The latest series of “Ripple Effect,” the Wharton School’s faculty research podcast, goes shopping. Titled “Holiday Retail,” the latest episodes look at consumer trends in the luxury market, online retail, the role inflation is playing, and the behemoth in retail competition, Amazon.
In “Redefining Modern Luxury Consumption,” Pinar Yildirim deciphers the changing consumer signals in the luxury market, the evolution of trends like “quiet luxury” and “conspicuous consumption,” and what it means for high-end brands.
“Luxury goods might seem like a superfluous way of spending your money, or money-burning, but it really gets to how we want to see ourselves and how we want others to see us. … At the same time, it’s signaling to others. It’s trying to consume goods in a way that makes us feel like we belong to a class, have some kind of status, and at the same time make it clear to others that we belong to a certain class.”
“E-commerce has been a less important part of luxury consumption. But we are now starting to see more and more luxury brands try to integrate at least some elements of sales, some elements of experiences, into e-commerce and even into some of the new technologies, some of the new environments, including the metaverse.”
“The consumer who’s looking for quiet luxury or the consumer who’s after minimalism is going to be a different consumer in terms of their luxury consumption life cycle. They will be at a different place compared to someone who’s looking for the big logo item or the more easily visible, conspicuous items.”
In “How Retail Stores Compete With Amazon,” marketing professor Barbara Kahn discusses how stores go head-to-head with the online retailer, and why opposing indicators make it hard to forecast trends.
“The one thing that people usually do when they look at holiday seasons is they look at trends. The problem is that the past few years have been completely unpredictable, so it’s really hard to make a forecast. If you start with 2020, what did the holiday season look like then? Everybody was buying home stuff because they were stuck in their house. … What does that mean for 2023? Who knows? You’re seeing these trends that are so different, it’s really hard to predict what people are going to buy this year.”
“I remember way back when in the recession of 2008–2009, luxury was so worried about people not shopping that they discounted their prices. And it took a really long time for them to get people back to buy luxury brands at full price, which is really what you want them to do. So, I think this Amazon Prime Day, and everybody following and accelerating, really makes people very deal sensitive. And that’s a problem.”
“The holidays put a stress test to all the operations. In terms of the delivery options, and also in the store execution. Some of the peak in stress on the online basis is because many retailers start to stock out in the physical stores. Customers that are looking for a particular doll or a particular toy for their kids, they really stress out and start to put those orders online. I think that, in part, is a manifestation of this challenge that retailers have to have a coordinated strategy both online and in stores.”
“I think it’s important for those retailers to keep in mind that customers are omnichannel. In that sense, it is a fictitious effort to try to characterize a particular customer as an online customer or brick-and-mortar customer. We are all omnichannel. We walk in the store with our phone in hand. We leave the story empty-handed because we know that we can order when we are at home.”
“When you go back to thinking about COVID, it was a period of time where people could not spend. They could not do things that they like to do. They could not take vacations. They could not eat in restaurants. It’s been a good two years or more that people felt constrained on all of these things. I think once we passed COVID and people see that they can go out again, they can go back to living their lives, there is a little bit of a change in the psychology of spending. One thing to think about is, there are all these missed experiences.”
“But I think even beyond that, something has changed. Because people realized, you know, ‘I should probably spend and consume and have a good time today, because who knows what’s going to happen down the road.’ I think those two things have changed during COVID in the aftermath of COVID, and led people to think a little differently when they decide how much they want to spend.”
“I would say, maybe a little speculatively, something else is happening now big time. And this is climate change. There is climate change itself, but there is also the awareness of it.”
And in “Using Consumer Behavior Analysis to Predict Shopping Habits,” marketing professor Peter Fader explains why it’s so important for retailers to build strong customer relationships and pay attention to customers year-round.
“I’m not saying that holiday marketing is a bad thing. You do have to push a lot of stuff out the door. But you should be doing it mindful of, who are these customers? And how can we tip it a little bit more towards the kinds of customers who will bring us lasting value? That’s a bridge too far, for a lot of retailers.”
“Maybe if companies are missing the opportunity to be more customer-centric, missing the opportunity to use their data to make better decisions that will lead to better long-run outcomes. On the other hand, there’s something about, indeed, putting all that aside. Let’s just have Christmas in a traditional way. Let’s enjoy the holiday season, and then we’ll get back to work on January 1st and then hopefully make 2024 not only a better year, but a smarter year, as we use data, as we understand our customers and run our businesses more effectively.”
For a full list of podcast episodes, visit the “Ripple Effect” website.