High-end watches and custom shirts in high demand in Houston even as inflation drives down other retail sales

The highest inflation in 40 years is squeezing households forced to pay higher prices for food, energy and almost everything else, pushing consumers to spend more cautiously and generally hurting retailers.

Unless they sell luxury goods.

Jewellers, watch sellers and bespoke tailors are all reporting strong sales that show no signs of waning. At Hamilton Shirts, a Houston store selling bespoke shirts for around $300, demand is so high that orders that once took three weeks to fulfill now take eight weeks as high-end shirt makers try to keep up. rhythm.

Customers spend,” said co-owner David Hamilton. “It’s been strong since last summer and it hasn’t slowed down yet..”

Luxury retailers are weathering inflation, rising interest rates and growing fears of recession that brick-and-mortar retailers say are responsible for slumping sales. Woodlands-based home goods retailer Conn’s, for example, cited such economic conditions last week when it reported a 19% drop in second-quarter sales from a year earlier.

The same goes for consumer electronics retailer Best Buy, which said its sales fell 12%. Bed Bath & Beyond reported a 26% drop in second-quarter sales, prompting the retailer to close 150 stores and lay off 20% of its workforce.

On the other hand, luxury goods are booming. The global market value of personal luxury goods rose 17-19% in the first quarter, according to global consultancy Bain & Co, which is now worth more than $2.8 billion.

“The United States, in particular, maintained momentum,” noted analysts at Bain.

That momentum was evident last weekend at the Montrose Collective, where Canadian jewelry brand Mejuri opened a new store in the mixed-use Westheimer Road development.
. The opening weekend queue stretched outside the store, a company spokesperson said, with customers clamoring for price tags ranging from $80 for earrings to $550 $ of solid gold necklaces.

At Zadok Jewelers, a family-run luxury jewelry and watch store, a watch can cost anywhere from $400 to more than $1 million, according to partner Jonathan Zadok. Recently, sales of watches over $5,000 have surged, Zadok. Watches that cost more than $50,000 sell even better, he said.

Consumer spending is a major concern for economists and Federal Reserve policymakers since it accounts for 70% of US economic activity. When consumers pull back, the economy in general also pulls back.

Consumers are paying 13% more for groceries, 15% more for electricity and 44% more for gasoline, according to the government’s latest inflation report. They are also paying more to borrow as the Fed aggressively raises interest rates to slow the economy and keep inflation under control – a policy that increases the risk of a recession.

Generally, higher prices and economic downturns tend to reduce demand for large discretionary purchases, such as new furniture or a television, which consumers can easily postpone until a time when the economy is doing better. But luxury retail has two distinguishing factors that allow the segment to thrive even in difficult times, according to Venky Shankar, research director of the Center for Retailing Studies at Texas A&M University.

The word luxury comes from a Latin word meaning excess or abundance. True to its name, Shankar said, the survival of the luxury market has largely come in the hands of wealthy consumers who have the excess cash to afford it.

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Spending on jewelry by households with incomes above $125,000, for example, jumped 20% in August from the same month a year earlier, although it fell for lower-income groups, according to credit card customer spending data published by Bank of America.

The second major factor, Shankar said, is that exclusivity and high price are part of the appeal of a luxury product.

Jewelry, luxury clothing, and other luxuries belong to a category economists call Veblen’s goods, named after economist Thorstein Veblen who developed the theory of conspicuous consumption. For these goods, an increase in prices increases demand. People buy luxury goods to be seen wearing them, even though — and often because — the price is so high, Shankar said.

The pandemic is another factor. The return to normal is helping demand for luxury goods, retailers said. For many white-collar workers returning to the office, the pressure to look good is especially high, said Segev Zadok, partner at Zadok Jewelers.

“They are upgrading their wardrobe, including buying jewelry and watches,” he said.

The return of large weddings also leads to many purchases of new shirts, according to Hamilton. Other customers have changed sizes during the pandemic due to disruptions in their daily routines and are now looking for clothes that better suit them – or their lifestyle.

“There was a pandemic-induced economic situation, and we are still recovering from that,” Shankar said. “It’s like a black swan, an event that happens once every 100 years or more. It’s a bit unique, this situation, and we might not have found it in a more typical recessionary or inflationary environment.

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