Thinking Twice About That $400 Handbag

  1. By Michael Barbaro (in The Nation in today's NY Times)

    IT was a retail juggernaut that swept through America’s shopping malls and bedroom closets, rewriting the rules of class and consumption.
    But affordable luxury is not looking so affordable — or sustainable — anymore.
    During the 2007 holiday shopping season, the middle-class consumers who spent the last decade splurging on $300 saucepans and $600 scarves, tightened their purse strings in the face of slipping home prices and rising energy costs.
    As a result, an entire economy built around aspiration is starting to collapse. Affordable luxury purveyors like Tiffany & Company, Nordstrom and Coach have experienced slowing sales and plunging stock prices, problems likely to deepen after the stock market’s continued slide last week reinforced fears of a recession.
    But one of the biggest casualties may be the illusion of wealth that millions of Americans enjoyed for years, one Burberry trench coat at a time.
    “You had a lot of people who graduated to a level of consumption they could not really afford,” said Adrianne Shapira, a retail analyst at Goldman Sachs. “Two-hundred-dollar pairs of denim were plausible when home values soared, but now $100 jeans are looking more reasonable.”
    The phenomenon earned many nicknames — mass affluence, new luxury, masstige — and was best summarized by the retail experts Michael J. Silverstein and Neil Fiske in their 2003 book, “Trading Up: The New American Luxury.”
    They posited that Americans with household incomes of $50,000 and above tend to “trade up” to high-end products in categories like kitchen appliances or bedding that are emotionally important to them, while perhaps pinching pennies elsewhere to compensate.
    Dozens of chains rode this masstige wave, and earned billions in the process. Coach persuaded women to buy $400 handbags when a $60 version from Macy’s could have sufficed. Williams-Sonoma trained shoppers to covet a $35 stainless-steel hand-crank can opener, even though Wal-Mart sells a high-quality electric model for less than half the price. And 7 for All Mankind convinced people that they wanted a $200 pair of jeans made from the same material in a $30 pair of Wranglers.
    But trading up was always a fragile phenomenon. It rested, in large part, on consumer psychology — a feeling of wealth derived from soaring home values and the steady growth of real income, that is, income adjusted for inflation.
    Today, any growth in real income is all but canceled out in consumers’ minds by falling home prices and rising energy costs. Michael J. Kowalski, the chief executive of Tiffany, calls this “the wealth affect.”
    Even if people have plenty of money on paper, he said, they suddenly feel less rich. “It is a reaction to the general economic uncertainty that everyone is feeling,” Mr. Kowalski said.
    At Tiffany, the wealth effect translated into sluggish holiday sales of jewelry priced between $1,000 and $10,000, items aimed at what the chain calls its “midtier luxury consumer.”
    Stephen I. Sadove, the chief executive of Saks Fifth Avenue, observed the same pullback in December. “The customer who aspires to luxury is slowing down,” he said. “But the high end of luxury retailing remains strong.”
    So what will become of masstige if the economy actually tips into a full-blown recession?
    Trading down, of course. Experts predict Americans will now grudgingly shift to cheaper brands for much of their shopping. For his part, Mr. Silverstein, the grandfather of trading up, is confident that consumers will pay a premium for the products that matter most to them.
    “The trading up phenomenon is quite recession-proof,” Mr. Silverstein said. “It might slow. But it’s way too early to say it’s over.”
     
  2. Not entirely purse-centric, but raises interesting questions about when people feel wealthy enough to purchase non-necessities. I doubt very many tPFers will be cutting back just yet, but who knows? I'm interested to hear what others think.
     
  3. This was an interesting article.

    I like how it touches upon the emotional connection of how we use money. People who buy prestige products just be prestigious may be deterred but people who buy these products because they really see the value and are willing to spend less in other areas may not be deterred as much.

    Still, it may affect HOW MANY $400 handbags people have. Who knows?
     
  4. I think people will still gladly spend the extra money for items that are important to them (purses for example) but therefore may cut down on other luxuries.

    Interesting article, thanks for sharing.
     
  5. i mean, i feel i have already. I dont buy myself those $200 jeans anymore (because i've gotten fatter, and well, also cause i'd much rather a leather good instead) Im starting to be a bit more like ashton kutcher. He says he owns one pair of jeans, which he really likes. Once he's through with it and they've gotten really ripped/orwhatever, he throws them away and buys another one!
     
  6. I'm glad I'm too fat for expensive jeans. The thought of spending more than $40 on a pair makes me sick.
     
  7. I don't know, this article also helps the high-end brands seem more exclusive, which is how they flatter their customer bases. If they keep reassuring us they're aspirational, and out of reach to the masses, we'll still aspire to own their products.
     
  8. Thanks for sharing; it's definitely something to think about.
     
  9. I have been having this conversation a lot lately. We are all victims of an inflated real estate economy where house prices are still a long way from adjusting to what they should be, based on salaries and rental market values. It makes sense to see a decrease in spending from those who would usually not think twice about it but are now seeing their homes decrease in value, it does make you feel less wealthy where that is most people's biggest asset/investment. It is the same with luxury items too, all of the small things really add up so in a failing economy it seems less practical but if it is something that someone really wants or is important to them emotionally, then they will find a way to have it (whatever their thing is) and cut back in other areas. Interesting article !
     
  10. Overall, it's probably true that sales are down for the mass-luxury market. But-- the thing that bugs me about articles like this is they are always written by some one (usually a man) who can't see why anyone would buy expensive clothes & accessories except to impress people! I don't carry a Chloe bag to convince anyone I'm rich ( I sure as heck am not) but because I love beautiful, well-made things.

    I just find it really condescending when a writer implies that women buy $200 jeans because we're brainwashed idiots. If he can't see the difference between Earnest Sewn and Walmart jeans, then he's an idiot.
     
  11. Yeah but there's nothing wrong with buying a $5000 TV. :hrmm:
     
  12. Those of us who love high-end for its quality will continue to buy. Those who only buy high-end to impress others will be weeded out in this "new economy".
     
  13. Very interesting read.
     
  14. Yeah, that's a good point. I will wear ANY jeans that fit right with my big bubble butt and small waist--I literally have NO price limit. And yet, I've never spent more than $120 because although I have tried on the $300 pairs, they don't fit right. Same with dress pants--I wear Express because it fits better than Theory, not because Theory is too expensive. Shoes, same deal--if Nine West sold five-inch stilettos (WITHOUT the platform), then I'd gladly pay for those instead of CL Pigalles. So I guess my point is that on the clothing side, I buy for what looks good on me, not for the brand AT ALL. And you're right, the author DOESN'T seem to accept that there may be some differences among brands other than price.

    My bags, I do have to admit, I buy because *I* like them, but am still proud if I feel like people are admiring them.
     
  15. I don't really think that you can get "the same thing" for 50% cheaper, as he is saying. I will agree that prices are definitely inflated to higher than they should be, but for the most part you definitely do pay for what you get.

    You could go to Wal Mart and get a "high quality" device for cheaper than Williams Sonoma, but chances are the WS one will outlast walmart's item by several years.

    You could get the $30 wranglers, and if they fit you by all means you should! But I find with designer jeans, the fit is better for my body. At one point in my life, American Eagle jeans were the perfect fit for me. I would buy those and never a designer pair. But everyone's body changes over time, and now I just find that J Brand jeans are the ones that happen to fit me best, and they happen to be more expensive.

    And handbags... I don't think I even need to go into this one! There is such a world of difference between a $40 bag and a $600 coach bag and a multiple $1000 Hermes, when it comes to quality and style.

    And really, whats wrong with being a little bit materialistic? It's there, it's not going away any time soon. If it brings you a little bit of joy to go and buy a $1000 LV when there is a $100 "similar" bag just down the street, why shouldn't you?