Beyond Retail

Wednesday, January 23, 2008

Is "Affordable Luxury" On The Way Out?

Umm... it could be. And that's not good for the Collection.

Chicago-based online fashion mag and blog Second City Style (which, I must note, I was reading for non-fashion related reasons) picked up on a story in Monday's New York Times. Entitled "Thinking Twice About That $400 Handbag," it discusses the current state of affordable luxury, and it doesn't seem to be too pretty.

During the just-concluded holiday shopping season, with plummeting home prices, rising energy costs, and a seemingly unstable economy, there weren't as many items purchased that fall into the "affordable luxury" category. According to the article, Tiffany & Co., Nordstrom, and Coach (all of which just so happen to operate in the new addition) are experiencing slowing sales and dipping stock prices.

I 've tried to explain the concept of "affordable luxury" to some people in the past and got pretty much laughed at. My description of it in the entry Malls vs. Wal-Mart: Why The Natick Collection Can Win wasn't really a whole lot better. The typical response is, "Who would ever spend $200 for a pair of jeans?" But they do. In droves.

To explain it better, the article summarizes the thoughts of retail experts Michael Silverstein and Neil Fiske. Here's basically what they said:
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.

Yes, it's yet another reference to 7 For All Mankind (from here on out referred to as "Seven") jeans. The bread-and-butter of "accessible luxury," they have become a fashion staple on affluent high school and college campuses. Easily identifiable by the presence of either an "A", a number "7", or a squiggly-line on the rear pockets, they have become the ultimate success story of the category. In Greater Boston and Chicagoland, Beyond Retail readers likely come across several pairs every day without realizing it.

*NOTE: Beyond Retail does not advocate looking at people's butts in an effort to determine the truth of the above statement, even if it is an effort to determine local retailing trends.*

If Sevens and other "accessible luxury" standards disappear, it's going to be hell for many retailers. Nordstrom will have no reason for existing. And what will the company's customers do? Do they immediately flip to buying $25 Lee or Levi's jeans from Sears instead?

Seven, which relatively recently became part of the VF Corporation's portfolio, has found themselves in a tight place (pun intended) if this economic state is for real. Do they set their jeans to have a mean price point of $100, likely reducing the quality of the product but retaining their clientele? Or do they retain the current pricing (which currently goes as high as $349) and acknowledge that their customers will likely end up purchasing fewer pairs of jeans if any at all, while having no strong product to compete at the lower $100 price level and letting a new competitor fill that gap.

And back to the local scene: what does this economic turn mean for the Natick Collection? It's really not good. The mall was designed around the "affordable luxury" customer, and if they're not going to be able to shop there, who will? Luckily, the Collection should be shielded from this collapse, at least initially. While there could very well be an exodus from the F wing for the mall's crossover customers from Natick and Framingham, the proximity of the Collection to some of the most affluent and "old money" neighborhoods in the state in communities including Weston, Dover, and Wayland should secure itself for the time being. As long as those communities don't fall apart overnight, the mall's clientele will still be around.

But perhaps JasmineSola closed just in time. We'll find out soon enough.


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