From BusinessWeek:

As I argued in my post entitled, “Luxury Market’s New “Normal” post Recession,” the Luxury market finds itself in a unique catch 22.  On the one hand, consumers aren’t interested these days in spending a lot of money on products that don’t have any more practical utility than the “regular” good.  On the other hand, if luxury brands lower their prices to attract thrifty customers, they’ll cease to be luxury.

But retail experts argue that price cuts could prove to be perilous for luxury retailers. “The losers [in this recession] will be the ones who destroyed their brand through the discount model,” says Janet Hoffman, global managing director of consultancy Accenture’s retail practice. “We won’t see the damage from that necessarily today, but we’ll come back in a year and be able to [notice].”

From JCKOnline:

There’s little new in this blog post on JCK Online. In fact, the author even quotes the same article from Recession Wire that I quoted from a few days ago.  There was one little tidbit at the end, though, that I thought was fresh and interesting.  The author argues that the real problem isn’t going to be to get the old spending habits back to their pre-recession levels — the real problem will be educating the younger generation to spend on impractical luxuries like jewelry.

If there is a change in the consumer mind-set, particularly towards the luxury sector, I would argue that it is taking hold more among younger consumers, who, even before the recession hit, seemed more interested in practical items (like IPODs and computers) and products which have a “greater meaning.” Turning those consumers into jewelry buyers will be the industry’s great challenge in the years ahead.

If this author is correct, then this will be the single great challenge to the industry in the years ahead.

From Star-Telegram.com:

I know I’ve written about this plenty, but there was something different in this article that I wanted to comment on.  In every other recession in the last 30 years, the rich were never really effected significantly.  They continued to spend as they did before the recession hit.  This time, it’s different.

Internationally respected consultancy Bain & Co. has predicted that luxury spending will drop 10% this year (in addition to what it has already dropped in the end of 2008).  This large of a drop is unprecedented.  They claim that a full recovery in luxury won’t occur until 2012.  That’s a dire forecast indeed.

While 10% might not sound like so much,

The richest 10 percent of U.S. households account for as much as 50 percent of consumer spending, according to the center’s calculations, based on Federal Reserve Board data. Consumer spending, in turn, accounts for about 70 percent of gross domestic product.

That means that the 10% drop in spending by the richest 10% of US households translates to a 5% drop in overall consumer spending, and a 3.5% drop in overall GDP.  That’s a gargantuan figure.