By Catie Low

Strong sales of high-end handbags and fancy food reveal shoppers are indulging in little luxuries in spite of the uncertain economic outlook.

The retreat in retail spending in July is not reflected in the sales of luxury accessories or restaurant meals, pointing to a spending sweet spot retailers can leverage in the countdown to Christmas.

Citi retail analyst Craig Woolford said shoppers were willing to open their wallets and treat themselves to a meal out or a more expensive bottle of wine despite the negative news on consumer spending.

He said spending at cafes and restaurants had jumped 44 per cent in the past five years and Oroton’s second-most-popular handbag last financial year was its limited-edition Rose Byrne tote with a $1200 price tag, more than double the average price of its handbags.

Mr Woolford said this data pointed to shoppers splurging on “small indulgences”, and retailers needed to take heed and not get too caught up in the commentary on weak consumer sentiment.

“Consumers are willing to spend money and retailers shouldn’t limit their thinking to weak consumer sentiment and de-spec products or reduce the quality of products,” he said.

Citi said several Australian retailers were attuned to the appetite for little luxuries, including Treasure Wine Estates, Super Retail Group and electronics retailer JB Hi-Fi.

Mr Woolford said JB Hi-Fi always moved quickly to capitalise on consumer trends and did a great job selling high-value hi-fi equipment, another example of an indulgence buy.

“The vast majority of people are employed and work hard, and if they are in Sydney or Melbourne they are probably pretty happy their house prices are rising,” he said.

“There is still this aura of the financial crisis and consumers are reading a lot of headlines that tell them they should be cautious but this is not over-the-top luxury.”

Shopper sentiment was rational and considered but where the value proposition was articulated, people were opening their wallets, Mr Woolford said.

Consumers don’t measure value purely by price. Value can also be delivered in the form of a luxury label that provides kudos or a limited-edition design, which taps into the concept of authenticity.

Retail Doctor Group’s Brian Walker said luxury label Louis Vuitton had its best years during the global financial crisis.

“[The] premium fashion and premium luxury retail market is the strongest and fastest-growing part of the retail market,” Mr Walker said.

“The more you move into niche and boutique retail, price is less of a factor provided it’s supported by high levels of service and a brand has a level of cache or aspirational value.

“The lower you get into commoditised retail product, like the discount department stores, price is definitely a factor.”

First published in Sydney Morning Herald, 28th September 2015