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For the fashion and the luxury goods industry the sales slide that began early last year suddenly became a nosedive after the events of September 11.
Traditionally, the luxury goods market is always hammered by a recession.
But September 11 also hit the travel industry hard and it was Asian tourism that fuelled the opening of luxury goods shops in Sydney's Castlereagh Street and Melbourne's Crown Casino complex.
Other luxury goods strongholds like London, Paris, Berlin, New York and Las Vegas exist as much for wellheeled tourists more so in some cases than for locals. An awareness of the impending downturn was present long before September, but luxury conglomerates like the Gucci Group, Louis Vuitton Moet Hennessy (LVMH) and Prada continued their ambitious expansion plans unabated widely publicised takeovers of global brands, multimillion dollar shop openings and senior staff poaching. The business equivalent of keeping up appearances.
Several luxury goods companies, notably the Gucci Group, have posted rosy estimations of sales this year, but international luxury goods analysts like Merrill Lynch believe that the situation will remain difficult for all companies in this sector because of their reliance on the tourist market.
Doom and gloom is a hard pill to swallow after years of escalating sales. LVMH has posted three profit warnings in the past few months. Gucci has said that it expects to meet its earnings estimate for 2001, but has retrenched 14 per cent of its US workforce. Thirdquarter earnings for Tiffany Company plunged 35 per cent in the last quarter. In Australia, Louis Vuitton and other luxury goods labels have laid off staff in all sectors.
Other factors that have nobbled the luxury goods industry are radical discounting, designer outlets and fakes.
There was a time that designer sales were restricted to toowackyfornormalpeople garments, customer returns and buyers' mistakes.
Today, prices are routinely slashed in every major capital city in the world, and the vast bulk of buyers defer their purchases until the inevitable 30 to 50 per cent off signs go up.
In the US, Australia, France and Germany entire streets, planned developments and even historic villages have become the places to flock to for halfprice designer clothing yearround.
Fakes, once the preserve of Asia,[url=http://www.sport.fr/sponsoring/uggpascher.html]ugg hommes[/url], are now sold everywhere.
New York, not Bangkok, has become the world capital of fake designer handbags.
If recessions have always had repercussions for the luxury goods industry, so has its own greed. Chanel popularised its No.5 fragrance in the 1950s and '60s by allowing the fabled perfume to be sold in 30,000 outlets in the US alone.
This trend leached customers away from department stores like Saks Fifth Avenue and Neiman Marcus in the US and David Jones in Australia. So much so that many of the world's grandest retail names are not only showing major drops in profits but also operating losses.
You may hear of the odd shop not going ahead as planned, like Prada's Hong Kong store, but luxury goods companies remain in openup mode.
In business theory, everyone benefits from increased competition. In their own shops designers can display their merchandise in the way they want, they can sell more of their own goods, and they can earn more money because they don't have to pay markup margins to the retailer.
Department stores retain their piece of the luxury pie because a whitehot brand can sell in more places.
The fly in the theoretical ointment has been that the upmarket consumer has changed, no matter how they have made or earned their money.
The core demographic of department store buyers worldwide is 35 to 54. Designers can't count on venerable stores capturing a younger market, and that's why they are so keen on building their own shop networks.
Talk of wanting to guide their own destinies is another proffered line to explain expansion. Translation: we prefer not to rely on or pay middlemen.
The recent Kmart bankruptcy in the US aside, luxury and department stores are also competing with savvy downmarket ones.
In the US, many regular customers at mass retailers now have personal incomes in excess of $US70,000 ($A131,000).
Walk into any Target outlet and that postmodern kettle might not be an Alessi, but it's a close enough copy at a fraction of the price.
But what is likely to happen in the luxury goods market as it pays the price for the recent era of good times?Consumers built up a mountain of debt fuelled by rising house prices and a runaway stock market, luxury goods companies opened too many stores and fashion houses built too many factories on a wave of optimism that has now hit the beach. Any recovery from the current economic downturn will be lukewarm say leading economists.
The only light at the end of the tunnel for the luxury goods market is that the growth of the global emerging affluent market is holding steady at 10 per cent a year.

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