"It was a retail juggernaut that swept through America's shopping malls and bedroom closets, rewriting the rules of class and consumption. But affordable luxury is not looking so affordable — or sustainable — anymore." So writes Michael Barbaro of the New York Times in an article under the amusing headline "Thinking Twice About That $400 Handbag."
"During the 2007 holiday shopping season, the middle-class consumers who spent the last decade splurging on $300 saucepans and $600 scarves, tightened their purse strings in the face of slipping home prices and rising energy costs," Barbaro writes. "As a result, an entire economy built around aspiration is starting to collapse. Affordable luxury purveyors like Tiffany & Company, Nordstrom and Coach have experienced slowing sales and plunging stock prices, problems likely to deepen after the stock market's continued slide last week reinforced fears of a recession." (To read the complete article, click here.)
Meanwhile, Starbucks, which is considered my many to be the quintessential mass luxury brand, announced that a pilot program through which it would seel $1 cups of coffee at certain times of day; the deal includes free refills. A round-up of reaction, much of it negative, is compiled at the Starbucks Gossip blog.
Barbaro notes that the folks who first identified the mass affluence phenomenon were the retail experts Michael J. Silverstein and Neil Fiske, authors of Trading Up: The New American Luxury, a book published in 2003 that argued that all retail brands should consider ways to become purveyors of affordable luxury. Not surprisingly, Silverstein tells the Times that reports of mass luxury's death are greatly exaggerated, and calls the trend "recession proof."
I think Silverstein may be right, and here's why. When I interviewed him five years ago, he mentioned an aspect of the typical mass luxury company that would seem to protect against periodic economic downturns—the fact that they tend to have less capital tied up in fixed assets. Budweiser, Silverstein observed, owns 100 percent of its U.S. capacity compared with Sam Adams, which owns only 45 percent of its capacity. If that is in fact true of many mass luxury companies, then the sector should be able to respond to fluctuations in demand with greater nimbleness than, say, traditional, slow-moving corporations. (To read my 2003 interview with Silverstein, click here.)
MIKE HOFMAN was previously editor of Inc.com and a deputy editor at Inc. magazine, which he joined in 1996. The site was nominated for a National Magazine Award for Digital Media in 2010, and was named the best business website by Folio Magazine. In 2006, Hofman was part of a team of writers nominated for a Webby Award for best business blog. He lives in New York City. @mikehofman