Because of the economic events over the past year, we have all seen a shift in personal spending. We pointed this out in a recent blog – The New Normal.
The good news for retailers is that spending is still going on, even among affluent shoppers who make up 20% of the nation’s households but account for 40% of all spending. They have just changed their buying habits like the rest of us.
We are finding new luxury in small indulgences. Recently, I visited one of our gourmet confectioners, Nashville Chocolate Kitchen in Franklin, TN. They specialize in high-end gourmet truffles and cupcakes. Their packaging is consistent with their luxury image. Americans may have cut back on their expensive vacations but they are certainly willing to pay $22 for an incredible box of truffles. “In hard times, chocolate is comforting and affordable,” stated Fabrizio Parini, senior vice president of marketing at Ghirardelli.
A recent article in USA Today points this out. McDonalds launched their Angus Third Pounder this summer. It cost $3.99 – the highest priced burger in McDonalds history. But why did they do this in the middle of a recession, you might ask? They are going after the casual dining market who might not want to spend double for the same meal. Their risk has paid off with both gourmet burgers and coffee in spite of the nutrition critics.
Another one of our customers, The Red Tulip in Gallatin, TN, is a gift shop that specializes in home décor and designer merchandise like Vera Bradley. The majority of their customers are just looking for that $15-30 gift item. They have a large friend base through Facebook and are members of The 3/50 Project to promote their store.
What is important to Red Tulip customers is that the store provides free wrapping services and unique gift items at great prices. Gift wrapping services add great value to your store because as busy customers will come back for it again and again.
I like to call this trend frugal opulence. How do we market to this new consumer? One strategy is to package smaller, affordable quantities of your product at attractive price points. Restaurants have already jumped on this strategy, and Walmart learned the power of moving large quantities at low margins years ago.
If you are selling flowers, offer smaller petite bouquets in unique reusable containers for less than $15 near the checkout. Your customers may come in to buy for a friend, but will leave with a little something for themselves, too. Wine shops can offer less expensive varieties in a great wine box or bag as a gift-to-go item. This principle works well for most retail stores and gift basket businesses.
Small luxuries like candies, bath and body products, cosmetics, and candles are affordable personal indulgences. Home decor and cooking-related products are hot because we are traveling less and enjoying our homes more. And no matter the economy, people still spend money on their children and pets.
Keep in mind, you can have the most attractive or delicious-yet-affordable products in town, but if people don’t know about them, it won’t help your bottom line. Promote, promote, promote in whatever way is effective for your business – print advertising, your website, email newsletters, social networking sites, refer-a-friend coupons, open houses, etc.
Even though we are slowly pulling out of this recession, there will be a new brand of consumer in the market that can boost your business. Focus on quality, segmented merchandise at lower price points, great packaging and advertising that works.