It’s commonly assumed that the creeping social stratification that’s widely written about crosses over to the retail sector, with the higher-end consumer shopping exclusively at luxury retail outlets and the lower-income buyer shopping at discount stores.
In fact, our analysis of anonymized transaction data at an aggregated level is painting quite a different picture. This aggregated data consists of segments of anonymized transactions with similar spending patterns, matched against categories of retailers.
Not only do high-end shoppers tend to “cross the street,” buying designer clothing at a luxury department store, but spending on school supplies and household goods at a low-end department store or eating at a quick-serve restaurant; but over a six-month period in 2011, in our analysis of aggregated transactions at 20 high-end brands, we found that a remarkably consistent portion of spend by regular shoppers at high-end stores was at discounters. A number of factors may be driving this.
Our data for the aggregated high-end shopper segment is showing that this segment, which shops at brand name luxury stores, also spends on average 6.5% of overall spend at bargain outlets. They also actually shop more frequently at discount stores. They may be buying their apparel at a high price point at luxury stores, but they’re also going to the discount department stores for their everyday spend, and eating at inexpensive food chains.
We can also conjecture from what we’re seeing that discount and “aspirational” shoppers are buying luxury brand goods in addition to lower price point merchandise. We’re calling these crossovers “affinity plays” – high-end shoppers still have an affinity for bargain hunting and spend segregation, and lower-end shoppers still want their brand names and luxury. This suggests a sort of democratization of the shopper mentality, fluidity between high end and low end, which has consigned pure snob appeal to the memory of a pre-recession mindset. In short, few shoppers are chasing snob appeal, even if they can afford it.
Some retailers have made it their business to shift their merchandising to take advantage of the crossover shopper – appealing to both a desire for luxury or brand image and a need for a lower price point. What they offer is a fun, bargain-rich shopping experience as well as fashionable merchandise. We’ve found through looking at aggregated transaction data that this marketing strategy holds broad appeal for both ends of the market.
What can this aggregated data tell us about crossover shopping?
These customer segments that spend at high-end retailers and are also consistently spending 6.5% of their total credit card spend in discount department stores, may be doing it to quench a thirst for bargain hunting; or to segregate their spend; or to segregate their spend so that they use discounters for everyday-type purchasing. With the knowledge from our aggregated sample, we can infer that there is enough movement between these sectors that retailers may gain significant advantage by teaming up with one another to attract customers. In other words, partnerships between luxury and discount merchandisers would probably encourage greater overall spend in the current economy.
The possibility of expanding partnerships between brands, as well as using analytics to help retailers across the spectrum make informed decisions about stocking and geographic planning, appears to be a winning strategy in cultivating these crossover shoppers. What can discount retailers do to encourage their high-end crossovers to put more items in the basket? This is just one of the lenses through which we approached this research.
Could a discount marketer that appeals to the aspirational shopper actually shift market share away from a luxury outlet? And vice-versa?
We think this is very likely. Discount retailers that manage to be “cool” for upscale shoppers — by creating shopping experiences that make bargain hunting fun and aesthetic — will clearly win out in this affinity play over those who simply offer “cheap.” Accepting and understanding the new reality of shopping fluidity can help inform big brand retailers and discounters alike. If retailers pay attention to the data analytics on what their customers buy, when, and where, they can strategize to capture shifting consumer sentiment, align their products with market demands, and achieve better returns.