The Affordable Luxury Surge
“I’ll have a grande non-fat latte, extra hot, no foam, please.” If your friend having their regular Starbucks order 6 days a week shocks you in this economic environment, you may be in for a surprise. It’s no secret that the economy isn’t as strong as it was before the COVID–19 pandemic, with interest rates rising and industries such as tech, advertising, and banking facing large-scale layoffs. Economists are predicting that consumers will tighten their spending in 2024. However, that doesn’t mean that consumers will stop spending. Instead, it means that people will become more picky about what they choose to spend money on. With limited resources, consumers will be more discerning about how they spend their extra cash.
So, what will people be spending on in 2024? Well, as absurd as the Starbucks example may have seemed, people are expected to spend more on what is termed “affordable luxuries” in 2024. So, why is this? And what exactly is an “affordable luxury”? Read on and you’ll find out!
What’s An Affordable Luxury?
An affordable luxury is a product or service that isn’t a necessity, but we’re willing to spend a little extra on, usually as a self-indulgence of some sort. So, for example, water is a necessity, but Fiji Water would be considered an affordable luxury.
Now that we know what affordable luxury is, let’s get into a bit more detail about why spending on affordable luxuries goes up during times of economic uncertainty. The Lipstick Index is a phenomenon coined by Estée Lauder's Leonard Lauder, and refers to the theory that spending on affordable luxuries increases during difficult economic times. Consumer psychologists have backed up this theory by saying that there’s evidence that people purchase affordable luxuries to try to boost their mood during challenging times.
There’s also some research to suggest that Millennials are purchasing more affordable luxury goods than other generations. This is due in part to the fact that many of them believe they won’t be able to afford a home in this economy. So, they think “what’s the point of saving money”? Or, “I can’t afford a home, but at least I have these nice clothes”. This isn’t to say that this generation isn’t saving at all, but it’s definitely a mentality shift from previous generations.Another piece of the puzzle is making sure the content is relevant and evokes some emotion from the audience. What do you want them to feel? Emotion will incite more action and make a relevant connection for your audience.
2024 Predictions
As mentioned in the intro, due to the economic fluctuations predicted for 2024, consumers are expected to spend more on affordable luxuries this year. This is especially the case for the food and beverage industry. Consumers are expected to increase spending on items such as specialty coffees, hand-crafted beverages, and restaurant meals. Why get a plain coffee when you can get an iced mocha latte made with Oleato Golden Foam? Especially since, as we learned above, the latter may make you feel just a little bit better. Spending on the little luxuries can help you feel a bit more in control, sure you can’t buy a house, but that doesn’t mean you can’t treat yourself.
Another industry that is expected to see a large increase in affordable luxury spending is the wellness & personal care industry. Consumers are expected to buy more anti-aging and “clean” skincare. This doesn’t come as a total surprise, since these types of products tend to make consumers feel better about themselves. For example, “clean” skincare may make consumers feel not only as though they are treating their skin well, but also that they’re helping the environment.
It’s also expected that we will see a surge in “practical luxuries” this year. A practical luxury is an item that you don’t really need but is likely to improve your quality of life and perhaps even your quality of work. An example would be the newest iPhone. Sure, you don’t need it, but it may make your life easier.
Real World Examples
How can marketers in the retail industry take advantage of this affordable luxury surge? Here are some strategies that are working for other brands…
Lean Into It
Research suggests that consumers will be spending more on affordable luxuries this year, but how will they know affordable luxury when they see it? Although most of the time it’s relatively intuitive, you can make it easier on consumers by telling them exactly what they’re looking for.
An example of a brand that is taking advantage of this strategy is Target. Target has a display in their beauty section that specifically showcases products considered affordable luxury, with a large sign saying “affordable joy”. They have a variety of different price points in order to reach as broad of a consumer group as possible.
Mix It Up
As alluded to in the Target example, it’s important to note that affordable luxury has a price range. What’s considered affordable luxury for one person, may not necessarily be the same for another. While some people may consider a $40 lipstick an affordable luxury, others may see lipstick in the $80 price point as being an affordable luxury. Another important factor is sometimes it’s easiest to tell which items are affordable luxury when you have something to compare it to. If you have 2 different lipsticks, one is $5 and one is $40, it’s an immediate signal to which one is the affordable luxury item.
A brand that does well with mixing it up is Macy’s. Macy’s offers a mix of affordable and luxury items on the same display. This allows them to showcase products at a variety of different price points to ensure they are reaching as many consumers as possible. Macy’s also ensures that this mix of products is available year-round, as opposed to relying solely on seasonal sales.
Social media is a great way to boost the demand for affordable luxuries. This is especially the case for younger generations who are more easily persuaded by social media influencers. Want the same top as Emma Chamberlain? Well, you can have it! For a premium of course…
Aritzia does a great job of this, and promotes their brand as “everyday luxury”, leveraging celebrity and social media influencers to drive demand. Consumers (often young women) can see what their favourite celebrities and influencers are wearing and they know they can get that exact shirt, sweater or jacket for only slightly more than what they would typically spend. Similar to other affordable luxury items, the clothes are just inexpensive enough to be within reach, however, the price point is much higher than similar items at discount stores.
Many beauty brands have found that TikTok is also helpful in creating demand for affordable luxury. Language around “treat yourself” can further drive the principle we talked about earlier: people buy affordable luxury items to give themselves a mood boost. Following that, TikToks around “self-care” have been a huge revenue driver for beauty retailers such as Shoppers Drug Mart and Sephora.
Ready for the Affordable Luxury Surge?
The affordable luxury surge is here! We’ve shared some of our insights on affordable luxuries, why spending on these types of products and services is expected to increase this year, and how marketers can take advantage of this opportunity. Of course, putting together a full marketing strategy based on any of the ideas mentioned above will take time, research and effort. If your brand wants to take advantage of the affordable luxury surge and is looking for some support and guidance, book a call with a member of our team.
Sources:
https://www.bbc.com/news/uk-wales-63047913
https://www.essence.com/news/watchthe-legacy-of-sisterhood-alpha-kappa-alpha/
https://www.brandvm.com/post/aritzia-marketing
https://www.cbc.ca/news/canada/calgary/lipstick-index-beauty-sales-1.7041218