The global economy is facing a potential recession as we approach mid-2023, which will significantly impact consumer spending behavior. One of the most notable trends that will emerge during this period is the rise of price-conscious high-end consumers. These individuals, who typically have a taste for luxury and premium products, will be more cautious with their spending due to economic uncertainties. This shift in consumer behavior presents both challenges and opportunities for brands catering to this market segment.
In the face of a recession, high-end consumers will prioritize value for money while still seeking quality, functionality, and durability in the products they purchase. Emotional connections through indulgence and exclusivity will also play a crucial role in their decision-making process. Brands that can successfully deliver premium experiences while offering competitive pricing and a strong value proposition will likely thrive in this environment.
One way for brands to cater to these price-conscious high-end consumers is by offering limited-time promotions or exclusive deals through membership tiers or subscription based models for luxury items, such as fashion, experiences and travel. This strategy not only creates a sense of urgency but also allows consumers to indulge in their desires without feeling guilty about overspending. Additionally, brands can consider introducing new value added perks and offers within their existing product offerings, ensuring that they maintain their premium image while providing additional value to high-end shoppers.
Moreover, brands can capitalize on the growing trend of renting high-end products as a cost-saving measure. Companies like Rent The Runway, Grover and Raylo have already experienced significant growth in the rental market, and this model could potentially extend to other niche sectors, such as maternity wear and accessories. By offering rental options, brands can provide access to premium products at a fraction of the cost, making them more appealing to price-conscious high-end consumers.
Anushka Salinas, President and COO, Rent The Runway said at NRF: State of Retail, “We serve a higher end consumer, and we are sort of a unique position with that consumer because we offer alot of value via our subscription program to that consumer, that consumer that we target has been relatively less impacted in this environment. “That said, we see that she is as cost conscious as she has ever been and that is leading her to be very, very selective about where and how she is spending her money, she has very high expectations.”
Furthermore, brands to consider is embracing the concept of intentional spending. As consumers become more selective with their purchases, they will weigh factors such as convenience, sustainability, ethics, and other intangible assets against the price. By focusing on these aspects, brands can create a new value equation that resonates with high-end consumers during a recession.
“We shared in our Q3 earnings that we raised prices in April and we did actually see an impact on the consumer from that price increase, even though we already offer 20X the GMV for every dollar she spends with RTR, it just highlights to us that she’s doing the at, even the high end consumer is doing the math right now, said Salina”
She added: “It really highlights that you have to continue to deliver more value to her in order for her to continue to spend with you. And so, it’s really an opportunity to refocus on the price value equation, for all brands, and especially for a brand like us where the PVE is so strong. And improving the value of every dollar she spends.”
The National Retail Federation today issued its annual forecast, anticipating that retail sales will grow between 4% and 6% in 2023. In total, NRF projects that retail sales will reach between $5.13 trillion and $5.23 trillion this year. NRF’s annual sales forecast was announced during the third annual State of Retail & the Consumer virtual conversation, where retail executives from major brands, prominent economists and consumer experts discussed the health of American consumers and the retail industry.
An impending recession will undoubtedly reshape the landscape for high-end consumer spending. Brands that can adapt to these changes by offering value-driven products and experiences, embracing intentional spending, and exploring alternative business models such as rentals will be better positioned to succeed in this challenging economic climate. By understanding and catering to the evolving needs of price-conscious high-end consumers, brands can maintain their premium image while staying relevant and competitive during a recession.