Luxury Goods Sales in 2007 - CNBC

MICHELLE CARUSO-CABRERA, CNBC ANCHOR: Luxury goods, a huge global business. As part of our Outlook 2007 series, we are going to take a global look at luxury spending. Joining us right now, Marc Cohen. He is director at Ledbury Research.Mark, thanks so much for joining us this morning. Let`s start with the United States, still the biggest consumer of luxury goods in the world right now, right? What about 2007, are we Americans going to keep buying those Hermes bags and scarves and Louis Vuitton bags?

MARC COHEN, DIRECTOR, LEDBURY RESEARCH: Well, I think so. The American market is an interesting one for next year. On the downside, if you like, the things people are concerned about are rising energy prices, concerns about the housing market and so on. So perhaps the more mass-affluent consumer may well weaken their spend. But obviously on the plus side, in a year where we have seen M & A activity as high as it has been since the tech boom six years ago, the very wealthy are getting even wealthier, and there is no doubt that they will still continue to spend at a very high rate.

MAURA FOGARTY, CNBC ANCHOR: Marc, it is Maura here in Asia. You know, Japan has been a big market for luxury goods items, everything from handbags to watches, to champagne now, in fact. Are we seeing any change in consumption patterns in Japan in particular now?

COHEN: I think we are to an extent. I mean, obviously as you say, Japan has been a very key market for luxury goods manufacturers for quite some time. And Japan has obviously spent a number of years with a reasonably stagnant market. I think we are seeing signs of a change there and a pickup in consumption, but we are also seeing a slight shift: historically Japanese consumers have tended towards the larger global international luxury brands, but now we are seeing more and more consumers there start to look for slightly more niche brands, things perhaps that others haven`t heard of. And there is exclusivity and a kind of kudos that comes with that. So we expect over time for Japan to become a more interesting place for luxury brands, and perhaps a harder place in which to operate.

ROSS WESTGATE, CNBC ANCHOR: And, Marc, it is Ross here. Everybody always talks about, of course, the impact of the BRIC countries, and China and India in particular. I actually wonder whether in some degrees it is a little over-hyped and whether we are still actually talking about potential rather than sort of fact-based impact today.

COHEN: Yes, I think that is probably right. When you look at the BRIC countries, I think certainly Brazil is one that has been slow to grow. Russia has strong domestic demand, China, too, but I think to an extent we are looking at a longer-term play there. Perhaps in the shorter term there are more developed countries, such as Eastern Europe, perhaps the Middle East, Dubai, particularly, even some places like Turkey and Istanbul that I think probably will provide better shorter-term gains for some of the luxury goods brands. There is no doubt that Russia, India, China have the demographics, they have a huge number of people, an increasing wealthy middle class, but I think that is going to take some time to come to fruition.

CARUSO-CABRERA: Marc, Michelle here in the United States again, where electronics are selling very well for the holiday season. Is that the same for the luxury buyers as well? What are the wealthy giving and getting for the holidays this year?

COHEN: Well, one thing about the wealthy is that actually, increasingly these days, wealthy people have made their own money and they have come from relatively normal backgrounds. So like you and me they want the same sorts of things, although clearly they have more money to spend on those items. Electronics strong for men, jewelry for women. But I think what we are seeing is a shift amongst the wealthy away from luxury goods themselves, more towards services, towards experiences, if you like, away from status symbols towards status experiences or status skills. So I think what we might see is quite a lot of people receiving spa treatments, receiving things like the opportunity to have a cooking lesson from a celebrity chef, that sort of thing. So, there is going to be a good amount of jewelry bought and all that sort of thing, but I think you will see slightly more curious presents - slightly more experiential presents this year being bought by and given to wealth individuals.