The "It Bag" May Be "It" No Longer, as Consumers Push Back on High Prices
As affluent customers decrease spending on personal luxuries, signs point to the end of the era of limitless spending on coveted items
The 1990s and early 2000s may have been the halcyon days of the fashion accessory. Manolo Blahnik and Christian Louboutin shoes, and wait-listed Birkin handbags led the pack of must-have accessories, and even those who blanched at the high-and-increasing prices of these items gave blue-box jeweler Tiffany and classic handbag brand Coach some of their best years. But those days may well be passed.
Recently I have noticed some major cracks in the armor of these status brands, and my research backs it up. For example, in one recent Wall Street Journal column by fashion advisor Teri Agins, she gave permission to her style conscious readers to eschew logo handbags - she writes, "I have always despised logos." - with advice on how to find handbags that do not include conspicuous brand logos, a badge of expense and social arrival - or at least social aspiration.
In her column Teri tells shoppers where to go to find good-quality bags for a reasonable price, even naming Wal-Mart as a store where she has found a stylish bag she isn't ashamed to carry. On her Wal-Mart bag, she says, "My brown woven handbag for $6.97 from the store has fooled the most persnickety bag snobs." As for me, I am totally hooked on the Big Buddha brand that sells stylish, animal-friendly bags for under $100.
This blog, "Why women love luxury handbags" by Maya Savanovich on JustLuxe.com, expresses a view on luxury handbags which I think is rapidly becoming passé, out of touch with the times, even embarrassing.
Get Inspired >> Learn how shoppers are buying fashion accessories today
I'm not surprised to see evidence of consumers turning away from obvious identifiers of luxury brands in their fashion accessories. In Unity Marketing's most recent Luxury Tracking Report, we see that while demand for personal luxuries has risen to the highest level since 2009, spending on personal luxuries (a category that includes fashion accessories, including the traditional category top-performers of handbags and shoes), has plummeted. Spending is down both quarter-to-quarter and year-to-year. This indicates that consumers are still buying, but paying less for their fashion accessories, perhaps by looking for sales and discounts, and perhaps by trading down to less premium brands.
We are already seeing confirmation of this weakness in the market, as traditional stalwarts Ralph Lauren, Coach, and Tiffany have all posted recent weak corporate results. Pundits are warning the luxury market is headed for a fall, and I think they might be right.
Take Action >> Prepare for customer push-back on exorbinant prices
Conventional wisdom holds that luxury accessories consumers - particularly those buying shoes and handbags - will pay a nearly unlimited price for the season's must-have accessory. Some of these shoe brands became household words due in part to the television show Sex and the City, while part of the cache of the Hermes Birkin bag was not just a price tag that could hit five figures, but also the waiting list that could span months.
However, we are seeing strong evidence that shoppers are pushing back. Perhaps it is the feeling of disconnect that came from weathering a recession in which one pair of those luxe shoes could equal an entire former paycheck for someone out of work. Perhaps it is the knowledge that a savvy shopper can buy a new handbag every season or for each outfit for less than the price of one luxury branded one. Perhaps it is the thrill of the bargain hunt and the secret pleasure of knowing how little you spent, rather than the public pleasure of everyone knowing how much.
Regardless, luxury accessories makers and manufacturers must adapt to this new market. Some of my top suggestions include:
Understand your customer:
The customer who can afford - or is willing - to spend $1,000s on a handbag is very narrow, roughly the top 10 percent of the affluent market, and getting even smaller as this weak economy drags on. That's why even such luxury retailers as Saks and Neiman Marcus have had to add more affordable brands to their mix.
Shoppers won't hand over their credit cards just to buy your logo anymore, but they will pay for items that communicate style, quality, and value. Stress the unique qualities of your items and why they represent a value proposition.
Take a hard look at your pricing structure and see if your prices fairly reflect the quality of your goods without overly "milking" your consumer. It is fine if your quality goods command a higher price than a discount store version - they should - but the days when exorbitant prices rule are gone.
Offer lower price options carefully:
While some brands have had great success offering a more budget-friendly line of goods, others have seen their entire brand value diluted by these cheaper versions. Understand your market, your customer, and your sales strategy before taking steps to compete too aggressively on price.