This article on Wall Street Journal Digita Network features AARC research about aspirational consumers (http://www.smartmoney.com/spend/deal-of-the-day/how-to-buy-luxury-goods-at-a-discount-1313705085759/?link=SM_hp_middle_optStory).
by Kelli Grant
August 2011
While the market upheaval and economic uncertainty has encouraged many people to tighten their budgets, shoppers lusting after that “it” bag, a first-class airline seat or a pricey car may now find those luxuries are more affordable than before.
Companies that make or sell high-end goods are increasingly aiming for what they call aspiration buyers — middle-class shoppers who can afford to occasionally splurge. The tactics are vast, including pitching less-expensive product lines, selling overstock online and allowing consumers to buy luxury perks in lieu of earning them. Audi, for example, is rewarding brand loyalty by offering $1,000 to $3,000 cash-back to households that already own an Audi and want another one. In September, eBay (EBAY: 30.49, 1.03, 3.50%) will team up with Nieman Marcus and other luxury e-tailers to sell goods at discounts of up to 65%. And new credit cards from American Airlines (AMR: 3.54, 0.28, 8.59%) and United (UAL: 18.59, 0.67, 3.74%) offer a cheaper buy-in for perks previously available only to elite road warriors and big spenders. “Luxury has become more democratized these days, and everyone wants access,” says Milton Pedraza, the president of Luxury Institute LLC, a marketing firm.
The luxury-for-everyone pitch may seem at odds with brands that owe some of their success to their elite images. But going down-market has become a survival tactic during tough economic times. Luxury goods sales fell 5% during 2008 and 2009, the biggest drop since 1995, according to Bain & Co., and experts say most of those lost sales were from these so-called aspiration buyers. (Shoppers with a net worth of $800,000 or more scaled back somewhat during the recession, but have largely kept spending, according to the American Affluence Research Center.) Recent market volatility could make middle-class shoppers even more important. Less than the very wealthy, aspiration buyers tend to have less of their net worth tied up in the stock market, and so the occasional downdraft may not stop them from spending, says AARC president Ron Kurtz.
The best deals on luxury goods may not come via coupon — or Groupon. Instead, luxury brands often use subtler tactics, like private sale events and invitation-only deals, Pedraza says: “You don’t want to scream ‘discount’ when you’re a luxury brand.” Getting in on these offers isn’t so hard, though. Consumers can give their contact information to the high-end stores and brands they like, says Fred Thompson, a partner at LoyaltyOne Consulting. Invited guests often gossip on sites like SheFinds.com or Mizhattan.com, where, in June, notices about Chanel’s two-day private sale with deals of 40% off made the rounds a week beforehand. Auto pricing site Edmunds.com tracks unadvertised auto incentives, including loyalty rebates.
Shoppers on the hunt for luxury goods are also finding success with so-called flash-sale sites such as Gilt Groupe, which offer discounts of 50% or better for a short time on clothing, home goods and other products. eBay launched its version, Fashion Vault, last fall and Amazon (AMZN: 206.53, 7.26, 3.64%) debuted MyHabit in May. But shoppers may find the same problem that outlet-mall shoppers often do: Some items on sale aren’t a part of the brands’ usual collections, they’ve been produced specifically for the sites. Which ones? The sites don’t usually say. Amazon and Gilt spokeswomen said there’s no need, because the items are legitimately from that brand or designer and have quality consistent with their price. “We make sure not to give the [buyer] lesser quality,” says a spokeswoman for Gilt.
Even non-luxury brands — think American Airlines, for example — are offering new opportunities to pay for a higher-end experience, says Thomas Jacobson, a senior executive in consulting firm Accenture’s pricing division. For example, airline credit cards have grown in popularity over the past year with the introduction of bigger benefits and waived fees for the first year, while the airlines have also started offering more a la carte purchase options to cut the line for boarding or pick a cushier seat. Cable companies, amusement parks and other companies are also offering pay-in options for a shorter wait. Here, consumers need to evaluate what they’re getting for the extra cash, Jacobson says. Your luxury experience might be little more than a convenience fee.