Except this isn't a myth, according to most retailers. Wealthy shoppers are still shopping, but they're buying private-label clothes at department stores and designer goods at outlets. So stores that cater to them are downscaling the merchandise, offering more private labels and cutting prices on designer items.
The New York Times just gave the trend its blessing. Apparently, designers are cutting corners and using cheaper fabrics so they can afford to drop prices, under pressure from retailers who want to pass on the price cuts to their well-heeled clients.
"If you like Prada, we will be moving the price points on Prada," said Steve Sadove, CEO of Saks International (SKS). Sadove told investors recently that Saks is taking prices on its "Best" product lines -- top designer labels -- down five to 10 percentage points to accommodate the new frugality at the top end. Shoppers are already seeing designer shoes and handbag prices drop around $200, he said.
Other department stores that increasingly sold more upscale merchandise during the bubble years are going back to basics. Nordstrom is starting to look more like it did in 2003, said Michael G. Koppel, chief financial officer of Nordstrom Inc. (JWN) "During the run-up of business of 2003 to 2007, a lot of customers said, 'We would like to buy more luxury'. Now, that cycle has pulled back," he told analysts at the recent Goldman Sacks Global Retail Conference.
So this year, Nordstrom has gone back to what was its more traditional assortment of women's apparel and by the end of the second quarter, sales numbers began to show evidence of progress, he said.
On the low end of the scale, Mike Duke, CEO of Wal-Mart Stores said his stores are gaining new shoppers among the wealthy. "We do see many of the new customers are high income customers that would not have shopped with us before," he said. "Today every customer wants to shop smarter."
And the debate always cycles back to whether conspicuous consumption will make its way back once the economy recovers. The arguments depend on what stake each retailer has on that comeback. While Duke said frugality is the "new normal," Sadove said luxury is here to stay. Sure, he admitted there is "malaise" among the wealthy, but he added it is clearing up as the numbers on the Dow Jones Index run up.
"Customers feel better at 9500 than they felt at 8500," said Sadove. "Once our consumer starts to feel highly confident...that things will start to improve, that's when you will see the consumption improvement."