Dear readers,
Fashion Business Reader is back after summer break. 😃
I hope you've been enjoying the summertime so far despite travel restrictions.
This week I’d like to share few concepts from “Trading Up: Why Consumers Want New Luxury Goods – and How Companies Create Them” by Michael Silverstein and Neil Fiske.
Below you will also find the fourth issue of FBR Brief on what to expect from Q4 2020, whether Chinese market gives some hope for Western companies and the phenomenon of “moisturizer index”.
Enjoy your week and stay safe,
Assiya Assanbayeva
Trading Up
“America's middle-market consumers are trading up, they're willing to pay a premium price for new luxury – products and services that possess higher levels of quality, taste, and aspiration than other goods in the category but are not as expensive.”
The book outlines the concept of the New Luxury and marketing strategies behind it. Published in 2008, the book describes the process of "trading up" of American society, however, same principles shape the process of "trading up" of Chinese society or any developing/developed nation with growing middle class. Indeed, authors conducted further research on consumers in China:
Consumers there have experienced tremendous growth in personal income and are beginning to spend on premium goods and services. The greatest opportunity for consumer businesses in China is in trading-up goods, particularly in apparel, consumer electronics, food and beverages, footwear, and personal care. As Chinese consumers have become more and more focused on product quality and safety, the value of well-known and trusted brands has grown dramatically.
What we’re observing now in 2020 is how the process of trading up of Chinese middle class is shaping the world.
Related reading: What China’s Affluent Consumers Want Post-COVID-19
Old Luxury Vs New Luxury
Old Luxury is about exclusivity, while New Luxury is more accessible. Old Luxury is elitist, meant only for a certain class of people, while New Luxury is for people at many income levels and in many walks of life.
The most intriguing aspect of the New Luxury – these products have a strong emotional engagement with consumers.
The New Luxury commands “the higher the price, the higher the volume”, to some extent, it's a blue ocean strategy:
“Trading up represents a growing segment of the economy, spans so many categories and appeals to such a broad range of consumers. The demand is highly elastic because it can be created in categories that have never had a premium offering before and once transformed into New Luxury product it can be traded up again.”
Related reading: This Psychological Response Will Make Or Break Your Luxury Brand
There are three major categories of New Luxury goods:
accessible superpremium - products that are priced at or near the top of their category, and at a considerable premium to conventional offerings – affordable to the middle-market consumer, but relatively low-ticket items
old luxury brand extensions - lower-priced versions of products traditionally affordable only for the rich, accessible and aspirational
masstige goods - neither at the top of their category in price nor related to other iterations of the brand, they command a premium over conventional products, but priced below super premium or Old Luxury goods
According to authors, trading up can benefit both consumers and producers:
For consumers, it offers a new kind of emotional engagement and business influence. For imaginative leaders, it offers a new way to think about growth, profitability, and the art of fulfilling dreams.
Can fashion survive a second wave of Covid-19?
A resurgence of Covid-19 in the US, Australia and some European countries and further lockdowns have come as many governments have announced plans to taper off support for businesses. These trends, compounded by the stress that intermittent reopening and reclosing has on businesses, could lead many more retailers into bankruptcy by the end of the year. (Vogue Business)
Preparing for Post-Pandemic Recovery—No Matter What It Looks Like
A report from consulting firm Kalypso lays out four scenarios for what companies could possibly expect through 2025, depending on what trajectory the coronavirus takes, to help prepare the fashion industry for what it could be facing in the next few years. (Sourcing Journal)
Fashion industry says purchase order cancellations will endure in Q3 and beyond
More than 60% of retailers in the United States Fashion Industry Association's survey said they have canceled or postponed less than one-third of their total orders. However, nearly 50% said the order cancellations and postponements go beyond the second quarter of 2020 and another 40% believe they could remain in effect until Q4 or later. (Supply Chain Dive)
Premium Retailers Ride China’s Recovery From Covid-19 Crisis
Though suffering globally, luxury brands were helped in China by travel restrictions that kept affluent consumers at home and away from splurging in foreign boutiques. […] Demand for luxury items had rebounded so strongly by mid-August that Gucci and Hermès stores in Shanghai were among those limiting visitor numbers to prevent overcrowding. (The Wall Street Journal)
Alibaba’s Tmall Global launches Go Global 11.11 Pitch Fest
The event will provide an opportunity for U.S. small and medium-sized businesses to test the market in China and have the chance to participate in Alibaba’s 2020 11.11 Global Shopping Festival, a huge shopping festival that saw 38.4 billion dollars of gross merchandise value in 24 hours last year. (FashionUnited)
Estee Lauder Says ‘Lipstick Index’ Is Out, Moisturizer Is In
Lipstick – and makeup broadly – is falling out of favor as consumers wear masks and don’t go out as much to meet friends. Instead, shoppers are immersing themselves in skin-care routines while hunkered down at home. (Bloomberg)