The Big Spender is back, and the Bargain Hunter is rifling through bins harder than ever.
In the post-recession holiday shopping season of digital coupons, snap sales and free shipping, two distinct classes of consumers are emerging.
One is the luxury shopper who is ready to drop anywhere from $520 for GPS-enabled ski goggles at Sporting Life to $1-million for a 16-carat diamond ring at Birks. At the other end is the bruised consumer, who is also back at the mall but more than ever is hunting for the best deal, checking e-mails and mobile apps in the quest for the ultimate bargain.
The polarization reflects a decline in disposable income that has hit the middle- and lower-income consumer harder than the well-off. The widening gap has forced retailers to adjust their tactics: High-end chains are rebounding by once again stocking up on pricier lines of goods, while discounters and dollar stores are flourishing by pulling in more mid-income consumers with a broader array of products and prices.
Merchants that are wedged in the middle are feeling the pressure of shifting spending patterns. Mid-priced chains, such as apparel giant Gap Inc. and department-store merchant Sears Canada Inc., are left chasing the cash-strapped with a constant stream of markdowns. Women’s clothier Boutique Jacob Inc. was pushed into bankruptcy protection last month.
“The market is splitting – either going up or going down,” said Randy Harris, president of market researcher Trendex North America in Toledo, Ohio. “Those in the middle of the market are in big trouble.”
Call it surgical shopping. What consumers at both ends of the spectrum have in common is an almost scientific approach to buying. They’re counting on retailers’ Web sites, consumer feedback on Facebook or price comparisons on mobile devices, examining everything from the ingredients in a $300 Giorgio Armani skin cream to the best deal on a flat-screen television. Stores are responding by racing to introduce video and audio product descriptions on their websites and mobile apps.
The gap between big spenders and spendthrifts was sharply widened by the recession, said Benjamin Tal, deputy chief economist at CIBC World Markets. High-income earners emerged from the downturn with lighter debt loads than mid- and low-income households. While the average Canadian consumer owes $1.36 for every $1 earned, the higher-income earner owes just $1.11 for every $1 of income, according to Ipsos Reid data.
“It’s very bullish for the Wal-Marts of the world,” Mr. Tal said of the discount titan. About Holt Renfrew & Co. Ltd., which caters to the rich, he said: “Holt’s probably will survive.”
From jeweller Tiffany & Co. to leather goods specialist Coach Inc., luxury retailers are rebounding from their worst days in the economic downturn. In 2010, worldwide luxury goods sales could rise 10 per cent after tumbling 8 per cent last year, management consultant Bain & Co. projects.
“Wealthy people are feeling more optimistic about the economy, about the stock market, about where the world is going,” said Tom Andruskevich, chief executive officer of Birks & Mayors Inc. “That’s true of a lot of luxury goods companies.”
Evidence of the highest earners spending at prerecession levels is surfacing. At Birks, whose same-store sales rose 5 per cent in the past two quarters, the chain recently sold its first item priced in the seven figures – a $1-million, 16-carat diamond ring – since the financial crisis, Mr. Andruskevich said. Its more expensive products, costing more than $20,000, are being snatched up at double-digit growth rates, while sales of items below $1,000 are increasing at a slower pace, he said.
