In the past five years, once-staid Bentley has been the car of choice for those with six figures to spend on transportation. But could the current economic downturn finally be starting to affect the luxury carmaker? The Times reports that Franz-Josef Paefgen, chief executive of Bentley, has said the English brand is noticing less sales in their number one market, the good old U.S.A. Traditionally, cars at the highest end of the market are more immune to the economy than those in the middle-to-upper range. Just a couple of months ago, we heard news that 2007 was the the best year ever for Bentley. The luxury car company sold 10,014 units worldwide, outselling Rolls-Royce, which also broke through the 1,000 mark for the first time last year, by around 10 to one.

But Dr .Paefgen says that Bentley, which is owned by Volkswagen, is now experiencing lower demand in their two top U.S. markets, New York and California. Bentley sells about 45 per cent of their cars in the US. Many of Bentley's deep-pocketed customers are in the financial sector which is an area that has taken deep hits recently.

Bentley's saving grace may come from China and Russia which are both just beginning to to really catch fire. In 2007 in China, sales grew by a blistering 93%, offering the automaker hope for a growing market.

With dire economic news coming out nearly every day what is going on in the luxury community? Are consumers worried? Have they stopped buying? At the American Express Publishing Luxury Summit the second annual Survey of Affluence & Wealth in America produced by American Express Publishing Corporation and the Harrison Group was revealed. As the survey reveals, no one is stopping their shopping anytime soon but they are shifting from what they call an "iWant" economy to an "iNeed" economy and finding new ways to spend money.

Economic slump or not, according to The New York Times the ultra-rich aren't slowing down on spending. This news follows right along with the current trend of contradicting reports we keep hearing, like the fact that luxury retailers are reporting steadily falling sales while private jet spending is holding steady or even going up but luxury car sales are down. So what is it, are the rich spending or aren't they? Or is it just that the ultra rich are still spending, but all those who are just "middle-of-the-road" rich are cutting back?

Having or chartering a private jet used to be a big deal, a very special luxury enjoyed by only the elitest of the elite, but private air travel is practically a necessity for even "entry level" wealthy people in today's world. Even with the economy in the condition it's in, those accustomed to traveling privately aren't giving up the luxury in exchange for less expensive commercial flights. And although chartering private jet travel certainly isn't cheap it's not as pricey as it used to be -- as little as $10,000 will get you where you want to go.

If the economy has any kind of negative effect on private air travel experts expect it to be in how much people fly, not in the privacy they expect when they do. Many of those who use private charters and/or own their own jets consider it a necessity in their lives, not a splurge.

Every year the watchmakers and jewelers converge on Basel, Switzerland in the spring for Baselworld and the SIHH show. It is the place where exhibitors display some of the most dazzling luxury goods in the world. But this year, fears over the U.S. economy may be dampening the usual excitement.

The show, like fashion shows, is one that looks ahead, trying to sell buyers on the goods they will want in their stores in September and October for the holiday season. Many are already predicting that the Christmas business of 2008 will be bad news for both the U.S. and Europe. The annual event has over 2,000 exhibitors and attracts around 100,000 buyers. According to Jacques Duchene, president of the BaselWorld Exhibitors Committee quoted in National Jeweler, last year was a boom year for Swiss watches: Swiss watch exports reached about $15.75 billion last year which was a 16 percent increase over the previous year, and a rise of more than 50 percent over the previous four years.

In this Reuters article, Rolf Schnyder, the chief executive of Swiss watchmaker Ulysse Nardin is quoted as saying that the slowdown in the U.S. market will generally affect the mid-range products. This reflects the general trend we have seen where luxury consumers at the top of the market are spending but those that are at the lower end of the affluence spectrum are cutting back.

For those who make watches and jewelry, bright spots can be found by looking east. Increased demand in Asia, Russia and the Middle East will likely provide most manufacturers with market growth even if other economies continue on their gloomy course. One thing that I will be curious to see is if the change in consumers will change the products. The big spenders in these markets often have particularly lavish tastes and a taste for diamond and jewel-covered watches as opposed to more subtle watches with elaborate complications. I wonder if in the next few years, the major manufacturers will be shifting their output to attract these customers.

Do luxury markets really hold up better than others during an economic crunch? Many experts say no, and it would seem the steady decline in luxury auto sales is backing them up. Estimates say that automobile sales fell in March, which would mark the 5th straight month of decline and could result in the lowest numbers since 2005. Analysts speculate the drop in auto buyers has to do with several factors, including higher-end buyers holding onto their vehicles longer (waiting for the market to improve) and fewer entry-level lux auto owners being able to afford to buy right now due to increasing costs in other areas of their budget.

Talbots, the preppy store with the red door, is fighting for relevance in the fashion market. The chain, which has always focused on classic fashion that skews a bit older, is looking to stay afloat at a time when retailers are facing major challenges. WWD reports on the company's three-year program. Talbots is planning to stay the course in terms of their take on classic clothing but they will also have an increased focus on large sizes offering both "boutiques" of large size offerings in their regular stores and additional Talbons Woman stores. They will also launch a premium outlet concept this year. The store has shut down their men's and children's divisions honing their focus on women's fashion.

It's an uphill climb for Talbots, which also owns the J. Jill brand. J. Jill generally attracts customers in their late forties and the Talbots average customer is in their fifties. Part of the challenge it seems is that younger women aren't turning to Talbots as they age. I think that there has been a fundamental shift in which women in their 30s and 40s find themselves to still be interested in fashion and current styles and continue to be drawn to department stores which offer clothing from a wide variety of current designers.

For the first time ever, pawn shops in Paris that typically accept family heirlooms and jewelry have made the decision to accept wine. With a minimum value of €60 required, the Crédit Municipal de Paris will give owners fifty-percent of the value and store the wine until it can be bought back. The building happens to have 18th century cellars below ground, providing the perfect storage area for the pawned wine. For wine that isn't bought back it will eventually be sold at auction. So far the most expensive bottle pawned was a Domaine de la Romanee Conti for €5,000.

Earlier this week the first quarter statements for two of the biggest luxury retailers, Saks and Neiman's, reported a healthy status but both aren't seeing as many shoppers as usual. For February, Saks enjoyed a small, little bump in revenue as sales rose 3.4 %, but Neimans dropped 7.3.% after January promotions. Although a recession never seems to affect the uber-affluent who will continue to shop for premium luxury items, the economic woes of late may make the aspiring customer hesitate until the market turns back around. I think its impressive how much internet buying adds to the bottom line -- last quarter Neiman's online sales were $180 million, up almost 16%! Both retailers are finding every opportunity they can to cut costs and provide items that will appeal to their customers, such as specialty items and certain must-have colors. Maybe they aren't enjoying the crowds of yesteryear but they aren't in any real pain yet...

Our faltering economy is starting to hit the cocktail culture. MarketWatch reports that while alcohol manufacturers usually do just fine in a tough economy, bars and nightclubs may find themselves in trouble. As the purse strings tighten people tend to opt for drinking at home versus spending their cash on pricey bar cocktails. Currently liquor is still seen as an affordable luxury, it is far easier to buy top shelf booze than a top-of-the-line car, but that may change over time. As we've mentioned before on this website, the current economic climate is having more of an effect on the middle of the wealth spectrum rather than the upper end. Therefore casual dining restaurants are feeling more of the pain thus far and the bar tab makes up a significant portion of each sale. Brand loyalty will protect many labels especially in the cases of people who have ordered the same drink for years.

Wine Spirits Daily has also been on the case trying to predict what will happen to the various liquor ranges. Most of the people in the industry that they surveyed believe that the $20 to $30 "premium" spirits are probably safe but the "ultra premium" bottles that are in the $50+ range might not be so appealing as the aspirational consumer starts to pare down. Most feel certain that the middle range of the market will remain safe. One of their respondents echoed the concerns expressed in the MarketWatch article that where people drink may change more than what people drink. Most people, regardless of the economy, won't be willing to give up their cocktails but if they can get them for cheaper they will.

So the economy has been taking a hit lately, but as a general rule the highest of high end products haven't really been affected -- apparently those with money up to their ears haven't been feeling the pinch, until now.

Numbers are streaming in from luxury car brands reporting serious sales drops this year from 2007 -- Jaguar sales fell by 52% (whoa!), BMW by 27%, Porsche by 13%, and Land Rover by 17%. Even Ferrari (surprisingly) reported a decline for this past January, although they claim the drop from last year was both planned and expected.

It will be interesting to see what the rest of 2008 brings for the luxury car market.

Times are hard for the traditional artisans of Italy. Back in December I wrote about Italian luxury fashion labels dealing with higher manufacturing costs. An International Herald Tribune article points out that the fact that the same factors are also affecting Italian goldsmiths who also have to deal with the rising price of gold. Italy, which has been producing beautiful gold jewelry for thousands of years (as is shown by the bracelet from ancient Pompeii above), was once tops in gold jewelry production but now China, India and Turkey are all offering serious competition. So far the larger luxury brands have been saved because they buy gold in advance but for smaller companies which buy their own metals each week are more likely to feel the pinch sooner. The good news is that most luxury companies continue to keep jewelry production in Italy. There is good reason for doing this, surveys of luxury consumers show that they care where their products are manufactured. A recent Unity Marketing survey regarding habits of luxury consumers showed that over two thirds of the 1,300 consumers polled show a preference for goods made in the USA, Italy, France and Germany and associate China with poorer quality luxury goods.

Women love to shop...it's like a law of nature or something. But it's no secret that lately the economy has been slowing down and the luxury market has been taking a hit -- high-income women may still love shopping but they're doing it a lot less. So how do luxury retailers plan to weather this storm? By making their products so compelling and irresistible that other purchases are put on hold to make room. High-end shoppers on a budget are not likely to trade down and start shopping at cheaper retailers, but instead they just become choosier with what they buy. In other words they may be buying less, but they're not stopping completely. So that awesome new handbag may have to yell a little louder to get attention, but it can still call your name like it always did.

There has been a definite slow down in the spending habits of the average American consumer this holiday season, and although the super rich weren't predicted to be affected the modestly rich, or "aspirational consumers," were another story. They were expected to slow down with the rest of us, and it seems those predictions were right on. Some of the biggest retailers catering to both the very wealthy and the merely "well-off" are making note of major slow-downs -- and even a loss of some of their customer base as many of their lower-income clientele retreat from stores like Neiman Marcus and Nordstrom to Kohl's and JCPenny's.

Are you spending less this holiday season?