INDEPENDENT RETAILER magazine is now the official news outlet for Wholesale Central visitors.
Each monthly issue is packed with new product ideas, supplier profiles, retailing news, and
business strategies to help you succeed.
See new articles daily online at IndependentRetailer.com.
Few could argue that it's good to be rich. A look at luxury retail sales suggests that for retailers, the best target is the really, really rich. The ultra wealthy are continuing to shop, while the merely wealthy are holding onto their purse strings a bit more tightly, going for value (at least by their definition), according to some retail reports.
"The aspirational shopper, the merely wealthy, is slowing down," said Bernard J. Haddigan, a managing director of the retail component of the Atlanta office of Marcus & Millichap, a nationwide real estate firm. This is resulting in slower sales at luxury chains that attempted to straddle both the ultra affluent and those who want to feel that way, he said.
Neiman Marcus, for example, recently reported a comparable sales increase of 1.7 percent for fiscal 2008, although its fiscal fourth quarter comparable store sales declined 1.4 percent. Nordstrom, which appeals to both the ultra wealthy and aspirational, reported a comp decrease of six percent for its most recent quarter.
The definition of ultra wealthy can vary by location. An exceptionally high income for some parts of the U.S. funds only a more middle class lifestyle in New York City, for example. In fact, a net worth of $25 to $50 million is, "not the range of Rolls Royces," Haddigan said. He defines the extremely wealthy as those households with a net worth of at least $100 million. But the extremely well off and the wannabes are still in the market.
"Emotionally, people are still conditioned to shop," he said. "The ultra high net worth individual is less than one percent of the population, but their buying power is still 15 to 20 percent of the market."
But where the wealthy shop may change. The merely wealthy will shop at Costco, which has a wide range of premium goods at value prices. Their more affluent brethren will be there too. Through August, the company had reported a comp store sales increase of six percent in the U.S., though rising gas prices are a major factor in the increase.
"A lot of the very wealthy got that way by understanding how to manage their money," Haddigan said. The merely wealthy, instead, are looking for value, albeit in a different way from those who frequent discounters. Rather than spending $5,000 on an outfit, the merely wealthy now may choose to spend a comparable sum on artwork, which may increase in value. Major purchases are now seen more as investments than indulgences.
"That consumer is out there and spending, but looking for value based assets," Haddigan concluded. "There also is a mindset to have some liquidity, and those assets, such as artwork, do have residual value. This is a question of discretionary versus necessity," Haddigan said. "And a lot of the discretionary is slowing down."
Marcus & Millichap anticipates at least 7,000 store closings this year. However, some sectors, such as grocers and pharmacies continue to do well
Entire contents ©2021, Sumner Communications, Inc. (203) 748-2050. All rights reserved. No part of this service may be reproduced in any form without the express written permission of Sumner Communications, Inc. except that an individual may download and/or forward articles via e-mail to a reasonable number of recipients for personal, non-commercial purposes.