February 14, 2009

Are We Still Trading Up?

"Middle-market consumers around the world are trading up to New Luxury products and services that deliver higher levels of quality, taste, and aspiration than conventional items."
Trading Up: The New American Luxury (2003)
Michael J. Silverstein and Neil Fiske

As the economic asteroid field whizzes by our ears, do we still have money for luxuries and trading up?

Smaller numbers. Bigger bucks.

Of all goods and services, new luxury items account for 20% of sales, 40% of revenue and 60% of profit.

We seem to find a way to get the stuff we want by spending less on the stuff feel is unimportant. For example, we may shell out five bucks for a latte and buy no name brand bathroom tissue. The earliest example for me was when I bought my first new car while renting a basement apartment. Great car, horrible apartment.

Instant Starbucks.

People can put down their picket signs. The company is about to introduce Via - a water soluble coffee. Yes, it's instant coffee and some may say the end of life as we know it but at least it's in their wheelhouse. CNN Money is calling it a "gamble".

Starbucks has been a brand many of us have used to illustrate the 'trading up' or 'living large' lifestyle.

"Because New Luxury goods sell for 20 to 200 percent more than standard mid-price goods, they deliver higher profits. They also can sell in much higher volumes than super premium products, and thus have greater potential for growth."
Trading Up: The New American Luxury (2003)

A colleague's wife and her purse.

She loves the purse but the zipper broke. Instead of tossing it and buying a new purse, she bought a new zipper. Sounds logical but more to the point, perhaps we've all contributed to this crisis because we've become too familiar with the concept of throwing out the broken one and buying a new one. Too often on credit.

Repair. Recycle. Reuse.

I got an email this week from someone who wondered if this downturn will cause the return of more repair shops. Good point. Let's stimulate the economy by employing more talented people who can make our stuff last longer. Plus, it makes for less landfill which in-turn helps the environment.

This is not about doing without, but the collective 'we' has been racking up the bill for too long and we simply can't trade up indefinitely.

We want companies to thrive, we want them to keep making stuff to turn a profit and we want to create jobs not lose them. Part of the correction may need to come from our collective reduction in tossing stuff away too quickly. And in the process, we could still find a way to treat ourselves once in a while.

How are you Trading Up?

km

 
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