Yesterday, I heard Michael Silverstein, author of Trading Up: Why Consumers Want New Luxury Goods... And How Companies Create Them address a group of luxury good marketers in a conference at Kiawah Island in South Carolina. The audience ranged from high-end jewelry and watch makers, to high end travel and hotel players, to top shelf auto and electronics manufacturers and everything in between. Michael shared chart after chart showing how both the upper end and the lower end of most consumer markets are growing nicely while the middle of the market is shrinking by double digit percentages.
It seems that consumers are buying $500 jeans at the high end shops but their underwear and socks are coming from Wal-Mart and Target style stores. This phenomenon, in part, is addressed in detail in Michael’s book. How as business owners, marketers, and salespeople can we make sure that our day to day offerings are in tune with this trend? Further ask yourself how we make sure that our offerings don’t get caught in the veritable squeeze of the middle market?
Michael also took the opportunity of his speech to warn the purveyors of luxury goods that the growth they are enjoying now, at the top end of the market, will very swiftly and very definitely be attacked by Korean and Chinese manufacturers who are ever so rapidly coming up the innovation and quality curves at the same time their brethren attack in the more traditional low priced entry level arenas.
So, if you’re enjoying the luxury business today, you need to be ready for an attack by entrants who may not even be on your radar as of yet while also watching out for those middle of the pack players who will attempt to move upscale to avoid the squeeze of the middle.
Likewise, if you are middle market player, not only is the trend working against you right now, you need to also worry about 1) today’s luxury players expanding downward, 2) the new entrants who shoot for the top of the market landing in the upper middle to compete with you instead, and of course 3) the potential for the low end suppliers to creep into the lower middle of the market where they’ll fight for your share as well. Oh the woes of the middle!
What a market battle we have brewing. Surprisingly, Michael didn’t get any questions from this group of luxury marketers who sat in semi-disbelief as to the potential turmoil just ahead versus the positive, go-go messages of their 2004 successes. That’s a real shame as Michael has posed some great questions for discussion amongst businesses of all types. See and enjoy Trading Up: Why Consumers Want New Luxury Goods... And How Companies Create Them.