The buying response of the coronavirus era to a recession: change

Waste challenges the rules of past economic recessions, when consumers engaged in less expensive items. And it’s not just the well-to-do involved. Less affluent shoppers buy items such as a premium spaghetti sauce or shampoo that is worth the salon and previously unavailable or believed to be worthless before the coronavirus pandemic forced people to reduce activities and isolate them.

Stephanie Moon bought a Chloé handbag on sale for $ 600 this summer as a reward for signing her first client to her newly launched consultancy. The 38-year-old San Francisco resident said she doesn’t usually buy designer bags, but that she felt she could afford it now.

“I save so much money because I’m not going anywhere and I’m not going to do anything,” he said. “Normally, I would give myself a night out with my friends, but this year it wasn’t an option.”

Millions of Americans remain unemployed and unemployment claims are at their highest level since September. Although, despite some signs of slowing growth in November, retail spending has been strong relative to the broader economic outlook, driven by increased online shopping. The National Retail Federation predicts that holiday sales will increase by 3.6% to 5.2%. Shoppers have been carrying Christmas decorations, which are scarce, as they try to brighten up sad and pandemic days.

After years of watching consumers, especially young people, shift their spending towards experiences, retailers across the spectrum say they have noticed more waste of things, from luxury chains like Neiman Marcus Group Inc. and Saks Fifth Avenue to Macy’s Inc.

and Signet Jewelers Ltd.

, owner of the Jared chain.

“Over the last few years, consumers have been choosing,‘ Do I take a trip to Rome or do I buy a handbag? “This year, the decision has been removed,” said Marc Metrick, CEO of Saks Fifth Avenue.

Mr Metrick said the biggest demand is from buyers who want luxury goods but can’t afford them regularly.

Neiman Marcus chief executive Geoffroy van Raemdonck said wealthy shoppers buy more expensive jewelry, shoes and handbags. “The same customer who would have bought a bag last year is buying two this year or buying a more expensive bag,” van Raemdonck said.

Neiman Marcus, which emerged from bankruptcy in September, has also attracted “entry-level” consumers who rarely even bought with the luxury chain before the Covid-19, he said. To appeal to them, he recently announced a partnership with payment company Affirm to offer installment payments for six to 36 months at no additional cost.

NPD Group Inc. found that customers at various income levels, from those earning less than $ 25,000 a year to those earning more than $ 100,000 a year, spend more on retail purchases than a year ago. In particular, for lower-income consumers, that spending did not dissipate after stimulus controls ended this summer.

“The growth rate of retail sales in the end is higher than in the end,” said Marshal Cohen, NPD’s chief industry adviser. “Consumers give away gold, send better, bigger and better gifts, and reward themselves.”

According to Bill Brace, Signet’s chief marketing officer, Signet’s Jared chain is experiencing the most growth at the highest prices, including items that cost more than $ 5,000. At Jared, sales of 2-carat loose diamonds and luxury watches have increased 30% from Nov. 1 through mid-December, compared to the same period last year. Over the same period, sales of 1.25-carat diamond earrings have increased by 40% compared to last year.

Brace said sales in these categories are growing at a rate of two to four times Signet’s overall sales growth in the most recent quarter. The company also owns the Kay Jewelers, Zales and Piercing Pagoda chains.

“Women are looking for jewelry that has a proper zoom,” Brace said. “They’re making diamond studs bigger.” He added that a Signet customer in Colorado recently bought three special edition watches that cost more than $ 10,000 each. “It’s unusual for someone to buy three at a time,” he said.

Macy’s customers buy more expensive jewelry, handbags and sleepwear, and shoppers spend more on each item than before on similar purchases, according to a spokeswoman. At the company’s Bloomingdale chain, affluent customers are purchasing luxury products.

“It’s not just because people buy snobby clothes,” said Tony Spring, CEO of Bloomingdale. “People realize that you can have very nice things that don’t come close to costing what experiences cost.”

Strong demand has allowed some luxury brands to raise some prices, according to Erwan Rambourg, global co-head of consumer and retail research at HSBC Holdings PLC. This spring, Louis Vuitton raised prices by about 8% globally, while Chanel set up an approximate 5% increase, he said.

A Chanel spokesman said the brand, like most other luxury labels, regularly adjusts prices to reflect changes in production costs, commodity prices and currency fluctuations, and also to avoid price discrepancies between countries. Louis Vuitton declined to comment.

“Since Covid came out, consumers have had a tendency to buy less, but buy better,” Rambourg said. “Unlike 9/11, which made spending on luxury seem vulgar and inappropriate, there is no stigma today.”

Sarah Johnson has been buying a Givenchy lipstick, a Chanel blush and a Yves Saint Laurent eye shadow, often spending $ 200 on a single shot. Prior to the pandemic, the 52-year-old New York City resident who works in public relations would have been pleased with the pharmacy brands.

She now plans to buy a designer bag as a gift for herself. “I’d never bought a designer bag in the past, but maybe I’ll use the money I saved for vacation to buy the Balenciaga bag I’ve always wanted,” he said in reference to the brand’s bags, $ 1,000.

Buyers of all revenue are also quoted in daily purchases as bottled water and spaghetti sauce, according to IRI, a market research firm that tracks $ 1.1 trillion in consumer product spending.

“We expected low-income buyers to buy more valuable brands,” said Krishnakumar Davey, president of IRI’s Strategic Analysis practice. “But they buy high-end products.”

Roy Cohen says he has been saving $ 2,000 a month since he stopped paying rent at his Manhattan office in June. The 65-year-old professional counselor canceled the holiday and eats less.

Instead, the East Hampton, New York resident says he is giving more to charity and saving things like premium olive oil. In the past, he said he would have bought the generic version from Costco Wholesale Corp.

“I’m very value-oriented,” Cohen said. “Before, I never would have thought expensive olive oil was worth it.”

Write to Suzanne Kapner to [email protected]