Shoppers go for less luxury

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By Kara Rowland

Double-digit price slashing, shopping spree raffles and other giveaways aren't limited to discount stores as upscale retailers are doing what they can to entice shoppers in what's shaping up to be the worst holiday season in years.

Online shoppers at high-end department stores Neiman Marcus and Saks Fifth Avenue are urged to enter their e-mail addresses for a chance to win a $3,000 shopping spree. Saks is selling designer items for up to 70 percent off and touting no payments and no interest for a year on purchases of jewelry and watches. Meanwhile, Bloomingdales.com is plugging its "best gifts under $100" and offering free shipping on orders over that amount.

While the luxury sector is traditionally more insulated during a consumer spending freeze thanks to its more affluent customer base, that is not the case with the current economic recession.

"High-end retail is horrendous," said Howard Davidowitz, chairman of Davidowitz & Associates Inc., a New York-based retail consulting and investment banking firm.

Luxury sales fell nearly 5 percent year-over-year in September, 20 percent in October and more than 24 percent in November, according to a SpendingPulse survey by MasterCard Advisors.

Across the board, the National Retail Federation has predicted the slowest growth in holiday sales in six years, at 2.2 percent. This season, luxury retailers are joining big-box stores like Wal-Mart and Target by offering deep discounts as a way to minimize losses and unload inventory.

For example, a Marc Jacobs draped back dress, originally priced at $2,100, is now going for $629.95 on SaksFifthAvenue.com. At Neimans, a Salvatore Ferragamo Mosaic Tote bag has been marked down from $2,374 to $2,050.

Analysts say the impact on the luxury sector is a function of just how bad the current downturn is.

"There's no more Lehman Brothers, there's no more Bear Stearns, Merrill Lynch has got half the people it used to have, Citigroup is firing people," Mr. Davidowitz said. "Financial services is in a depression and they are the biggest consumers of luxury goods."

The financial crisis has especially frozen spending among so-called "aspirational" buyers who rely on credit for their splurges.