When merchants tally up their Christmas sales this year, the items that have flown from their shelves may fall into two classes: luxury goods for which consumers are willing to pay a premium, and value goods sold in volume at a discount.
"This is going to be an `A' Christmas for the new luxury companies and for the value providers, and a `D' Christmas for the companies caught in the middle -- the companies who are neither the best nor the least expensive," predicted Michael J. Silverstein, senior vice president at the Boston Consulting Group and leader of its global consumer and retail practice.
The reason is what Silverstein and his colleagues have defined as the biggest trend reshaping the consumer landscape: trading up.
According to their research, 96 percent of consumers trade up, or spend more, for quality products that engage them emotionally. It's as much a matter of psychology as income. A construction worker on a tight budget may splurge on a $3,000 set of Callaway golf clubs, just as an otherwise frugal real estate developer might spring for a BMW. Anyone who has passed a Dunkin' Donuts to duck into a Starbucks recognizes the phenomenon.
For brands that have smartly positioned themselves, from Victoria's Secret to Williams-Sonoma, trading up is paying off. "'It's a $400 billion business today, and it's growing to $1 trillion by the end of the decade," said Silverstein. He explores the trend in a book published this fall, "Trading Up: The New American Luxury," written with Neil Fiske, an ex-colleague who is now chief executive at Bath & Body Works.
Unlike "old luxury" goods, often out of the price range of middle-class consumers, "new luxury" goods offer superior technical or functional benefits but are priced within reach of a mass market. Silverstein divides them into four categories: taking care of me (health care, spas, in-home gourmet food, linen); connecting (clothing, dining out, home theater, cruises); questing (travel, cars, sports equipment, computers); and, individual style (watches, shoes, jewelry, lingerie).
Women, who have accounted for all the growth in real family income in the past 30 years, tend to be the chief decision-makers in family buying, Silverstein noted. "Eighty-five percent of new luxury goods are purchased by women," he said. "This is the real women's movement. It's a consumer movement."
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