have no desire to buy the same items. It’s not that you’re a better person, just that your peers aren’t impressed by Coach bags. Rest assured, when you feel the need to buy a classic Pre-War six on Park Avenue or put your child in private school, you’ll be in the grips of the exact same hunger as the minimum wage fast food worker eyeing the new arrivals at Foot Locker.

  61. azgirl says:

    My house payment is $1400 but it is a 15 year.. yea baby, I am almost half way done, and I am under 40. I like to buy the “luxury” brands– but at the Last Chance store- for under $10… cheap! Oh yea!

  62. I’ve gotta say this.

    All the products with big letters all over them are absolutely stupid looking. Coach and D&G come to mind here. Do we have to be so incredibly concerned with the symbol of the brand that it has to cover every inch of the product? I love my truck, but it only says dodge on it in 1 place. City folk love their air jordans, but they’ve only got 2 or 3 check marks on them.

    The shit is just plain ugly people. Its sad that people arent buying it now because they can’t afford it. They shouldnt have been buying it in the first place, it’s fugly.

  63. cheepsquate says:

    My $300 Cynthia Rowley bag that cost $5 from the thrift shop will do me just fine, thanks. I guess if the aspirational crowd stops dropping stuff off I’m in trouble- but somehow I think I’ll be OK for quite a while – as I have been for the last 30 years ha ha . In addition to being cheaper, thrift shopping also obviously has a much lighter ecological footprint than buying new…

  64. cheepsquate says:

    @ MYCOKESBIGGERTHANYOURS
    Stop shilling the voodoo supply side party line man, that went out with Bush I. The economy has been coasting on cheap mortgages and consumer spending and nothing else for the LAST FIVE YEARS. This isn’t a correction, its a major economic problem that affects the whole system…