recession

How the Wealthy are Spending Their Money This Year

Filed under: Wealth

Last week, I sat down with representatives from American Express Publishing and Harrison Group to see a presentation and discuss a question which is on many of our minds: How are the wealthy reacting to the recession?

Well, to start with, more than half (53%) are worried they could run out of money. Dr. Jim Taylor, vice chairman of Harrison Group, and Cara David, senior vice president of corporate marketing and integrated media of American Express Publishing spent approximately an hour display charts that showed the results of countless hours spent crunching the first-quarter responses of 1,300 Americans with discretionary incomes over $100,000 (that means income after tax, mortgage, home maintenance, and child education costs are subtracted).

This year there are 120,000 fewer households that fit in that range.

Of the 1,300 moderately-to-very wealthy Americans surveyed, 70% believe that the recession will last longer than a year, and 35% think this could be a long term depression. 78% report that the crisis has affected their sense of financial security.

So how does the spending look? "Luxury is not dead, there's simply a filter on risk," says Taylor. 77% said they are buying fewer "big ticket items" this year -- so it's a safe bet that they're buying brands they trust. There seems to be a trend among the wealthy of pride in their willingness to not buy things. This goes beyond the usual chatter of talking about great bargains you got; people are actually feeling an increase in their self-esteem related to their ability to take control of their own lives. Believe it or not, spending less is making people happier. People checking the "Very Happy" box went from 58% last year to 66% this year -- women up 10%, men up 4%.

Tags: american express publishing, data, harrison group, HarrisonGroup, money, recession, wealth

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Art Houses Brace for Worst but Leave Room for Hope

by Tom Johansmeyer (RSS feed) —

Filed under: Auctions, Art

Art auction houses are looking to protect themselves. Lacking a local "enforcer" to find once eager collectors and shake them down for every last dollar, the likes of Sotheby's and Christie's will spend the coming fortnight managing expectations while trying to eke out a living. Atop the agenda this season is the notion of protecting price levels for Impressionist, modern and contemporary pieces.

Reality has struck.

Sotheby's has revealed a sales target of $179 million to $256 million for the spring. Last fall, the auction house hit $411 million – which is paltry compared to the $742 million take at this time last year. The showpiece now is "Baroque Egg with Bow," a sculpture by Jeff Koons, which carries a Sotheby's estimate of $6 million. While this sounds rich for today's market, the house almost quadrupled that amount with a sculpture from the same artist in 2007.

For those who haven't been keeping score, 2007 for the art world was like 1999 for technology people.

By reinforcing concern through modest estimates and carefully selected lots, the major (and smaller auction houses) are subtly positioning themselves for any unexpected support. A strong spring auction – as measured by current economic conditions – could cause global art market confidence to rebound. A turn for the worse, however, would be exacerbated by already depressed hopes.

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Tags: art, art auction, art auctions, ArtAuction, ArtAuctions, artist, artists, artwork, auction, auction house, auction houses, auction-house, auctionhouse, auctionhouses, auctions, bargain hunters, bargain hunting, BargainHunters, BargainHunting, christies, damien hirst, DamienHirst, financial crisis, FinancialCrisis, francis bacon, FrancisBacon, jeff koons, JeffKoons, lucian freud, LucianFreud, recession, sotheby, sothebys

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Franck Muller Watch Company Makes Cut Backs, Layoffs - In A Nice Way

by Ariel Adams (RSS feed) —

Filed under: Timepieces / Watches

Metaphorically related to the name behind the "Crazy Hours" watch pictured above, times are crazy at Swiss Franck Muller, which this month is beginning a round of layoffs designed to help maintain survival for this luxury watchmaker. The company has been quiet the last couple of years, but for a while in the early 2000s, was one of the most popular luxury watch makers with their flamboyant good looks. Now, the 550-person company is feeling the sting of the economy and is letting go at least 92 people, a large chunk of their work force. The good news at least is that the people being escorted out will have a nice severance package to enjoy, based on their seniority in the company, and dependents. The truth is that European companies are loathe to engage in mass layoffs given the often personal relationships they enjoy with their employees. Only grave times call for such action, and the parties affected are often always taken care of to the best of the company's abilities. This is in stark contrast to the US, where layoffs are often complimented with just 2 weeks pay, no pension, and a friendly "get the hell out of here."

In addition to the friendly treatment the ex Franck Muller employees are getting, Franck Muller is also hiring a professional "career repositioning firm" whose goal it is to help the laid-off employees find new jobs! Wow. The problems at Franck Muller are not unique, as vastly decreased luxury watch sales are common across the board these days.

Ariel Adams publishes the popular watch review site aBlogtoRead.com.

Tags: firings, franck muller, FranckMuller, layoffs, recession, timepiece, watch

Only 79 Art Auction Bids Topped One Million Dollars in First Quarter of 2009

by Tom Johansmeyer (RSS feed) —

Filed under: Auctions, Art

Art addictions are wearing off, thanks in large part to the brutal discipline enforced by the global financial crisis. Only 79 sales generated bids north of $1 million in the first quarter of the year – only half the number that crossed this threshold for the same period in 2008.

The proportion of lots with estimates below $5,000 – pretty much the lowest point at which art can be considered "investment grade" – was 77 percent, 10 percent higher than in 2008. Pieces offered for more than $50,000 represent only 3 percent of the lots coming on the block so far this year. It was 6 percent for the first quarter of 2008.

ArtPrice puts the contraction of the global fine art market at 10 percent since the beginning of 2009. It shrunk 30 percent in 2008, after showing fantastic growth of 18 percent in 2007 – when the market peaked.

At the beginning of 2008, artists, dealers and auction houses braced themselves for a difficult year, and if nothing else, they were rewarded for their preparation with the ultimate delivery of bad news. Conditions are continuing this year. For those with the resources (and the storage space), now could be a great time to pick up some old masters or maybe make a speculative play in the emerging market space.

Just be prepared to buy and hold ... for a while.

[Photo of "El Picador" by Julio Aguilera]

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Tags: art, art auction, art auctions, art market, ArtAuction, ArtAuctions, artist, ArtMarket, artwork, auction, auction house, auction-house, auctionhouse, auctions, financial crisis, FinancialCrisis, investment grade, InvestmentGrade, recession

Dining Out Tops List of Budget Cutbacks

by Deidre Woollard (RSS feed) —

Filed under: Dining

Bad news for the restaurant world, eating out has topped the list of a survey of what people are willing to give up during a recession. The survey, conducted by New York marketing firm GfK Custom Research last fall found that 82 percent of those surveyed could easily forgo restaurant time as their first cutback in a difficult economy. Forbes reports that the National Restaurant Association in Washington, D.C., predicts that Americans will spend $566 billion eating out in 2009 which is a small 2.5 percent increase over 2008. The good news for those still interested in dining is that the deals abound. All across the restaurant spectrum, from casual dining to some of the best restaurants in the U.S., discounts and special offers provide an incentive to let someone else do the cooking.

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Tags: dining, economy, recession, restaurant

Young Artists Get Shot at Success, Galleries Fight to Survive

by Tom Johansmeyer (RSS feed) —

Filed under: Art

Any successful entrepreneur can tell you that tough markets are fertile ground for future success. If you can carve your piece of the world out now, an upturn later will reward you handsomely.

This sentiment must be on the mind of young British artists – such as Merlin Carpenter. London's contemporary art galleries are starting to show affordable works by newer artists. Far from investing in the future or giving the hopeful a fighting chance, this tactic is seen as a way to develop a near-term revenue stream that will help galleries survive the current financial crisis. Retrospectively, this stopgap measure could be seen as pure genius for the art galleries that discover the next Richard Prince or (blech) Damien Hirst.

Claims of forward thinking, however, will have to remain in the future. For now, dealers and galleries in London are struggling. Allsopp Contemporary shut down an exhibition space, and Yvon Lambert pulled out of London.

The market is searching to find – and exploit – some young blood, and buyers are pressing for discounts. The winners may just be the artists. Those discovered through desperation will define the market in the future.

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Tags: art, art galleries, art gallery, ArtGalleries, ArtGallery, artist, artists, british art, british artists, BritishArt, BritishArtists, damien hirst, DamienHirst, england, financial crises, financial crisis, financial crunch, FinancialCrises, FinancialCrisis, FinancialCrunch, galleries, gallery, london, recession, richard prince, RichardPrince, united kingdom, UnitedKingdom

Sotheby's Charges for Coffee at Hong Kong Auction

by Tom Johansmeyer (RSS feed) —

Filed under: Auctions, Art

You know it's rough out there when Sotheby's makes you pay for coffee. At its five-day Hong Kong auction, the house was able to move only $89 million in antiques (HK$691 million), paintings and gems – less than half the take for the same event in 2008. With bidders forced to HK$20 (which looks more menacing than the U.S. equivalent, $2.50), one can only hope that Sotheby's was able to make up the difference.

This is a far cry from the $227 million that sold a year ago.

Sensitive to the global financial crisis, Sotheby's planned ahead, offering fewer expensive lots, which tend to get a bit more bidder action when financial markets are struggling. A larger number of wine lots showed up, as the liquid flows more easily than canvas. All of the bottles moved at the first Sotheby's Hong Kong wine auction.

Despite the downturn in art prices, some feel that now is a good time to invest in the oldest of old media. Ian Kai, an art dealer based in Beijing, remarked for Bloomberg, "Governments are printing so much money now. Fine artworks might be a better way to store value than currency."

The highest-priced piece at the auction was "Fishing Harvest" by Lin Fengmian, which fetched a hair over $2 million. Most paintings sold for prices well below those of comparable works at last year's auctions. Heading into the Hong Kong auction, Sotheby's cut presale estimates by an average of 20 percent and expanded its offering to include video installations and other non-painting works.

And that could be the enduring benefit of this marketplace.

"We are now seeing conceptual art at Hong Kong auctions, which is fantastic," said Sandra Walters, a Hong Kong-based collector who runs a namesake art-consulting company.

A broader perspective will lead to future returns for artists, collectors and auction houses.

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Tags: art auction, art auctions, ArtAuction, ArtAuctions, auction, auction-house, auctionhouse, auctions, beijing, china, financial, financial crisis, FinancialCrisis, financials, hong kong, hong kong filmart, HongKong, HongKongFilmart, recession, sotheby, sothebys, sothebys international realty, wine, wine auction, WineAuction

JoS. A. Banks Says Lose Your Job, We'll Let You Keep The Suit For Free

by Deidre Woollard (RSS feed) —

Filed under: Apparel

JoS. A. Bank Clothiers has created a new program to keep nervous businessmen buying suits. The company says they will refund the price of a suit if the purchaser loses his job and also allow him to keep the suit. The offer applies to any suit (or suit separates coat plus pants) purchased during the JoS. A. Bank $199 Sale, from March 16, 2009 through April 9, 2009. If the customer involuntarily loses his job between April 16, 2009 and July 1, 2009,the company will refund his money up to a maximum of $199, and he may keep the suit.

The suitmaker joins other companies such as Hyundai which promises that if you buy a car and then lose your job they will pick up the payments for three months and Jet Blue which offers refunds to those who book trips but then find themselves jobless.

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Tags: betting on the economy, BettingOnTheEconomy, recession, suit

Darby Scott Jewelry

by Annie Scott (RSS feed) —

Filed under: Apparel, Jewelry

Darby Scott Amber Statement Necklace, $450

Darby Scott, who previously brought us this stunning, $260,000 Green Tourmaline and Diamond Minaudière Clutch, has a jewelry line you've just got to see.

Available at both high end and moderate prices, the Darby Scott Amber Statement Necklace (available on her website in this shade and also a rich "Dark Amber") at right is just $450 -- so you can even wear Darby Scott during the recession. If your tastes tend toward the more expensive, see the gallery below for her decadent $8,800 grey agate and malachite necklaces.

Darby Scott isn't just making fine jewelry and classy purses; keep an eye on DarbyScott.com -- she's going back to clothing, and she's about to launch her new line. We have a feeling we're going to be seeing opulent fabrics and very expensive, glittering details. We would expect no less from Darby Scott!

Check out more of her sparkling, glamorous designs in the chunky style for which we have come to love her below:

Gallery: Darby Scott Jewelry

Tags: darby scott, DarbyScott, jewelry, necklace, recession

Fossil Makes Staff Cuts

by Deidre Woollard (RSS feed) —

Filed under: Timepieces / Watches

Fossil Watches is the latest company in the troubled jewelry and watch sector to hit hard times. The maker of casual mid-priced watches, jewelry, handbags and accessories has announced that it is laying off hundreds of employees around the world to cut costs. JCK News reported that the company could be eliminating up to 260 positions which is four percent of its approximately 6,000 employees. Fossil's executive officers and senior vice presidents will be taking a pay cut and a hiring freeze is in effect. The company saw a 12.9 percent decline in fourth quarter net income but in fiscal 2008, Fossil's net sales rose 10.5 percent.

Fossil has slowed their plans for retail store growth. The company also has licenses for Giorgio Armani, Michael Kors, Adidas, Burberry, Marc Jacobs, and Donna Karan and sells their various lines through department stores, jewelry and watch stores, and specialty retailers around the world as well as on their website. The total payroll cost cuts should save the company about $16 million annually.

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Tags: fossil, recession, watches

Russian Shoppers Pulling Back Too

by Deidre Woollard (RSS feed) —

I've written about the troubles befalling American malls but it's tough in Russia too. The AP reports that the economic crisis and low oil prices are starting to make Moscow's popular GUM shopping center on Red Square look a bit like a ghost town. Some boutiques are closing while others are doing the same thing that their U.S counterparts are doing, offering deep discounts to lure anyone who might still be shopping. Russia has been a tremendous growth area for many international brands over the past few years as Russians became accustomed to increased spending power. Now it seems that they've followed the rest of the world into shopping retreat.

Back in October I mentioned that the managing director of Mercury, the country's biggest luxury goods group has said that sales have fallen at the popular TsUM shopping center. Mercury's stores sell many of the world's top luxury brands, everything from Gucci to Maserati cars and Chopard jewelry through the TsUM department store and other luxury shops.

Also it was recently announced that this year's Moscow World Fine Art Fair, set to take place at the end of May, has been canceled. The cancellation was mainly due to troubles getting sufficient sponsorship to cover the costs of the fair. ArtInfo reports that only a few dealers had pulled out of the fair but cancellations from Bulgari and Harry Winston prompted the organizers to cancel now rather than months from now when the economic crisis could be even worse. They hope to bring the fair back next year.

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Tags: moscow, recession, shopping, spending, then and now, ThenAndNow

Hotels Make Cutbacks, Hope You Won't Notice

by Deidre Woollard (RSS feed) —

Filed under: Luxury Travel & Hotels

Many hotels have cut their rates to deal with the lower occupancy levels but they are also making other less welcome cuts. The Wall Street Journal's Sarah Nassauer reports on changes hotels are making to save money. The Courtyard and other Marriott chains have stopped putting hand lotion in their rooms. Wyndham Hotels and Resorts are leaving guest fewer towels and at the Ritz-Carlton the hotel's signature exuberant displays of fresh cut floral arrangements have been swapped out for potted plants and other more durable decorative items. Also at the Ritz-Carlton, the hours at restaurants, spas and retail shops are being reduced so that they can cut back on staff and on operating costs.

The changes are often subtle, a few less options at breakfast, less free cookies or snacks or a smaller selection of toiletries. In many cases you might not even notice unless you are a regular customer of a certain chain. Hotels are hoping that most of the changes will slip by undetected for most guests and will try to accommodate those who might be missing the free coffee in the lobby or that sewing kit in the room. For the luxury hotels the challenge is to maintain the same sense of careful attention and sumptuousness that customers pay for without continuing to erode the bottom line.

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Tags: hotels, recession, ritz-carlton

Lagerfeld Says 'Long Live the Recession'

by Jared Paul Stern (RSS feed) —

Filed under: Wealth

Chanel may have slashed 200 jobs and pulled the plug on its Mobile Art project, but the label's creative director Karl Lagerfeld says the recession is actually a good thing. "I see it like a cleaning up - it was too rotten anyway - so it had to be cleaned up," Lagerfeld tells the BBC. "I see it like a healthy thing - horrible but healthy, like some miracle treatment of the world."

As for the uselessness of designing luxury goods that many can no longer afford to buy, Lagerfeld insists the premise is faulty. "People have different kinds of dreams," he declares. "After all, people need a handbag, there are cheaper handbags. But if you can buy a beautiful one and if that's your dream to buy, why not?"

We're not sure Chanel's business can solely be sustained on dreams, but that doesn't faze the Kaiser. "I can be interested in a $20 million diamond I will never buy, without desiring the diamond," he notes. "If you want only things you can afford, it's boring too. It's great to see things you may not buy - because you don't have the money - but it is very ugly to think they shouldn't exist because you can not buy them."

As we reported last month, Lagerfeld himself has cut back somewhat these days, but still employs a full domestic staff and three chauffeur-driven Hummers.

Tags: Chanel, karl lagerfeld, KarlLagerfeld, Recession

Blogging From the Luxury Summit: How the Wealthy Spend When Times Get Tough

by Deidre Woollard (RSS feed) —

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.

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Tags: economy, expire-images2009-4-20, luxury summit, LuxurySummit, recession, shopping

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A Sign of Tough Times, Paris Pawn Shops Accepting Wine

by Laura Malesich (RSS feed) —

Filed under: Wine

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.

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Tags: Credit-Municipal-de-Paris, Domaine-de-la-Romanee-Conti, economy, pawned-wine, recession, wine

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