Luxury brands such as Versace and Gucci have been especially hard hit in their Japanese stores as the recession has sharply affected that country's love for luxury items. In Tokyo, a new sense of thrift abounds as uncertainty about the economy lingers. That is very bad news for retailers of high end handbags, shoes and clothing.
Akiko Sayama re-examined her spending habits when the Tokyo staffing agency where she works cut its overtime budget. She lost more than $13,000 in annual pay, so one of the first things she did was curb her tastes for Louis Vuitton and PPR SA's Gucci.
"I need to cut back where I can," said Sayama, 41, who lives in Saitama prefecture outside of Tokyo. "It's not like I lost my interest in luxury brands. I can't afford them."
Sayama is embracing a frugality that, along with a shrinking population and falling wages, is causing Japan's economy to contract by 5.7 percent this year, according to the median estimate of 17 economists compiled by Bloomberg. Luxury spending in the country could fall 14 percent to 19 billion euros ($28.1 billion) this year from a peak of 22 billion euros in 2005 and 2006, Boston-based consultant Bain & Co. said.
The worldwide luxury market is expected to shrink 8 percent to 153 billion euros this year, including a 16 percent decline in the Americas and an 8 percent drop in Europe. Yet spending in China, the world's most populous country, may grow 12 percent to 6.6 billion euros this year, compared with 5.9 billion euros last year, Bain said Oct. 19.
"Given the pace of economic growth, luxury-goods makers are starting to give up on Tokyo, as they shift their focus to other Asian markets like China and Singapore," said Naoki Iizuka, a senior economist at Mizuho Securities Co. in Tokyo.
"The situation will remain severe here because more people are losing their interests in brands with the advent of cheaper, fast fashions."
Many Tokyo shoppers are scaling down due to the recession. Shoppers who used to buy Paris designers' clothing have switched to buying from
Uniqlo. Plans for expansion in Tokyo are being scrapped.
LVMH Moet Hennessy Louis Vuitton SA ditched its plans to open a
flagship store in the Ginza shopping district. The Gap took over the retail space instead.
While the spending in Tokyo is on hold, it is rising in China. That is being noticed by all the big luxury firms. It's the reason we keep reading reports about how exciting things are in Ulaanbataar. Just because you're in Mongolia doesn't mean you won't have access to a well-stocked Louis Vuitton store.
