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Although luxury shoppers’ favorite destination is Nordstrom, the high-end consumer also likes to hunt for bargains at off-price and discount retailers.
This story first appeared in the February 6, 2008 issue of WWD. Subscribe Today.
According to a poll conducted by WWD and the Global Strategy Group, the majority of women surveyed identify with the term “bargain hunter,” and more than half the respondents buy most of their clothing at a discount.
“Luxury shoppers are perhaps more selective when it comes to spending habits than at other points in the past. They are willing to spend for special items, but also expect to find high-quality merchandise at affordable prices. The luxury shoppers aren’t just going to Neiman’s, they’re going to TJ Maxx and Target, too,” said Jef Pollock, president of Global Strategy Group.
“Price matters — to everyone. While luxury shoppers are obviously less constrained by price — and are more willing to spend more to get what they want — adult women and luxury shoppers both appreciate a good deal,” Pollock added.
The results of the survey come as there are growing signs that the U.S. economy is in a recession, triggered by credit market woes, sagging consumer confidence and a subpar holiday shopping season. Wall Street has pulled back on the retail sector, fearful that consumer spending will grind to a halt. And, as sales in the department store channel slow, some analysts are wondering if the high-end purchaser will pull back this year.
This week, analysts will be keeping a close eye on financial results from LVMH Moët Hennessy Louis Vuitton as well as same-store sales results from Neiman Marcus, Saks Fifth Avenue and Nordstrom.
The survey questioned 2,494 adult women nationwide with an interest in fashion about their opinions and behavior when it comes to shopping and fashion. These women were divided into two groups according to income level: 494 of the women were considered luxury shoppers, defined as those with household incomes of more than $250,000, while 2,000 respondents were middle income, earning $30,000 to $250,000.
The luxury shoppers said they are aware of their purchasing power and are unafraid to exert it. Of these shoppers, 27 percent said they splurged because they can afford to, and only 19 percent set a budget before shopping, compared with 51 percent of the middle-income shoppers.
For “must-have” items, 93 percent of the luxury shoppers will buy at full price, and one in five purchases a new wardrobe each season.
“It’s all about style,” Pollock said. “They place a high premium on unique, one-of-a-kind items and seek out wait lists and limited edition items as a means of distinguishing themselves. And luxury shoppers see themselves as style gurus in a way that women overall do not — they are the people their friends turn to [for] fashion advice.”
Female shoppers not only want, but expect a constant stream of new stock in stores, with 80 percent of luxury consumers and 66 percent of middle-income ones expecting new merchandise every time they go shopping. They are looking for key items throughout the year, rather than just during a particular season, requiring retailers to constantly be different and exciting.
The majority of female shoppers — 75 percent of middle-income and 95 percent of luxury shoppers — are willing to pay more for quality. At the same time, most admit high quality does not have to equate to high prices.
In the midst of a consumer spending slowdown and retailers lowering earnings expectations, luxury markets might not be as immune to macroeconomic shifts as predicted. The luxury segment grew 7.1 percent during the holidays, down from a 10.8 jump mid-fall, according to SpendingPulse, MasterCard Advisors’ macroeconomic retail data service.
Burt Tansky, president of Neiman Marcus, acknowledged that the current retail environment is “somewhat challenging,” in a first-quarter earnings call to Wall Street. But luxury purchasers are not holding onto their money. More than half said they still spend $5,000 a year on clothing and accessories, and 86 percent are planning to spend the same or more as last year.
Handbags topped the lists for luxury shoppers for what they would splurge on, and shoes for what they can’t live without, fitting in neatly with Neiman’s and Saks, both of which mentioned in their most recent quarterly conference calls that designer shoes and handbags were among their best performers. It was close, but 58 percent of luxury respondents would choose to save their handbag collection over their shoes during a fire.
High-end shoppers also love wearing designer labels, with 80 percent of them sporting brands such as Ralph Lauren, Michael Kors and Coach, compared with 44 percent of middle-income purchasers. When choosing if brand or price is more important while shopping, 44 percent of luxury shoppers chose brand, compared with only 14 percent of middle-income shoppers.
But these brands do not include celebrity lines, with 59 percent of luxury and 48 percent of middle-income shoppers turning their noses up at pop-idol brands. However, celebrity fragrances have gained traction in comparison.
Department stores remain the preferred retail destination, with 81 percent of middle-income shoppers and 57 percent of luxury shoppers choosing them over boutiques. Reasons for choosing department stores ranged from flexible return policies to a large selection of brands and sizes. In fact, an unwavering 69 percent of purchasers in both groups put flexible return policies as the most important factor when shopping in a store.
Nordstrom tops the list for luxury shoppers, with 59 percent choosing it as their number-one destination. It’s closely followed by Macy’s, 58 percent; Bloomingdale’s and Neiman’s, 27 percent each, and Saks, 25 percent.
Middle-income shoppers preferred Macy’s, 52 percent; J.C. Penney, 49 percent; Kohl’s, 48 percent, and Dillard’s, 23 percent.
Luxury shoppers also buy from other retail channels, including online and smaller boutiques. On a monthly basis, 38 percent of luxury consumers frequent boutiques at least a few times, compared with 11 percent of middle-income shoppers. These said their reasons for shopping at boutiques were for a more personalized shopping experience; in fact, one in five mention a lack of service as their greatest frustration while shopping. Brand selection and the ability to find merchandise quickly and easily were also cited as key factors.
Shoppers’ online choices followed their brick-and-mortar preferences. For the luxury group, popular sites were the online versions of Nordstrom, Macy’s and Neiman Marcus. During the first quarter ended Oct. 27, Neiman Marcus said the company achieved Internet sales of almost 23 percent, exceeding its expectations.
For middle-income shoppers, the online versions of J.C. Penney and Target were most popular, but also included stores with no real-life precursor, such as eBay and Amazon. In one month, only 28 percent of middle-income shoppers purchased online, compared with 51 percent of luxury shoppers.
“Luxury shoppers are distinct in how they perceive their shopping experiences,” Pollock said. “Shopping is much more emotional for adult women than it is for luxury shoppers. Women shop — and splurge — because it makes them feel good. Luxury shoppers do it because they can afford to.”
|What’s in the closet – and how much does it cost?|
|In the Closet||Middle-Income Respondents||Luxury Respondents|
|20 pairs of shoes or more||61%||93%|
|More than 10 pairs of jeans||19%||32%|
|Five or more watches||24%||37%|
|Five or more pairs of sunglasses||12%||29%|
|Spending Habits||Middle-Income Respondents||Luxury Respondents|
|More than $500 on a handbag||7%||49%|
|More than $150 on a pair of shoes||21%||80%|
|More than $250 on a dress||16%||77%|
|More than $500 on a coat||10%||63%|