• Consumers are proving that there is a market for small dollar amounts for on-line content.   Ring tones, cheap internet calls through Skype, iTunes and more are ringing up big dollar amounts on micro-transactions.  It was once believed that consumers would not pay for on-line content and the only way to profit was through on-line advertising and monthly subscription services.  Now advertising revenue for the time being is not as profitable as once thought and consumers expect information to be free.

Home accessories, a luxury in a down market

• Little luxuries in depressed times cheer people up.  In the down market designers of big ticket furniture items are facing a major challenge.  A few smart ones are adding well designed home accessory collections to their offerings.  But this is not just about pure design; consumers also want functional products that are long lasting, something that the discounters do not provide. Consumers of high quality furniture are attracted to premium materials and finishes and high levels of craftsmanship.
• Home gift and table top retailer recently engaged famed British Architect Zaha Hadid to design a collection for the company.
• Unlike big ticket furniture, home accessories can change by the season to better reflect both design and fashion trends.

Aspirational and luxury retail taking a hit

• Luxury brands in the recent economic boom of 2003-2007 focused on their existing trade with a greater variety of high priced goods, but often with perceptible reductions in quality.   The luxury brands also sought to expand their empire by attracting new aspirational consumers by opening more points of purchase to reach a larger market and by developing new products at lower price points for those who aspired to step up to the brand.  This resulted in more consumers paying more for premium goods.  But just a few years later, the consumer at all levels has traded down and perhaps to never return to the same level of consumption, in this generation.

Cinemas – New Affordable Indulgences

• Affordable indulgences such as cinema sales are doing very well in today’s economy.  With cut-back dollars in the pocket from consumers trading down, saving more, eating out less or at lower priced cafes, and deferring of large purchases a night at the cinema is considered to be a just reward for all of the hard work.

Consumers rethinking green

• The public no doubt has a real concern for the environment but may not be as committed to paying for green and ethical as one may expect.  Recent studies indicate that less than 50% of the market would only pay 10% more for social conscious products.  This brings into question the viability of ethical shopping for green, and organic, fair trade in depressed economic times.  Apparently, it is easier to take the moral high road in good times.

Decade of Decadence

• The decade that offered affordable luxuries, premium upgrades, and aspirational obtainment is over and may not ever return.  Our research indicates that consumers are leaving high end trendy and flashy brands for more classic looks.
• Luxury brands are rethinking their business models and no longer will brands have the latitude to support the lavish excess of the industry.  Logic and business sense will preside over the more creative aspects of the industry.  New luxury brand strategies for success in the past boom economy include:  first, the number of collections are going to be reduced which will decrease design costs; second, established brands are going to move away from lavish print advertising and focus more on in store events; third, the number of flagship and anchor stores in a chain will be reduced; fourth, brands will open and control their own outlets as opposed to selling their goods in department stores;  and finally, the luxury business is going to find a way to do business without the lavish excesses of the past consisting of fashion shows; celebrity designers; and other similar expenses.

Off-Target

• Consumers at all levels are trading down, including shoppers of Target who are trading down within the store, which caught the chain off guard while sales at Wal-Mart continue to increase.  Sales at Target, the more upscale of the two discounters continue to show little life.  It has been reported that the Target upscale shopper has now moved to more downscale and lower margin items within the store, thus reducing higher profits from better margin goods required to support a lower price structure on other more basic items.  Non-discretionary items such as healthcare and baby products and food have been the best sellers, while apparel and home products have been weaker.

Form Follows Beauty?

• Luxury consumers want more than function and form and look for products with meaning:  Smart brands are positioning their products as sources of serenity, well being, beauty and harmony.

Shopping Less for the Best

• High end shoppers are still shopping, in part for recreation or something to do, but instead of buying multiple products or shopping numerous stores they are tending to make fewer high dollar purchases at a limited number of stores.  This trend of consuming by looking needs to be carefully followed.

End of the diamond myth

• High quality, certified and graded diamonds are now being sold at 70% discounts, by the online discount Retailer Brand Alley.  Supplied by the same laboratory that supplies De Beer’s diamonds, consumers now have a new access to the luxury of precious stones.

Teen market shift

• Leading teen retailers Abercrombie and American Eagle are consistently reporting significantly lower sales in same store sales over last year while the Buckle is report strong sales.  Sales for Abercrombie have been down 20% and more while American Eagle has seen rent sales decreases in the 7% range.  Conversely, the Buckle offering a combination of national brands and pricing is seeing sales increases of +20% and more.  The reason:  The teen market may be changing to one which is seeking a little more diversity than the simple jean and Abercrombie T-shirt.  Additionally, Abercrombie has kept prices high despite competitors’ markdowns.  In regards to American Eagle, in recent years the company has increased its price points and decreased the percentage of national brands in favor of its own brand.  On paper it looked like an accountant’s dream strategy to improve margins, but the consumer has not bought it.