For the first time in history, rich people are actually getting poorer, and luxury retailers are freaking out about it. The average income for the top 5 per cent of people fell from $358,700 in 2006 to $313,298 in 2010, Pam Danziger, president of luxury research firm Unity Marketing said in a report. That means that swanky retailers are furiously vying for customers’ discretionary income.
We saw this trend at work with Burberry, whose shares slid 20 per cent after the retailer reported sales were down. CEO Angela Ahrendts blamed the trend on the “external environment.”
Danziger explained why declining incomes are hitting the luxury retailer especially hard:
“Because these same consumers are significantly invested in their high-end lifestyle with income committed to a wide-range of fixed expenses to maintain that lifestyle, it’s in discretionary spending where they are going to take their cuts. So that translates into less money to spend each month for clothes, shoes and handbags, jewelry and home decorative accessories. These folks have plenty of all that stuff already, so it is the easiest, most painless way to adjust one’s budget when there is less money coming in each month.”
The days of “shop ’til you drop” for the wealthy are long gone, Danziger said. This means that luxury retailers are working hard to figure out how to catch consumers’ attention.
We checked out some luxury retailers for signs of the trend:
- Nordstrom has started collaborating with less expensive retailers like British fast-fashion store Topshop. They’re also marketing “key” pieces for fall, basics like jackets or denim that people could wear for a lot of occasions.
- Saks is offering promotions including a “double points event” for loyalty program members and free shipping on orders greater than $150.
- Bergdorf Goodman has a bevy of exclusive merchandise for its 111th anniversary, including a $4,000 pair of Christian Louboutin shoes.
To get the consumer’s attention, even the luxury retailers are working harder than ever.
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