Luxury goods are back in fashion as the wealthy return to the shops
By Scheherazade Daneshkhu in Paris 2010-04-16

The age of austerity is over, as the well-heeled splash out on Porsches and Dom Pérignon champagne, according to retailers of luxury goods.

The wealthy are more prepared to open their wallets than at any time in the past two years, suggesting they have put the financial crisis behind them.

But they are still looking for value for money and craftsmanship, says a study published today. Flashy labels and glitz have yet to make a comeback.

Porsche, the luxury carmaker, said this week that orders for its new Cayenne sports utility vehicle, due to arrive in European showrooms next month with a €55,400 ($75,000) price tag, were stronger than expected.

“We're looking at an incredibly high order intake from almost all markets,” said Michael Macht, chief executive.

LVMH, the world's biggest luxury goods group by sales, said sales of its Dom Pérignon champagne and premium XO cognac in the first three months of the year had been “much better” than last year.

“Luxury brands are gaining appeal again, [it's] the end of shame for local consumers in mature markets,” says the report by Bain & Co, the consultancy. It predicts luxury industry sales of €158bn this year, up 4 per cent, against its October forecast of a 1 per cent rise.

Bain said all parts of the world and all types of luxury goods would recover in 2010 after last year's 8 per cent drop in luxury sales, the worst ever for the industry. Asia – excluding Japan – and particularly China, would remain the main driver of growth.

However, the recession has changed consumer behaviour, said Bain: “There is a need to justify the premium price. Brand is not enough.”