With consumer confidence falling, unemployment rising, and the U.S. striking back, you might think that luxury goods are the last thing consumers would buy. But shoppers may gravitate toward little luxuries — moderately priced, far-from-essential items that lift their spirits.
“At a time of crisis, consumers have a difficult time justifying expenditures perceived as extras,” says Pam Danziger, president of Stevens, PA-based research firm Unity Marketing. So marketers of products such as furniture and high-end jewelry may see a drop in sales.
At the same time, Danziger says, people are seeking comfort in items such as fine chocolates, bath products, candles, costume jewelry, fresh flowers, and cosmetics. “If marketers can position their products as indulgences — life’s little luxuries that make people feel good — they may benefit,” she says.
The need for little luxuries has enabled San Francisco-based beauty products manufacturer/marketer BeneFit to stay on plan. Cofounder Jean Danielson says that women who may not drop $150 on a suede shirt right now are still willing to spend $15 for a new lipstick.
“Wartime has traditionally been a time where lipsticks and other beauty products do well, because they give consumers immediate results and make you feel good,” says Danielson, who notes that BeneFit has weathered other economically difficult times, such as the recession of the early 1990s, without a downturn in sales. Though she won’t disclose projections for 2001, Danielson says that catalog sales account for 10%-15% of the company’s business, or $10 million-$13 million in annual revenue.
Edison, NJ-based toiletries manufacturer/marketer Caswell-Massey has also done well in tumultuous times. President Anne Robinson recalls that in 1990 Kuwait had been invaded, the U.S. faced war with Iraq, and the economy was still shaky from the previous year’s stock-market crash. Still, Robinson says, her company’s sales that holiday season were on plan. “I’m hoping that this Christmas will follow that pattern,” she says. “The types of small indulgences that we sell make people feel better, if only for a short time.”
Buying presents for others also helps soothe the soul. San Francisco-based gifts mailer Red Envelope has continued to see strong sales in some of its product categories, which CEO Martin McClanan says may be a result of the terrorist activity. “Gifts in our ‘thinking of you/just because’ category, for example, have been very popular since the attacks.” Such gifts include the French soap sampler ($25), the luck bracelet ($30), and chocolate-covered Oreos ($35). “It could be that consumers are much more focused now on expressing emotion such as love or friendship through small gifts and tokens of affection,” McClanan says.
Red Envelope was running roughly 20% ahead of plan prior to Sept. 11, McClanan says. A few slow days followed the attacks, but sales are still slightly ahead of plan. The marketer is paying attention to which product categories have been selling well during the past few weeks. “We’re having regular merchandise discussions to look at reacting to that by possibly expanding those categories,” he says.
At the same time, BeneFit is looking at its customer service more carefully and has made some changes in light of the overall mood.
“We’ve handed out tip sheets to our call center reps instructing them to be more personable and informative with customers,” Danielson explains. “It’s a dark time in our country, and because of that we’ve instructed our phone reps to offer things, such as doubling up on gift boxes for customers or throwing in extra samples of our products. It’s not necessarily upselling. Instead, it’s a way to connect with our customers.”