Harvey Nichols chief executive Joseph Wan has warned the luxury sector will not recover from the global banking collapse for at least five years after the downturn prompted a “substantial shift” in the mindset of shoppers.
Wan told Drapers that luxury retailers should be prepared for the total pool of consumption in the sector to shrink.
He said: “We do not talk about economic recovery at all, forget about it. We are focused on recognising and understanding that there has been a change of the total landscape in luxury retailing.”
He added: “It is inevitable that the total consumption for luxury goods in the Western economies in the next five years will be less in total than previous to the Lehman Brothers collapse.”
He said that over the next five years government spending cuts and job losses would result in wealthy customers changing their lifestyles and increasing their savings ratios.
However, Wan said that Harvey Nichols had traded ahead of budget in the first half of the year to September 30 after cutting back its buy and promotional activity. It will open a floor in February devoted to a more accessible fashion offer to counter shifting shopping habits.
By contrast, Harrods managing director Michael Ward said the business had seen no changes to its wealthy shoppers’ spending habits.
Ward said: “At the moment we are continuing to see significant growth. The growth is occurring on brands on a higher level such as Louis Vuitton, Chanel and Christian Dior.”
He added that average transaction levels at Harrods continued to rise and said: “The majority of the growth in September and October was locals returning to buy.
“The worst thing the luxury sector could do is to go downmarket and become undifferentiated from the mid-market,” said Ward.
- To read the full interview with Joseph Wan, see next week’s issue of Drapers.