NEW YORK — Approximately $76 billion in potential sales of apparel evaporated from 1999 through 2002 as share of consumers’ disposable income spent on the category continued a longtime slide.
So said Paul Nunes, co-author of the just-published “Mass Affluence: 7 New Rules of Marketing to Today’s Consumer” (Harvard Business School Press: $29.95).
During that four-year period, the share of disposable income spent on apparel by people in top-quintile income households, or those with annual income north of $65,000, dropped to 3.5 percent from 4.8 percent.
The bottom line, Nunes advised in “Mass Affluence,” is that the dramatic shift in Americans’ income distribution over the past three decades has not been fully exploited by marketers. In his book, the author, an executive research fellow at the Accenture Institute for High Performance Business, lays out a plan by which businesses can win over the group he describes as the “moneyed masses” — those who are spending relatively less on various products.
In the mid-Eighties, the top 20 percent of households by income were spending about three-quarters, or 74 percent, of their disposable income on products and services, rather than allocating it elsewhere, such as to savings and investments. By 2002, the share of disposable income allotted to consumption of goods and services had fallen to 66 percent. If expenditures by the top quintile of households by income were still 74 percent today, Americans would be spending another $100 billion a year on consumption of goods and services, Nunes estimated.
The decline in spending on apparel came even as the top 20 percent income households accounted for 63 percent of Americans’ household income in 2000. That’s a significantly greater share of the country’s income than the 32 percent that top-quintile households accounted for back in 1970 (in year-2000 dollars).
Further, between 1989 and 2002, top-quintile income households increased their annual outlays for apparel by only 8 percent, to an average of $3,478 in 2002, from an average of $3,227 in 1989 — even as the segment’s income grew by 49 percent.
The unrealized spending on products like apparel can be captured, in part, by applying three rules of designing offerings, advised Nunes and co-author Brian Johnson:
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