CPP Luxury Industry Management Consultants Ltd reports a drop of 25% in the Romanian luxury market in the first trimester of 2010, with the most affected sectors being: auto, boats, jewellery, fashion and travel. The segments that have registered lower drops are: hospitality, accessories, perfumes, watches, SPA and gourmet/organic. The drops are due to a number of factors:
– the decrease of buying power, especially due to the restrictive access to bank loans and leasin
– the prices in Romania are still higher than in other worldwide shopping destinations, plus many brands are willing to offer considerably higher discounts in their flagship stores (jewellery, watches, car
– the decrease in the cost of accommodation and air travel for the main shopping destinations (i.e. many hotels in Milan or Paris offer rates 30% lower than the same period last year
– the highly mediatised possibility of over-taxation of the people with high income
– the investment factor – many consumers buy products whose value will grow in time, choosing less seasonal products, as well as those made of quality materials (exotic leathers, etc)
We are also witnessing important changes in the behaviour and preferences of the luxury consumers:
– more and more people adopt the ‘mix and match’ trend, renouncing the ‘total’ look of an attire comprised only of luxury brands
– adopting an ‘anti-luxury’ attitude; this is a phenomenon we see all over the world, with more and more consumers finding it acceptable to wear fake productsbrands that were considered premium before the crisis are now considered ‘luxury’ (Tommy Hilfiger, Guess, Lacoste); previously the consumers of these brands would buy D&G, DSquared, Just Cavalli, etc
– less travelling, especially weekend break and compromising in the form of choosing a lower ranked hotel (4 instead of 5 stars), preferring to allocate the budget for shopping and entertainment (meals, clubbing, etc)
With regards to the fashion segment, the most affected is the women’s, where also there is a lower number of monobrand stores. The men’s fashion and accessories record lower drops due to their target: bankers, businessmen, lawyers, notaries, for whom these products are foremost a necessity.
As for the luxury jewellery segment, the presence of the vast majority of brands in a multibrand system, implicitly with a more restricted selection and higher prices than abroad, has led to important drops in this segment.
The statement of one Romanian bank representative according to which there are 150,000 people with incomes of over 100,000 Euros is totally wrong. Not even the regional markets that have a higher number of incomes, such as Serbia, Poland or Ukraine don’t have more than 50,000 such people. According to CPP’s estimations, there are 35,000 people in Romania with an annual income of at least 100,000 Euros.
CPP considers that the numerous statements made by the authorities on the over-taxation of some categories of luxury products will not bring about the expected effect, namely the collection of more taxes, on the contrary. More than 30% of rich Romanians already do their shopping abroad, and such measures will only make this percentage increase.
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