They shop luxe and they shop discount, fulfilling both practical and psychological needs along the way.
Cross-shopping is nothing new in fashion. Wardrobes are works of art and function that are drawn from a variety of sources.
Even so, the inclusion of, say, both Nordstrom and Kohl’s in a shopping diet seems drastic to many. But research from MasterCard suggests high-end shoppers have no problem delving into the discount channel. In fact, they appear to spend more at lower-priced chains than in what would seem to be their natural luxe habitat.
At the request of WWD, MasterCard Advisors looked at the aggregate spending habits of more than 100,000 anonymous cardholders who made at least one purchase at one of nine high-end retailers last year. The group made more than 25 million total MasterCard transactions last year and proved to be relatively channel-agnostic.
The luxe stores included in the sample captured about 2 percent of the group’s total MasterCard spending, while discount department stores, a category that does not include wholesale clubs, garnered about twice that, or 4 percent.
When shoppers in the sample did spend at the high-end stores, their average ticket was about three times larger than when they shopped at discount department stores, but they shopped at the luxe stores only one time for every six visits to a discount department store.
Andrew Mantis, MasterCard Advisors’ senior vice president of merchant information services, said these broad trends reinforced what the research wing of the credit card company finds when it looks at spending patterns for individual retailers — that luxury consumers are very comfortable shopping the other end of the price scale.
In part, this extreme cross-shopping flows from the daily needs of busy lives and the structure of retailing. Even the shopper who can afford to buy everything at Saks Fifth Avenue can’t find everything they need there. Lawn chairs for soccer practice, party favors for toddlers, extra towels for a camping trip, lightbulbs and a million other things draw shoppers to a host of lower-priced chains, from dollar stores on up.
Even though struggling midtier chains such as Kohl’s or J.C. Penney will remain dependent on their bread-and-butter middle-class consumer, the research suggests lower-end retailers have a deeper relationship with a high-end shopper than even they might realize. And this relationship, if cultivated properly, could open up new possibilities. Elsewhere, cheap-chic retailers including Zara and H&M have succeeded in drawing a broad range of shoppers by upping the fashion quotient of discount apparel.
“There is a democratization in many ways,” Mantis said. “Shoppers are going where it makes sense to get a reasonable price.”
Leon Nicholas, director of retail insights at Kantar Retail, said shoppers are looking to complement what they’re buying at high-end stores, going to a dollar store, for instance, for party balloons.
“One-quarter of Nordstrom shoppers shop at Dollar Tree,” Nicholas said, drawing on his company’s own consumer research.
Discount stores are providing shoppers with more than the goods on the shelf — they’re providing a psychological out for at least some consumers who see themselves in a holistic manner.
“There’s more room for people to have a broader conceptualization of what they are and what stores they belong in,” said Kit Yarrow, a consumer psychologist at Golden Gate University in San Francisco. “People don’t want to be — in their own image of themselves — in that category of those high-end stores. They think of themselves in a broad way. People who do have means don’t want to be identified as people who are in a category that separates them from the rest of the world. They want to think of themselves as a little more average. There’s almost an anticachet around being wealthy.”
And so consumers are viewing stores differently.
“People really perceive the entire shopping universe to be available to them today,” Yarrow said. “I don’t think people think of themselves as a Macy’s shopper today. They did even five years ago.”
Luxe shoppers are also using their trips to the discount world to justify their other spending.
The consumer itch that needs to be scratched here is long familiar to grocery retailers, which refer to it as “licensing,” said Herb Sorensen, consumer expert and author of “Inside the Mind of the Shopper.” It’s the reason why the grocers lay out their stores so the produce section and all of its healthy green things is followed immediately by the bakery — shoppers buy something good for themselves and then feel they have license to go for the sweet treat.
It might not be logical, but it’s how shoppers operate.
“You tend to think about it in a rational way and it’s mostly not rational,” Sorensen said. “Every guy thinks they’re great in bed. Well, there is a certain image, but it has no relationship in reality. People think they’re really careful shoppers. This is simply not true. It’s not a rational process, mostly. They respond to cues and things that they themselves are not aware of.”
And so, a trip to Target might give a luxe shopper the license to make a stop at Gucci and Chanel and so on.
The economy’s been bad, but it hasn’t been bad for everyone and those shoppers from across the price spectrum who still have the means to spend are looking for an excuse to open up.
“Large numbers of people have just as much income and comparable expense as they had five, 10 years ago,” Sorensen said. “What they’ve been hit with is massive psychological damage. It’s no longer like, ‘I’m riding on a crest of a wave.’”
Mark Montagna, an analyst at Avondale Partners who focuses on value retailers, said dollar stores are well aware that they draw higher-end shoppers, a fact that other low-end stores don’t address as much.
“I’m not sure that they’re talking to [higher-end shoppers] or trying to figure out how to talk to them better,” Montagna said. “Whatever they’re doing, they need to talk to them more often because that customer will be more of a full-price customer. They’re also going to be buying the higher-end product at these value department stores.”
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