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Secret spending of 'guilty rich' is saving economy

Ireland's "guilty rich" have emerged from the financial crisis with fewer scars than feared and still have the knack of spending large amounts of money, but just that bit more quietly than they did during the boom years.

These are the same people responsible for pushing total retail sales back into positive territory for the first time since January 2008, as reported last week when the rest of us refused to spend.

Susan Hunter Lingerie, located in the Westbury Mall in Dublin, sells pure cotton and pure silk tactile underwear that women would kill to have next to their skin, but they come with a hefty price tag. A cashmere dressing gown will set you back €870.

"Women can't be seen to be wearing bling-tastic clothes these days and are afraid to show off ostentatious wealth as they don't want anyone to know, so they are spending as much as they want on expensive underwear which no one can see," said owner Susan Hunter.

"We have one hundred grand worth of stock so plenty of women who work and earn their own money come in here to spend it, they no longer have a mortgage as many are in the 50 age-bracket so they are not affected by cutbacks."

On the back of the latest figures from the Central Statistics Office, consumer sentiment has improved with the volume of retail goods sold in February three per cent higher than it was a year ago.

"The latest retail sales report which covered February gives an overall picture that a pick up has occurred in consumer spending. A change in consumer attitudes and consumer spending are causing positive figures to emerge," said Simon Barry, chief economist with Ulster Bank Capital Markets.

And so it seems general optimism and increased confidence amongst the "secret rich" means consumers are coming out of their shells and encouraging many to go shopping for that summer wardrobe in the last month or two.

With consumers' financial attitudes relaxing slightly, this surge in spending reflects a decline in the savings rate, rather than a surge in income. Off the Rails presenter and one of Ireland's top fashion stylists Sonya Lennon believes people are buying with purpose and think about the value of an item long-term. "People are opting for a wow-cut garment or something with a beautiful fabric rather than a trend piece. The new luxury is the human touch of a garment. Economics and fashion are so strongly linked that the ostentatious displays have fallen out of fashion. Brown Thomas has reconfigured their designer floor to a low-key collection instead of in-your-face fashion," she said.

And art isn't exempt either. Auctioneer John De Vere of de Vere art auctions on Kildare Street in Dublin took in €580,000 when he sold 85 paintings last Tuesday and he has also identified a new type of buyer in the market. "We were selling paintings from between €500 to €60,000, there is no doubt we had a packed attendance and sold 70 per cent of our paintings. There are a lot of new buyers about who regard art as a form of investment. One Irish lady flew in especially from England and bought six paintings, spending €60,000 in total, as a form of investment as she understandably didn't want to put her money into a bank or buy shares," he said.

Paul Sheeran Jewellers, off Grafton Street in Dublin, agreed that people are most definitely still buying jewellery and watches across the board. "They don't want to be seen as flashy and so are opting for items which are classical in style and more dateless. A lot of our selling is in the €50 to €1,000 price range and diamond rings are selling very well," he said.

Jeweller Rebecca Davis owns rebeccadavis.com in the Westbury Mall and has witnessed an increase in consumer spending in the last few weeks.

She believes if someone wants to spend, they will. "They will probably not be as flashy about it but jewellery makes a woman feel beautiful and special so why not," she said.

Louise Stokes, owner of the high-end designer jewellers Loulerie on Chatham Street in Dublin, has seen people want to make purchases in private or just not want to be seen throwing the cash around especially now when things are tight for a lot of people. "We will always accommodate this in our store by doing private appointments," she said.

Loulerie will soon launch its e-commerce site where customers can buy online without anyone looking over their shoulder as to what amounts one is spending.

Louise thinks the word "guilt" seems unique to our Irish culture and sees why the phrase "guilty rich" has a place in today's economic climate with gross overspending and excesses of many a high-profile person being played out in the media when the general public have suffered job losses and significant cuts to their spending habits. "I don't think guilt should always be associated with spending. There is no way our economy and especially the retail sector can recover if people are scared to death to spend," she said.

Stylist Cathy, who offers a personal shopping service, agrees that people are still spending money on personal items but things have changed slightly. "At the height of the Celtic Tiger, there was a very obvious bling-tastic and wag-style in fashion; one couldn't hear enough about how much something cost and one would show off their wealth with very obvious branding. It was a very vulgar period and now it is seen to be in poor taste to be flashing cash in people's faces," she said.

However, according to Cathy, her clients have become more fashion savvy. Their interest is in shopping smart with less volume but they continue to buy those rare, classic, expensive items of clothing. "A Brown Thomas shopper is never going to venture into Penneys even with the recession as they still want to wear beautiful pieces which cost money but they no longer buy in volume; that's the difference. They are buying expensive designs they can wear through the seasons with a high quality fabric and cut," she said.

Instead of being seen to splash out on a new home, there has been a turnaround in household spending on big-ticket items such as furniture, which has led to a 14.9 per cent monthly rise in sales of furniture and lighting, taking the annual rate of growth in this category to 4.7 per cent.

Ger Ryan, homewares buying director at Arnotts has seen an increase in sales since the end of January. "With a lack of spending in this area last year, there is a desire for change and newness now in homes. A lot of customers who are revamping their homes are investing in statement designer pieces," he said.

An upbeat tone can also be heard from the cook-ware and table-ware department in Arnotts, with people spending more as the trend of dining in increases. People do not want to be seen eating in expensive restaurants so they are spending money on expensive food items to eat in the home instead.

Peter Dunne, director of Mitchell & Son Wine Merchants, has seen an upturn in posh dining and entertaining at home as of late and they are often asked to match menus with appropriate wines, aperitifs such as champagne, wines and port/cognac.

"Some people still feel uncomfortable (about dining out) and choose the home option, especially if a restaurant does not have a 'private dining room' or a 'snug' in which to escape notice," he said.

And Ireland's most beautiful lifestyle store, which houses the world's most exclusive designer collections, is not faring too badly out of the recession either as there is still that pocket of high-end customers ready to throw their cash at these luxury goods. Stephen Sealey, managing director of the Brown Thomas group, agreed that this year saw an improvement in confidence, which has been reflected in an increased demand for expensive purchases.

"Our accessory business is performing really strongly, across all price levels, from new brands like Michael Kors, through to Chanel and Hermes. Mulberry bags have been particularly strong," he said.

"The trend is for more understated bags, which are more of an investment purchase. Just last month, we sold out 3,000 Tory Burch-designed tote bags."

The fine watch and jewellery business is also performing much more strongly, with exclusive brands like Panerai doing really well. In fashions, especially designer women's wear, Brown Thomas had a very strong start to the spring season, with a number of collections almost sold out.

And so the spending spree is upon us, but the remaining question is whether this impressive pace of consumption spending by the "secret rich" can be sustainable in an environment mostly made up of limited employment growth and little credit growth.

Sunday Independent