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A Nemo blog. Dealing with uncommon cents.

Photo courtesy of The NY Times

According to the NY Times, even luxury goods are not exempt from the faltering economy. High-end Fifth Avenue department stores including Bergdorf Goodman are luring in shoppers with enticingly deep discounts. Customers are now digging though designer handbags on tables with prices slashed upwards of 40%. The New Yorker’s Patricia Marx has even remarked that “Sixty percent off is the new black.”

Surprisingly, established luxury retailer Saks dug even deeper than its competitors, dropping the prices of much of its fall fashion up to 70 percent. Customers were so shocked that they assumed that many of the price tags were misprints.

A just released MasterCard Advisors report lists luxury goods sales as being of nearly 25% off this year when compared with last. The era revolving around the endless drive towards high-end consumption appears to be drying up fast.

The NY Times raises the question that everyone is pondering: With such deep discounts on luxury goods, consumers are left wondering what the astronomical mark-ups were in the past. And, now that they’ve witnessed these bargain basement prices, will they be willing to pay full price ever again?

A slumping economy has caught much of the apparel industry off guard and faltering under an increasingly volitile wave that can be attributed to the deflation of pricing on mainstream American labels, increased manufacturing costs and savvier consumers who are putting more thought into their purchases.

While the price of gas, utilities and groceries has skyrocketed, discretionary (non-essential) spending has been hit hard. “Fast fashion” retailers have fared okay so far in this lackluster market, but eventually, something has got to give.

Many of the staples in mainstream American apparel (Levi’s jeans, Lacoste polos) have actually decreased in price, even when adjusted for inflation due in part to the trend of moving manufacturing to countries with cheaper labor costs. But with the dollar losing steam, those rates have jumped. “As far as bottom costs go, we’re there. I think we’ve exploited all the countries on earth for people who really want to work for nothing,” said Bud Konheim, the chief executive office of Nicole Miller (NYTimes.com).

In many social circles, it is now hip to focus on individuality with regards to fashion and making thoughtful purchases. Instead of purchasing a gaudy, logo-driven article that is instantly recognizable (and quickly dated), people are leaning towards rare, more unique items. “Everything we pick up today has to pass a test,” said Candace Corlett, the president of WSL Strategic Retail, a consulting group. And, with so many options nowadays, who can blame consumers for taking their time to make a purchase? Unfortunately, the NY Times mentions that this is causing many fashion executives to feel the pressure on their bottom lines. Bud Konheim laments that “We as a business cannot afford to have a customer take a second look and ask, ‘Do I need this?’ That is the kiss of death. We’re finished, because nobody really needs anything we make as a total industry.”

Not everyone is faring badly in the tough American economy. Tom Wallace, President of trend forecasting company Label Networks lists a handful of brands including American Apparel, H&M and Uniqlo that are weathering the storm surprisingly well. This may be because of their ability to deliver consistently on-trend clothing in basic shapes at reasonable prices that are easily mixed in with what consumers already own.

To be fair, the recession isn’t hitting everyone. The International Herald Tribune says that “While American buyers are keeping an uncharacteristically low profile, with a beady eye on the miserable dollar exchange rate, other parts of the world are rejoicing in burgeoning markets and have no thought of recession.”

To cope with the lagging economy, luxury fashion houses are surviving the downturn by pushing accessories including jewelry, shoes and handbags more heavily. While shoppers might pass up high priced trendy clothing, they will still drop money on items they can use regularly.

As the U.S. recession deepens, it will be interesting to see what creative tactics brands will employ to stay relevant when consumers are more concerned with basic needs. With rock bottom prices already the norm in the nation’s collective consciousness, the sinking of many labels will be inevitable.