It could have been 2007, save for one small detail.
Last weekend I saw a group of well-dressed, obviously well-to-do women in East Hampton, N.Y. They grabbed my attention because they were loaded down with shopping bags, a sight I rarely see anymore. They were saying goodbye to each other after what looked like a morning spent hitting the shops. Amid the air kisses and hugs, I heard two of them congratulate each other on their new-found bounty. “You got some great buys today,” one said to the other. “Yeah, I feel really good about what we bought,” said another. “We got some real steals.”
Steals? Deals? I’m pretty sure this group wouldn’t have had the same conversation a couple of years ago. But today, when the discount reigns supreme, it has become chic to boast about saving money. In fact, it may be one of the only “feel good” aspects to shopping in the current economy.
The obsession over discounts, sales and promotions is part of the game now. With markdowns rampant at all levels of the market, shoppers have quickly become accustomed to the expectation of a bargain. And while those bargains are driving some traffic and lifting some shoppers’ spirits, they are also creating something much more profound: They are radically redefining the entire shopping universe, as “value” emerges as the dominant motivating factor.
In a world where full price has quickly become a rarity and consumers of all stripes have embraced paying less for more, the value paradigm has dramatically shifted. Not long ago, when customers were flush, value took a back seat to style, exclusivity and aspiration. Today, the game is completely different.
This is particularly true near the top end of the women’s market, including the ladies-who-lunch crowd in the Hamptons and other cash-rich locales, where price was rarely an object during the boom years. Today, the air is much thinner in the luxe category. So thin, in fact, that many feel the market will return to its traditional place, catering only to the super rich. It is unclear at this point how many of those super-rich customers will continue to pay a premium for the best items, however. Only time will tell.
What is clear is that the aspirational crowd has proudly joined the ranks of bargain hunters, and the repercussions of that are moving all the way down the food chain. Except for an exclusive group of brands that are able to hold on at the top end, the rest of the industry now finds itself catering to a consumer that has redefined the concept of value.
This shift poses an enormous and potentially tricky challenge for brands and retailers alike. If the approachable luxe product is repriced, what does that mean to the other merchandising categories? If department stores suddenly lower their price points, what happens to the other retailers?
The only way retailers can stay on top of the shift is to pay careful attention to what is moving on their much-quieter selling floors. With more time to talk to shoppers, the smart ones are working hard to figure out what makes this value-obsessed customer tick.
In the process, some big and important gaps in the market have emerged, offering enormous opportunities for both retailers and wholesalers. For example, while the high-end market was glutted with product during the last few years, the tier below it wasn’t.
Today, some of the biggest department store chains are madly hunting for designer-driven items — both men’s and women’s — that retail for much less than the stock they replace. This will create new and very profitable growth areas for brands that hit the new sweet spot.
Throughout the industry, the squeeze is on. Brands are leaning on their suppliers to lower costs and add perceived value, while retailers rethink their branded assortment by pushing existing partners to up the ante and looking for new ones that offer more bang for the buck. It’s a painful and potentially life-threatening process for those retailers and wholesalers that can’t find their rightful position in the market.
Even if the economy recovers faster than expected, the new value paradigm will most likely survive for quite a while. It will be a lasting testament to a moment in time that redefined retailing as we knew it.