Consumers had to adapt to a fast-changing retail landscape in 2020 and as the industry re-establishes itself in 2021, shoppers are keeping some of these behaviors – and forging new ones. A recent report from retail research startup Future Commerce shows that consumer interest in purchasing goods is growing, especially for luxury, while the circular economy could prove to be a valuable strategy for mid- and high-end retailers.
Future Commerce surveyed more than 1,000 U.S. consumers and found that over half of respondents said that being with their “stuff” made them happy, while 60% described being surrounded by objects they love as making them feel “safe” and “in control.” Following the restriction of many experiential purchases, many consumers have been opting for tangible items that they can use or wear.
And these shoppers are not just using purchases for the feel-good factor, but also as investments: 53% reported investing in non-traditional securities this year, with luxury and designer goods one of the most popular categories. After an initial dip, Future Commerce observes a comeback for luxury as certain demographics look for new ways to experience quality and connection.
“The new luxury market has prioritized being connected – whether around community, culture, or ethos,” said Phillip Jackson, co-founder of Future Commerce. “On that foundation, goods and services are given status and the certainty of service, speed of logistics, and ease of connection give legitimacy to the offering.”
While the financial challenges of the pandemic mean not everyone is able to participate, the luxury market has found some success with the HENRY consumer (High Earner Not Rich Yet), who has been better positioned for success post-pandemic. Jackson describes this demographic as an “information-obsessed group ready to move on to the next phase of economic advancement” – which means making higher-end purchases.
On the opposite end of the spectrum, Future Commerce observes success for businesses offering affordable, mass-market experiences. The so-called K recovery of the economy has created a dichotomy of shoppers: Those who prioritize value and those who covet aspirational quality, the HENRYs.
“The era of the millennial aesthetic has done well to inform Target and Walmart that all generations now see the aesthetic as a sign of quality,” said Jackson. “This created an opportunity for house brands and white-labeled products to mimic the aesthetic at a lower price point, with diminishing quality. This also comes at a time when anyone has access to global supply chain, e-commerce and fulfillment infrastructure, all without having to leave the couch.”
This presents a challenge to the middle-market brands, who may be too expensive for those on a budget but not exclusive enough for the HENRYs. However, the Future Commerce report found that consumers do value a “trusted brand” twice as much as they value a luxury pedigree. This suggests that businesses can reclaim customers if they can build that relationship.
Engaging in the circular economy, where items are repurposed or recycled, is one way that brands and retailers can earn consumer trust. As environmental concerns grow in the consumer consciousness, 81% of respondents reported having actively secured a second-life for their products. This is increasingly likely for luxury items; their higher value incentivizes that owners resell and many younger shoppers look to buy secondhand as a way to participate in the brand.
“The barrier to entry is high: Recycled materials often cost more than raw materials and that cost is passed on to the consumer,” said Jackson. “Innovation in tech platforms will allow more brands to launch and manage their own [recycle] programs. Tools like Recurate are making owned secondhand markets achievable at every scale. Additionally, providing original education about opportunities to reuse or repurpose products could be comforting for customers.”