As an amateur observer of consumer behavior and company marketing strategies we listened with interest to BloombergRadio’s morning Surveillance show when Tom Keane and Pimm Fox quipped with Stephanie Schiller Wissink, equity analyst and Managing Director at Jefferies, about shopping at Sephora and Ulta with their daughters. Why have young women and millennials shifted their buying patterns away from department stores to these modern, internet-based multi-brand stores?
Wissink’s observations pair well with the slow progress of labor market recovery and wage growth since the Great Recession. We suggest that when you don’t have enough money to buy a Dior handbag, a Dior lipstick is a relatively affordable luxury and still gives a psychological “feelgood” lift for the avid shopper. This works both for the baby boomer that was “downsized” (think of GILT.com) as well as the young adult who may not be earning enough yet to buy luxury goods. In Wissink’s words, the “beauty” shopper has been “borrowing from her traditional fashion wallet”.
Other products fit this pattern as well. Savvy companies have expanded their product lines to stay engaged with consumers through recessions (not to mention that many of these products are high margin). Think about when colorful socks became the fashion– some older readers may remember The Sock Shop. Or consider McDonald’s move into upscale coffee drinks. Or even the growth of Starbucks during this time. In developing countries, a woman’s first purchase when a bit of free cash becomes available is likely to be a nice-smelling soap, whether for laundry or bathing.
Wissink then commented that this is the first quarter when beauty is not a “call out leader” for department stores. Stores are finding that spending is returning to apparel, footwear and accessories. This too, dovetails with recent improvement in the job market, wage growth and nascent expansion of the labor force.
