The luxury world never believes in losing consumers due to inflation. On the contrary, as inflation increases, it is a consensus that luxury goods often raise prices to maintain their value and consolidate their monopoly position.
Recently, in response to inflationary pressures, luxury brand Cartier plans to raise prices in the coming weeks, Cartier CEO Cyrille Vigneron pointed out that a reasonable price increase will offset some of the impact of the us dollar and the Chinese currency against the euro exchange rate, the adjustment will be between 3% and 5%, in order to ensure that the brand continues to use high-quality diamonds, platinum and gold and other materials to make products, while responding to exchange rate fluctuations, materials, A range of rising cost implications such as transportation and labor costs.
Cyrille Vigneron also pointed out in an interview with Bloomberg that "our business is long-term, so we must carefully adjust the pricing of our products, and the price fluctuations cannot be too large." In the long run, the overall growth and distribution of global wealth is beneficial to the current global luxury market. ”
Cartier's boutique at Harrod Mall
Especially in the past two years, due to the impact of inflation on raw materials and labor costs, the price increase of luxury goods has reached the fastest rate ever. But even so, the sales performance of luxury goods has not been affected, and contrarian growth and long queues of stores are "normal scenes" in the case of inflation.
Although the authenticity of the "LVMH Greater China Executive Conference Call Points Chart" recently circulated online has not been confirmed, the performance of luxury brands in continuous price increases under extremely high inflationary pressures can be seen that ultra-high net worth customers are the main group of luxury brands in the future, continuing to pay attention to high-end product lines, "eliminating the declining non-income customer base through price increases" is also the most normal business choice for luxury brands, and luxury companies have never been able to establish contact with all consumers in a wide variety of markets. It is worth mentioning that the maroquinerie series of crocodile leather custom handbags launched by LVMH brand Celine can also reveal the brand and even the group's emphasis on high-net-worth individuals and the strengthening of high-end attributes.
Celine launches the maroquinerie collection of croc leather custom handbags
All indications are that the pressures of inflation tend to act more on low-income people, and it can be seen from past historical experience that rising prices, whether it is luxury goods or ordinary consumer goods, will never stop the richer consumer groups. In contrast, after every pandemic in history, social wealth will tend to be more concentrated at the top, that is, the richer the rich, the poorer, the more depressed the economy, the better the luxury goods, which is also known as the Matthew Effect.
But in fact, the target audience of more companies has always been ordinary consumers, and as more and more consumers show incredible volatility in their behavior, what impact will the growing inflation have on the shopping behavior of ordinary consumers in the coming months? Here are two reports that may reveal the less optimistic outlook for the average consumer.
Two reports may reveal the outlook for the average consumer who is not optimistic
According to the National Bureau of Statistics, China's Consumer Price Index (CPI) rose 1.5% year-on-year in March 2022, an increase of 0.6 percentage points from the previous month. Experts analyze that prices will continue to rise moderately in 2022, and the trend of commodity prices transmitting to the prices of some terminal consumer goods may continue, which may drive consumer price increases.
According to EY's latest EY Future Consumer Index, consumers are generally anxious and worried about inflation and the continued rise in the price of "ordinary everyday goods", but an EY spokesperson also said that "consumers will become more and more picky and prefer to buy brands that meet their values".
At the same time, the report pointed out that half of consumers currently say that the rising cost of goods and services makes them unaffordable, and when asked what the most important purchase standard is now, 58% of consumers mention price, while 64% of consumers believe that price will be the most important purchase standard in the next three years.
Affirm, a U.S. consumer fintech company, also conducted a study on how inflation affects consumer spending habits, with 66 percent of consumers concerned that rising costs would prevent them from paying for a live experience of what they plan to buy this year, compared to 73 percent of millennials and Gen Z.
The Affirm report states that 66% of consumers are concerned that rising costs will prevent their purchase plans
From the conclusions of the survey from both parties, EY found that the only factor that affects consumers' purchase decisions outside of price factors is availability, Jeff Orschell, head of consumer retail at EY IN the United States, pointed out, "Consumers tell us that they are still willing to pay higher prices for necessities, and they know in their hearts that inflation will inevitably lead to higher prices of necessities and will continue to rise." ”
When it comes to price sensitivity, EY's research found that gasoline, fresh food and packaged foods are not too much affected by consumer buying behavior compared to quality foods, and consumers are ready for price increases, with 65% of consumers saying they will still refuel and 59% saying that fresh food is still important to life.
When it comes to fashion, Jeff Orschell says, "The apparel industry is currently facing a big problem – 38% of consumers say they are reducing their purchase of clothing, 29% say they are buying fewer beauty products, and a third of consumers say they are buying fewer consumer electronics. ”
After repeated lockdowns, the desire to experience becomes a consumer's first wish, Jeff Orschell says people are at a stage where "I've had enough of the pandemic, I want to experience life, eat at restaurants, go on vacation."
With an increased focus on sustainability, despite the high cost of inflation, 40% of consumers say they will only buy branded products that align with their values, with 53% of millennials, 46% of Gen Z and 26% of baby boomers being aware of this.
EY's current recommendations for companies are to take short- and medium-term action to mitigate the impact of inflation by exercising pricing power, protecting profit margins and boosting productivity. "This is a great time for retailers with private labels to promote their brands, and we're already seeing more and more consumers willing to go shopping in brick-and-mortar stores."
For apparel companies, companies should continue to tighten to ensure that their physical store channels can be effectively used.
Second, companies need to re-examine their supply chains, EY notes, "We've seen that the supply chains we've built over the past few decades are inelastic, and this has been proven time and time again over the past two years, with long lead times inevitably leading to delays in large orders, and every business in the world is currently considering how to shorten their supply chains, which has become a global consciousness in the business world." ”
In Affirm's report, Affirm's chief commercial officer, Silvija Martincevic, said that whether consumers are "currently looking for the most suitable price to buy a new kitchen appliance, or saving the rest of their money for emergencies, one thing is clear, consumers are feeling the pressure of inflation because prices are indeed continuing to rise."
The U.S. Consumer Price Index (CPI) rose 8.5 percent year-over-year in March, the highest since December 1981
In response to growing financial pressures, 53 percent of millennials and Gen Z said they would plan to spend less, and 21 percent said they would use this year's tax rebates to invest. In stark contrast, 81 percent of Gen Xers and baby boomers told Affirm they plan to keep existing spending or more during inflation, with only 14 percent saying they would use their tax refunds for investments.
When it comes to saving money, for 38 percent, that means meeting household expenses as a top priority. More than half (53%) of consumers said they would no longer prioritize eating out, while 47% said they would no longer prioritize recreational activities and 34% said they would no longer prioritize beauty spending, a conclusion that is worth watching out for beauty retailers. WWD
Written by Alexandra Pastore
Edit Lucy Geng, yalta
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