Overcoming the Guilt of Luxury Purchases
By
Tom Ryan
The
overriding guilt of shopping in a downturn is said to be delaying a recovery
in luxury spending but some high-end firms and retailers are working on
ways to reduce or at least divert those feelings.
When
buying feels good, an article in The Wall Street Journal states,
it produces a high similar to the euphoria of eating chocolate. In bad times,
consumers hide purchases and shopping bags or avoid stores all together to
avoid the temptation and, while shopping, guilt can permeate the experience.
“It’s
not very strong at the beginning but increases when you swipe your credit
card through the credit-card reader,” said Martin Lindstrom, a brand strategist
and author of Buyology:
Truth and Lies About Why We Buy.
Nonetheless,
the article stated a number of ways high-end purveyors are attempting to
diffuse those guilty impulses:
- Unexpected locations: Ittierre
SpA, the Italian parent of the Gianfranco Ferre and licensee of labels
such as Just Cavalli and John Galliano, is considering opening some
temporary pop-up stores in unexpected parts of European and U.S. cities
that aren’t traditional luxury centers. These pop-up stores are intended
to deflect the natural guilt that comes when entering traditional stores.
Said Andrea Ciccoli, the administrator for Ittierre, “People are so
disciplined, their super-ego tells them not to buy, and then they don’t
buy.” - Internet shopping: Online
shopping skirts the “luxury shame” of walking out a high-end store
flashing a big shopping bag. Alexis Maybank, the co-founder of Gilt
Groupe, which organizes online, by-invitation-only 36-hour sales
of high-end labels, also said online shopping behavior is different
than in-store. Instead of browsing for hours, “you take five minutes
out at a specific moment of the day to get the things you need,” she
said. - Charity
connection: Cole
Haan recently offered a 15 percent discount on a new pair of
shoes when any old pair was donated for charity. Merci, a new,
trendy Paris luxury store, donates all profits, after operating costs
are paid, to children’s charities. Merci also recently opened
a temporary one-month shop in New York with the Gap. Such ulterior
motives can help with “the argument shoppers have with themselves,” said
Sue Phillips, the London-based chief executive of consumer-research
firm Synovate Censydiam. - Eco-connection: Some
higher-end brands are more heavily marketing their environmental
friendliness with consumers already showing a willingness to
pay up for green and green brands. Swedish clothing brand Filippa
K opened a secondhand store in Stockholm selling used clothes
of its own brand for at least half off. Said Anders Wiberg, who
oversees the Filippa K boutique, “The customer looks at us as
taking more action.”
Discussion
Questions: In what ways can luxury firms overcome the guilt associated with
shopping in a downturn? What do you think of the strategies offered in the
article?
An economic “downturn” has collective and aggregate effects on the economy, no doubt about that. However, the “economy” is an individual thing where psychological factors are concerned. There is no “group think” or “group feel” that prevents people from buying luxury items because of “guilt.” Come on!
The least of luxury brands’ worries is “shopper guilt.” Please. Exploring how a luxury brand stands out from a commoditized world and over-delivery seems a smarter use of time.
We’re asking the wrong question.
Not so long ago, “luxury” meant extremely expensive goods sold in very few venues. Then we had the march of the bubbles–baby boomers entering their acquisitive years, the tech bubble, and the housing bubble. Suddenly, everyone was “rich” with a conviction of endless, robust growth in their home’s value and 401k. So-called luxury grew to feed this larger population of “rich” customers. Then we got to Fall, 2007.
Uh-oh.
Luxury has returned to what it was 30 years ago–a very exclusive market. The broad market for what was called luxury has realized that there are no endless growth curves. They don’t feel “rich” anymore.
You can put all the lipstick you want on this pig, but I think the days of conspicuous consumption of questionable luxury goods are over, at least until Gen Y enters their acquisitive years.
Bob Phipps is right. Any luxury brand or retailer worrying about buyer guilt is not worrying about the correct elements of their business. Perhaps it is wishing and hoping there is a solution.
When the downturn hit, personal shoppers in the highest-end luxury stores started reporting that their customers were bringing purchases back, that credit cards were being rejected and that those customers who continued to buy were buying less in volume and less in price.
It isn’t guilt that is keeping the shoppers away. It is that most of the shoppers had no business buying the luxury goods. It isn’t any different than the mortgagees who buy a house that they can’t afford or the home owners that previously ran their equity loans to the max to support consumer purchases.
The ultimate challenge for the luxury marketers and retailers is that they are facing a new world. This new world will be one where there sales will not be driven by consumers who must borrow to make the purchases. Rather than focusing on GUILT, go spend some time in Europe and study who is buying luxury goods and why and market against that customer because that is the luxury customer in the U.S. for a long, long time.
I think the guilt is fading. I continue to use the term “frugality fatigue.” Americans, in particular, like to spend money. And the last time I talked to someone from Harrods (July–in the middle of the downturn) the company had not experienced much of a loss in business.
So, I must say…”What guilt?” Just give it time.
Concepts like Merci represent a new sensibility at retail that to me, isn’t driven by mitigating shopper guilt but rather by social consciousness, exclusivity, and a new respect for shoppers. I made a point of visiting Merci (a store I call the “anti-Collette”) while in Paris this year and it was one of the highlights of my trip. Industrial loft vibe, dogs welcome, exclusive lines provided by Stella McCartney and other designers, quirky housewares, a perfumerie, a coffee shop, and a delightful organic cafe where shoppers lingered over wine and cheese. In short, a place where you could spend hours (and I did) and a stark contrast to velvet rope boutiques and cheap chic boutiques stuffed to the rafters with disposable goods.
Merci respects the intelligence and discerning tastes of its customers and showcases its carefully curated choices in a calm, interesting and welcoming environment. Why that combination was so thrilling still surprises me.
I don’t think of it as guilt, I think of it as prudence; second thoughts. Can I really afford this, is this the right thing to do?
Assuaging these doubts are an important part of the sales process. When cash was plentiful, this wasn’t as critical as it is now.
Having said that, the market for luxury goods has shrunk, and it’s clear that it’s not going to bounce back to what it was in the foreseeable future. This means that every luxury retailer has to sharpen their game to earn the sales that are out there.
I’ll leave the individual marketing strategies and schemes to the luxury brands and their assorted marketing and ad folks. I alluded to the much bigger issue here in yesterday’s post about the Retail:Next Study results. Specifically, the consumer has changed how they shop and brands must now change how they market to consumers. Key to that is being more creative in outreach, whether creating new buying channels (e.g. pop-up stores), finding new consumer demos to target (e.g. green consumers) or teeing off the consumer’s desire to create a better world (e.g. donations to charities).
Which techniques work best for which brands is highly relevant to the specific brand, the targeted consumer demo and the product being touted. What we need to remember is that such creativity is not just important for luxury brands, it’s important for all retail brands as they navigate the new retail reality. Even value brands that have benefited from the downturn must be more creative, especially as the consumer’s spending confidence increases and shoppers begin to ponder migrating to new brands.
It is an interesting thought in response to the ‘luxury shopper guilt’ challenge that so many respondents put the responsibility back on the stores’ response (where it should be), rather than simply changing the customer’s mind about shopping. I also note the growing opinion that old money, or money solidly earned will continue to spend on luxury goods. It is those who had to stretch to make those luxury purchases and the stores who expanded too fast and with questionable luxury products that will most likely fall off their game.
Once again this is a timely discussion as I have just returned to Hong Kong from a seven day study tour of shopping centers and stores in China. The majority of centers we saw had an 80-20 split of international to local stores, many of the international being luxury or at least looked upon by the local market as high-end. Right now, the customer is buying, with little evidence that they are concerned about their financial future…which is a huge departure from the cultural history of the Chinese; frugal, respectful and caring for elders before oneself, thoughtful deliberation before a commitment to take action.
I am looking for parallels. Will conspicuous consumption of international brands and luxury in China begin to mirror what is happening in the West as the flow of new money slows? There are admittedly many more rich in China due to the way money is earned and who controls the flow. As well as by the fact that there are three times the population in the country.
But in any case, will International and Luxury retailers find it a lot tougher going in the future? Will any of the ideas offered by the author of this book have any effect on the Chinese consumer? We are watching.
I have to agree that guilt is the wrong concern here. While there might be another downturn, many high-end brands are seeing their sales reach much higher levels than last year at this time. There is indeed “frugality fatigue” and while the indulgences might be more limited, they are still out there. The key for luxury merchants is to focus on the right customers, not all customers.
If someone can afford to buy a “luxury” item and feels guilty about it, but still buys it, they have other problems (they should give more money to charities…though they should do this either way, of course). Luxury merchants should focus on the value of their goods and services, providing beyond exemplary service to their customers, and reinforce the exclusivity through soft benefits.
Finally, luxury merchants should also band together and explore partnerships where they can help support each other’s brands and increase the focus on active customers that are still shopping…guilt-free.
The newest research from American Affluence Research Center tells us that only 7% of the affluent have taken actions that might be indicative of “stealth wealth” and “luxury shame.”
The real issue is that the affluent in America have recalibrated their values. 80% come from a middle-class background. They’ve returned to their roots, anxious to preserve their success and investments.