The Michael Kors brand has achieved unstoppable momentum even in the age of discount retailers.The company recently raised its guidance again after blockbuster sales in the second quarter.
Meanwhile, other aspirational brands like Tiffany & Co. and Restoration Hardware are struggling.
Michael Kors succeeded because it was the first retailer to hit the market’s sweet spot: people with money to spend but who aren’t rich.
Luxury marketing expert Pam Danziger calls these people HENRYs, for “High Earners Not Rich Yet.” They are the people who make between $100,000 and $250,000, she says.
HENRYs are a growing segment, while the wealthiest people are making less than they used to.
Danziger explained the concept to us in a recent note:
Ultra-affluents (i.e. those at the top 2 per cent of U.S. households with incomes starting at $250,000) cut their spending by nearly 30 per cent from 2010, while the HENRYs (High Earners Not RichYet with incomes $100,000-$249,999) increased their spending on luxury by some 11 per cent from 2009 levels. Even though HENRYs individually have a far lower spending threshold than ultra-affluents, there are nearly 10 HENRY households for every ultra-affluent. That is why with a total of 21.3 million households, the HENRY segment is a critically important part of the consumer market.
With Michael Kors’ $450 handbags and $250 watches, HENRYs can show off their success without feeling like they’re going overboard.
Kors wisely chose the exact right audience, and now it’s paying off.
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