Wall Street is thinking a lot about handbags this week, with earnings reports from Kate Spade, Michael Kors and Coach. They’re three different companies that share one similar problem: a handbag market stuck in a rut.
Why that’s currently the case is the kind of thing that interests Pam Danziger, who tracks the rich for Unity Marketing. Like a lot of marketers, she loves catchy names for groups of people. One currently on her mind is HENRYs: High earners, not rich yet.
This is all relative, of course. By her definition, HENRYs have incomes above $100,000. They would drop hundreds on handbags before the recession. But now, even though their income and investments have largely recovered from the downturn, they don’t quite feel rich enough to splurge on this season’s hot new bucket bag.
“Today, those people feel decidedly middle class and not at all luxury class,” Danziger explains.
There’s another thing going on in consumer brains, and it’s the handbag makers’ fault. They’ve gotten into the habit of offering big discounts through sales and outlet stores. That moves product, but potentially creates a problem.
“It’s this deconditioning the consumer to think, even if I like this item, I have to wait, because I’ll get it on a discount in a few weeks or a month,” says Paul Swinand, who follows luxury goods at Morningstar.
Shoppers who don’t feel rich or willing to pay full price mean big trouble for handbag companies.
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