The Economist has a thought-provoking article on the "two most noteworthy trends among the swelling ranks of middle-class consumers around the world—trends that appear to be, at first glance, at odds with each other. These are the tendencies for consumers to be more cost-conscious; but simultaneously more willing to splurge money on luxury items." Key takeaways:
- Sales both at the top and bottom of the consumer market are rapidly growing while sales are being squeezed hard in the middle, though it is still the largest market segment in rich countries.
- One reason [for trading down] why this change has taken place is that the discount retailers have raised the quality of their products. A second development is the rapid increase in transparency in consumer markets, thanks not least to the internet.
- Americans, in particular, “have become addicted to the deal, which is leading them to do irrational things” … One consequence is that people buy lots of stuff they do not need … chiefly because it seems to be a bargain.
- Companies that get stuck in the mid-market may be doomed. But as businesses trading up clash with those trading down, some of them may end up as losers, too.
Recommended reading on this topic:
- "Trading Up" where Michael Silverstein and Neil Fiske explored half of the change, the phenomenon of the middle-class occasionally treating themselves to luxuries that they would once have regarded as unaffordable.
- "Treasure Hunt: Inside the Mind of the New Consumer" where Michael Silverstein and John Butman report on the other side of that coin, the popularity of trading down—hunting for basic goods at bargain prices, not least to generate the savings that can be lavished on the occasional luxury.
- "The Naked Corporation" by Don Tapscott and David Ticoll
- "Shopportunity! : How to Be a Retail Revolutionary" by Kate Newlin