From Covid-19 lockdown times to economic slowdowns, the pandemic has hugely affected health, wealth and happiness parameters around the world. The cost of living for each income bracket has now changed and a brand strategy of smart retail intelligence is now the strongest line of defence for a company against economic uncertainty.
To cut down costs, consumers are now pulling the plug on the more expensive homeware items such as furniture, kitchen equipment and electrical sales. Home appliances are undergoing a major shift as compared to last year while absorbing price inflation from shipping and materials.
The Work-From-Home office market equipment is not needed anymore as customers return to work and demand lessens. Even last year at this time in the fag end of the pandemic, only 13% of US home office items were on sale with discount depths averaging 21%, whereas now around 31% of the range stands reduced with discounts being 7pp deeper YoY.
Luxury brand segment observes ‘Buy expensive but buy lesser’
However, all is not lost as customers are still spending the same or even more in certain segments relevant to their specific economic and lifestyle segments. Luxury bags become more exclusive and the price of luxury’s status symbol, the woman’s handbag, is showing an upward trajectory compared to the earlier pre-covid and during covid years. The average selling price in the global high-brand market in 2022 has experienced a 10% increase vs. 2021 and 12% vs. 2019. The Italian luxury fashion house Fendi known for its fur and leather goods is driving up this elevated pricing architecture, as every fashionable woman must have a Fendi bag along with her little black dress in her closet. A Fendi bag described as being a “Baguette” silhouette has marked an 18% increase compared to 2021, and 16% to 2019.
This is because the high-end luxury market has more flexibility to raise prices on best-selling bags and trends in high demand as the well heeled customers in this segment are less likely to be as impacted by rising prices of inflation. Also, the bags category is subject to higher price hikes due to their intricate construction, expensive textiles and expensive manual labour. Most are aspirational brands with a cult following and are seen as a lucrative investment as they sell easily even as seconds or pre-loved.
Sneakers doing better than sportswear
Sneakers continue to become more expensive, particularly as UK retailers, have raised prices by 9% year on year. Customers are still eager to pay the 2%-9% lift in sneaker prices, with the majority of SKU sell outs up 56% over the past three months versus YoY. However, lower-income shoppers are becoming increasingly priced out of the market. So this is not economically viable. Sportswear isn’t seeing such broad price variances as other areas as the return to work culture increases with an average selling price of sweatpants and hoodies dropping between 1%-3%.
Kids school wear market remains unaffected
The recession hasn’t affected the kidswear market too much as cash-strapped parents still need to splurge on their children, as the recent back-to-school period in September shows. Faced with new guidelines regarding affordable schoolwear, along with the high cost of living, many UK retailers are freezing or reducing school uniform pricing. The proportion of own-brand schoolwear in stock that falls in the full price bracket of £5-£10 has increased from 18% to 23%, while the £10-£15 price point maintains the greatest proportion of products.
With a strong determination to follow latest trends, the luxury fashion market is an unpredictable one even in these economic slowdown times with customers buying more expensive but fewer haute style pieces and this is what is keeping the industry revved up.