Following the economic collapse in 2008, many retailers thought the aspiration consumer was gone for good.
Gone were the days of high-price impulse purchases, and the endless appetite for designer goods, they thought.
Now, as we venture into 2014, it is evident that the aspirational consumer is back again, with luxury retailers vying for their time, attention and dollars. Additionally, more consumers in a variety of income brackets now have the desire to buy luxury products, presenting a plethora of new opportunities for brands and retailers alike to engage shoppers and drive sales.
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In the below Q&A, Hana Ben-Shabat, luxury expert and a partner in the Retail Practice of A.T. Kearney, delves into the state of the aspirational consumer, her browsing and buying behaviors, and how luxury brands can see success as the economy recovers.
Retail TouchPoints (RTP): Can you share the characteristics of the aspirational consumer?
Hana Ben-Shabat: Aspirational consumers are those with household income of $100,000 to $400,000. They are affluent, but not yet rich. These consumers typically have a college education or higher. Based on the 2010 U.S. census, about 20 percent of U.S. households fall into this income category.
The aspirational shopper’s approach to shopping is “Mix and Match” — you are equally likely to meet them at Target or Neiman Marcus. They shop carefully, not necessarily for the best price but certainly for the best value. Prior to the recession, they most likely practiced “Stretching Up,” or spending more time and money at Neiman Marcus than in Target.
Taking advantage of easy credit, these consumers were acting on their aspiration for luxury goods and services, but they often got over extended, wrapping themselves in the credit bubble.
Once the financial bubble burst in 2008, many felt the decline or loss of their key assets and therefore a reality check set in. For a while the newspaper headlines read “RIP aspirational consumer.” It seemed that they would never bounce back, but they have, finally.
RTP: Based on your research, what is the current state of the affluent customer? Is the affluent customer thriving and or bouncing back after the recession?
Ben-Shabat: The aspirational consumer is back, but in a very different way. It is about true “Trading Up” not “stretching up.” They still seek the pleasure of owning a luxury goods product either as a status symbol or as true appreciation of the brand craftsmanship, but they do so carefully. As such, they are more likely to purchase items they can really afford — the Hermes Scarf, not the Hermes bag for example.
RTP: How is the volatile economy impacting the lifestyle and/or buying decisions of affluent consumers?
Ben-Shabat: The most important factors are employment and savings. If they feel secure about these two factors they are more comfortable making the occasional luxury purchase. However, having experienced the impact of the last recession, they do so very carefully.
RTP: Do you find that affluent consumers are loyal to only a few key brands/retailers, or are they shopping across a variety of outlets and in several channels? How will these shopping behaviors change during 2014 and beyond?
Ben-Shabat: Like every shopper, aspirational shoppers do favor a few key brands and they will shop directly at the branded store, department store or outlet store when available. Recently, the increase of e-Commerce opened up new opportunities for aspirational consumers to find the products they look for on different websites globally. This trend will get stronger in 2014 and beyond.
RTP: What do affluent consumers expect from brands and retailers in terms of the browsing and buying experience?
Ben-Shabat: Great Products, Good Pricing, Good Service. Nothing new to report, here…
RTP: Can you share more details regarding the luxury pyramid? What is it and what is it comprise of?
Ben-Shabat: Luxury goods are defined by their premium price and availability in exclusive retail locations. They are differentiated from other goods on the basis of price, exclusivity, limited availability, and quality.
However, as a part of the quest for growth, some luxury brands started to offer products that are more accessible, offering larger numbers of consumers the opportunity to participate in the brand experience. These products are available and distributed in a less exclusive manner than others, creating the distribution pyramid effect.
At the top of the pyramid are the items one can find in the branded boutiques or high-end department stores. At the bottom of the pyramid are the items that are more widely distributed through mid-tier department stores or other channels.
RTP: How are luxury brands improving their products and/or marketing strategies to appeal to affluent consumers, as well as a broader base of customers in lower income brackets?
Ben-Shabat: Advertising print “spreads,” e.g. multiple pages in fashion magazines like Vogue where they display side by side the top of the pyramid items with bottom of the pyramid items. In addition, social media outlets such as Facebook are becoming important vehicles to drive consumer engagement with the brand.
