Middle Class and Poor Continue to Suffer While the Rich Continue to Shop

Luxury goods are selling far faster than retail and store brands. More indication that the divide between America’s rich and middle  and working classes. While the rich aren’t spending at the levels they were before the 2008 economic crash, they are close to those levels. Luxury goods initially fared far worse as the recession gained momentum, but now this type of retailer is experiencing double and triple-digit profits. Many now mark up, rather than, discount items using the marketing psychology that associates price with quality. The appeal is great among the wealthy.

According to The New York Times, the luxury category has posted 10 consecutive months of sales increases in comparison to one year ago. July saw an 11.6 percent increase — the largest one-month gain in over a year.

“If a designer shoe goes up from $800 to $860, who notices?” said Arnold Aronson, managing director of retail strategies at the consulting firm Kurt Salmon, and the former chairman and chief executive of Saks.

“Our business is fairly closely tied to how the market performs,” said Karen W. Katz, the president and chief executive of Neiman Marcus Group. “Though there are bumps based on different economic data, it’s generally been trending in a positive direction.”

For middle class and working poor families, there are no designer shoe price increase comparisons, but ones that are closer to daily existence. For instance, when a retail bag of Granny Smith apples increases from $3.99 to 4.99, is it time to get eight cans of store brand fruit cocktail instead?

The wealthy argue that they are more constrained than before the recession began. One luxury shopper stated that she spends more on classic pieces and avoids ostentatious items that are branded. With the well-heeled set, being showy about one’s good fortunes is now frowned upon.

How well are the luxury brands doing?

  • Tiffany’s Q1 sales up 20 percent to $761 million.
  • LVMH (Louis Vuitton, Moet, and Hennessey) 2011 first half growth was up 13 percent, or $$14.9 billion.
  • PPR (Gucci, Yves Saint Laurent, etc.) gained 23 percent in the first half of 2011
  • BMW doubled its profits from one year ago from a 16.5 percent in sales.
  • Porsche first-half profits rose 59 percent.
  • Mercedes-Benz’s S-class sedan sales jumped 14 percent in July in the United States.




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