Luxury retailers are being forced to readjust their business models in the midst of the global crisis, a new report has found, with the luxury retail sector likely to emerge from the recession in a radically different form.

This warning comes amid a forecast 6% decline in global luxury expenditure to EUR211bn in 2009 - making this one of the worst years on record.

In particular Japan and the US will see sharp declines in sales growth of 14.6% and 12.1% respectively.

Perhaps most significantly, the global downturn has changed mass market consumer attitudes - halting the expansion of the luxury sector into this area, says the research from retail analyst Verdict Research.

"The change in external circumstances has once again demonstrated the cyclical nature of the luxury business," says Daniel Lucht, senior analyst and author of the report on 'Global luxury retailing 2009.'

"Contrary to what has often been claimed luxury by any means is certainly not immune to crises."

Currency fluctuations have also been a major issue for the vertically integrated luxury players who make products in Europe for sale to the rest of the world.

The result has been a need to raise retail sales prices to make up for the shortfall in local currency depreciations - which is very difficult to carry off even for a luxury business.

Emerging markets (such as the Middle East, Russia and emerging Asia) have also seen sales slump, and attitudes too are likely to mirror those in the west where ostentation is a thing of the past.

For luxury retailers the game now is almost exclusively about traditional core markets, the EU, the US and Japan.

Cutting costs by renegotiating leases, reducing advertising, axing under-performing brands and reining in expansion is one way to reengineer the luxury business model, the report says.

Another tactical response is to aggressively drive sales growth. "The new opportunity lies in shopping centres" adds Daniel Lucht.

Other sales drivers could revolve around careful diversification into new sectors such as tourism and wellness and renewed licensing activity.

And key to the luxury retailers' future prospects is the internet, with its broad reach and low costs.