By  on April 26, 2010

Affluent young shoppers helped limit the damage to the luxury sector last year and set it on a course for recovery earlier than other parts of the economy.

According to recent transaction data from a network with more than $111 billion in annual luxury spending with more than 700 luxury merchants, American Express Business Insights, the analytics and consulting organization within American Express, said global luxury spending in 2009 showed signs of a rebound, and even growth.

Despite a 20 percent decline in U.S. luxury spending last year, consumer purchases during the second half of the year increased almost 10 percent. Following up on that rebound, they spiked just over 20 percent in February and March of this year.

This stabilization in luxury spending is part of a global trend, in which emerging economies such as India and Brazil have bounced back vigorously. The two markets weathered a 20 percent decline in luxury spending last year, but registered a 54 percent pickup in February and March.

Luxury spending in Japan and Australia was up 5 percent in 2009, and jumped 18 percent in February and March. In the European Union, which declined 15 percent last year, it increased 14 percent in February and March, according to American Express data.

“We saw luxury fall off pretty quickly, but we thought it would be more sustained,” said Ed Jay, senior vice president of Business Insights. “We were surprised it did not fall more through [2009], and we were even more surprised at how quickly it came back.”

Jay attributed the breakneck reversal in emerging markets and in Australia to the fact that credit availability and the fallout of the U.S. financial markets affected these regions less.

For Europe and North America, the slow ascent had more to do with the growth of sales in luxury e-commerce. In 2008 to 2009, the spend performance by luxury e-tailers soared 87 percent, while sales at retailers with Web sites increased just 0.7 percent.

Instrumental in this rebound was the younger, more affluent spender, who is typically male and between 25 and 44. Although these consumers represent a small segment of the overall luxury demographic, they were the most resilient during the downturn, rebounding the most dramatically.

But what also fueled luxury’s comeback was the fact that, among traditional shoppers, the number of transactions during the recession never fell, Jay said.

Perhaps it was a fear of committing a faux pas, but many of these shoppers opted to make their purchases online.

“They just didn’t want to be seen coming out of stores with shopping bags,” he said, noting this shopper traded down less than originally believed.

As a result, when the economy started to turn, luxury recovered faster, Jay said, noting that normally, this sector’s recovery lags post-recession.

This momentum has continued, Jay said, despite the fact that there are fewer promotions, less inventory and higher prices than last year.“We are not seeing a slowdown in luxury spending. We are seeing growth across the board,” he said. “We don’t see an inflection point yet.”

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