A model sun bathes at the Summer Fair in Moscow, June 27, 2009. The fair displays luxury goods and luxury services.
Even the world's mega-rich are feeling the effects of the worst recession in seven decades.
Luxury isn't what it used to be. Conspicuous consumption is frowned upon and greed has been replaced by a new frugality, according to research on the spending habits of the wealthy.
"Across the board, at every level of wealth, we have seen a significant, if not dramatic (hit)," said Milton Pedraza, the CEO of the Luxury Institute, which provides insights in the world of the wealthy.
Wealthy individuals worth $100 million have seen their fortune slump to $60 million. Someone with a $1 billion fortune, is now probably worth $600 million, he added.
"It is a somber environment out there in terms of luxury because of the lack of money and the failure of the luxury industry to deliver on what consumers see as the fundamentals," he said, citing superior quality, craftsmanship, design, exclusivity, brand heritage and customer service.
"Those are the worst that they are not delivering on," he added.
NEED NOT WANT
A survey of more than 400 wealthy consumers with six-figure plus incomes and high net worth showed 42 percent are spending less on luxury items since the beginning of the year.
More than half said their spending is "based on need rather than want" and three-quarters regard luxury items as an extravagance.
Sixty-percent said in today's economy buying luxury items would be irresponsible and in what could send shudders down Rodeo Drive in Los Angeles and New York's Fifth Avenue, 21 percent said they would spend more on discounted goods and services.
"The top category where consumers said they would be spending the least from now until the end of the year. is jewelry, by a long shot," said Pedraza, adding that home furnishings, watches, handbags and shoes followed.
On the upside 15 percent of wealthy consumers said they would spend more on leisure travel. A similar number cited dining, health and fitness, technology, entertainment or cars as items for which they would dig deeper into their pockets.
In addition to being more reluctant to dispense with their hard-earned cash on luxury items, well-heeled consumers are also less eager to flaunt their wealth.
"You don't want to become the pinata," Pedraza said referring to the party toy and likening it to a rich-bashing attitude.
"You don't want to stand out as a conspicuous consumer of luxury ... There is a sensitivity (about displaying wealth)."
Pedraza predicts there will be a temperate, moderate approach to luxury in the next decade.
"I think it will take at least 24 months to get to the level of 2007. And we will get there differently by selling more value, more classic luxury than we will with frivolous luxury. And it will be spending by fewer people," he said.
Luxury brands will also have to up their game to get consumers through the door and then out with bundles of luxury buys.
"Brands are starting to understand they need to deliver impeccable customer service and experience and to inspire customer loyalty. They need to do something far more special for their clients," he added.