Shop Till You Stop
When the economy sours, even big spenders pare back. What corners of luxury are being cut?
At the designer ready-to-wear collections in Paris in March, Sarah Siegel Magness was so appalled by how much some of the more basic things cost, she decided not to shop.
"I spent $450 on a car service for two hours, $2,000 a night for a junior hotel suite, and at dinner, an entrée with tea was $130," says Siegel Magness, founder of contemporary-sportswear company So Low. "I bought nothing except from a designer who doesn't sell in the U.S. Going to Paris right now is just stupid money."
It seems an odd statement coming from a woman whose husband has been on and off the Forbes 400 list since 2003. However, with the dollar hitting a historic low against the euro on April 22, the Standard & Poor's 500-stock index down about 7 percent from last year, and the real estate market in turmoil, even some with extremely deep pockets are feeling pinched--whether they're actually taking a financial hit or not.
"Intellectually, it affects you--the fact that you know the economy is not doing well," Magness says. "Your conscience won't let you do certain things. There have to be people that spend in this economy to keep it afloat, but most are cutting out wasteful things, like $12,000 dresses."
Clementine Brown, spokeswoman for high-end concierge service Quintessentially, says the company has already seen a shift in spending among clients. "We look after the really rich, and these people will continue to stay rich," she says. "That's not to say they're not thinking more carefully about their money."
Instead of sinking their dollars into flashier, more fleeting items, clients are gravitating toward purchases that will last, such as wine, art, and estates, she says. "If they took a holiday in Antigua last year, maybe this year they're investing in an estate in the Caribbean, which is popular because of the weak dollar."
The private-jet industry has taken off since the late 1990s, drawing travelers with its convenience and privacy. Many operators claimed double-digit annual growth. Todd Rome, president of Blue Star Jets, a New York-based private-jet brokerage company, says his business is up overall but that entry-level customers--called light-jet clients because they fly in the smallest planes--are harder to come by. He is also seeing multiple families sharing jets to lower the costs, especially during holidays. Still, Rome says, the category continues to grow because "once you start flying privately, you can't stop."
The same might be said of spa and beauty treatments. According to Savigny Partners, a London-based corporate-finance and mergers-and-acquisitions firm, there are more spas in the United States than there are Starbucks worldwide, tallying up $9.4 billion in annual sales.
When times are tough, appointments for haircuts and coloring processes, manicures, waxing, and massages are among the last things to go, claims Rita Hazan, owner of the Rita Hazan Salon on New York's Fifth Avenue. "People take care of themselves--these things make them feel good," she says. Hazan is almost fully booked for her sought-after highlights, which start at $550. But clients are spending less lavishly on some services. "Instead of having a stylist come to their house for a daily blowout [at $500 a pop, plus tip], women are coming to the salon," she says. An in-house blowout costs $100.
Lucia Tait, co-founder of Coup de Coeur, which offers privately guided shopping tours of New York, says some of the company's clients have changed the way they spend. "We've noticed that people are shopping with a purchase or an event in mind," Tait says. "They're buying with a purpose." Instead of trendier "it" bag-type items, customers are looking for investment pieces that will last more than one season.
And instead of requesting visits to mainstream designer boutiques, more clients want tours of edgier areas--and deals. "We'll shop Nolita, the meatpacking district, and the West Village," says co-founder Amanda Sheppard. "We learn about trends from the boutiques and then go to Forever 21 or H&M to translate them."
Last year, Sheppard was helping a woman find a ball gown for her daughter. The client spent about $10,000 in one day, purchasing a dress at Bergdorf Goodman, "to-die-for" Givenchy shoes, and some jewelry.
"More recently," Sheppard says, "we took a mother shopping for a prom dress for her daughter. It was well under $1,000, and it was something she could wear again."Visit Portfolio.com for the latest business news and opinion, executive profiles and careers. Portfolio.com© 2007 Condé Nast Inc. All rights reserved.
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