retail news in context, analysis with attitude

Interesting piece in the Washington Post about how, now that cities continue facing problems created by closed offices and residents' exodus because of the pandemic, "luxury retailers are rushing to open new and increasingly lavish stores in suburbs and the vacation hot spots where the wealthy have retreated during the pandemic. Gucci is heading to Oak Brook, Ill. Moncler recently set up shop in Vail, Colo. Dior has a new storefront in Scottsdale, Ariz., and Louis Vuitton in Plano, Tex. And Hermès, the maker of the $500,000 Birkin bag, is settling into suburban Detroit."

The story notes that "with travel and dining out largely off the table, many are splurging in other ways. Sales of luxury homes — with a median price of $1.03 million — surged 88 percent in the most recent quarter, far outpacing their lower-priced counterparts, according to data from national real estate brokerage Redfin. Demand for second homes, which more than doubled early in the pandemic, remained elevated through May. High-end automakers Audi and BMW saw revenue spike 90 percent in the most recent quarter, while Porsche sold a record 36,300 vehicles in the first half of the year.

That shift in spending has padded the fortunes of high-end brands. Sales at fashion house Hermès rose 127 percent in the most recent quarter, while profits at luxury giant LVMH Moët Hennessy Louis Vuitton are up fourfold from a year ago. Demand for Hermès bags, often considered investment pieces because of their high resale value, remained brisk during the pandemic, with one selling for as much as $450,000 at auction last year.

"The post-covid luxury spending boom has begun," the Post writes.  "It’s already reshaping the economy."

KC's View:

How nice for them.

For me - and, I think, much of the MNB audience - the relevant piece of the Post story notes that many of these luxury brands "are scaling back" the partnerships on which they used to depend to sell their wares, in favor "of selling directly to consumers. Having their own stores gives brands increased control over what they sell, and for how much, translating to higher profit margins."

This is something that retailers have to think about - to what extent are they vulnerable to disintermediation?

By the way … I guess F. Scott Fitzgerald and Ernest Hemingway had it right.  It was Fitzgerald who reportedly once said, "You know, the rich are different from you and me."  And Hemingway said, "Yes. They've got more money."

And they're not afraid to use it.