Everywhere you look, brands that once catered to the rich are now targeting the rest of us. Costco is the biggest retailer of Bordeaux wines. Wolfgang Puck has a restaurant at O'Hare Airport. Starbucks has outlets in Meijer, the Midwestern grocery chain.
The new book Trading Up: The New American Luxury,by Michael Silverstein of Boston Consulting Group and Neil Fiske, formerly of BCG and now chief executive officer of Bath & Body Works, explains how American companies have invented the oxymoronic business of mass elitism.
Old Luxury goods are high-margin, low-volume products priced so only the wealthiest can afford them. You can get rich selling Old Luxury. New Luxury goods, by contrast, are not quite cheap, high-volume goods aimed at the 47 million middle-market households that make more than $50,000—Williams-Sonoma dishes, Samuel Adams beer, Victoria's Secret lingerie, Bath & Body Works Sandlewood Rose Relaxing Body Wash. You can get really rich selling New Luxury.
The consultants have divined that everyone is willing to pay more for something.It could be bread, lipstick, wine, golf clubs, underwear, chocolate, dolls, or pet food, so long as it speaks to a longing in the soul. Silverstein and Fiske write that consumers are moving up to "a new level of goods and services that cost more than conventional products—sometimes a lot more—but seemed to deliver a lot more value, particularly emotional value, to them."
This is the Shopping of Meaning. "The American consumer is in a state of heightened emotionalism." After surveying 2,300 consumers, the authors concluded that "many Americans feel overworked, isolated, lonely, worried, and unhappy." But it turns out the cure is shopping for premium-priced products. Don't have time to walk your poodle? Prove you love him by buying expensive dog food. Feeling down? A 5-cent Hershey's Kiss may provide a jolt of sugar, but a $2 Godiva truffle will perk you up more.
Some of the arguments they put forth in support of a happy, shallow, harmless materialism are tendentious. "For its apostles—and there are many—a visit to the Cheesecake Factory is mostly about Connecting and Questing." (It's hard to see what Quest there is involved in eating at the Cheesecake Factory, except: Can I possibly finish the 6 pounds of Caesar salad they piled on my plate?) And, perhaps this is a result of spending too much time in New York, but it seems to Moneybox that the authors have a strange idea of what constitutes "luxury." Panera Bread? Kendall-Jackson wines? Carnival Cruises?
The book does not focus on how New Luxury products may, in fact, be dragging down their manufacturers. There's a fine line between "masstige" and cheapening your brand. Once you've bought a Polo shirt at Costco for $20, you might not pay $50 for the same shirt on Madison Avenue.
Part of the allure of luxury goods was that other people couldn't easily afford them. By contrast, New Luxury goods are supposed to be inclusive. "New Luxury goods also provide a way for consumers to align themselves with people whose values and interest they share—to join the club." But what club precisely are people who buy the new $27,800 BMW 3-Series joining? The club of people who can afford to pay $27,800 for a cheap BMW but can't afford a "real" one?
As much as customers may be trading up, the companies are trading down, because the demands of the market force them to. Virtually all the New Luxury titans are publicly held. And many went public in the 1990s. To meet investors' expectations, a company must show sustained growth, whether it's Tiffany or Wal-Mart. Of course, companies that sell premium-priced products tend to reach the limits of their natural markets more quickly than discounters do. And so New Luxury companies are likely to expand into areas where their natural customers are scarce, in order to get huge. Restoration Hardware tried and failed to do this. Callaway Golf lost tens of millions of dollars trying to sell fancy golf balls when the market for its high-end clubs softened. Cosi, the sandwich chain, has been a disaster since it went public. Indeed, the stock charts of many New Luxury purveyors don't look so hot.
Almost as an afterthought, the authors append a discourse about luxury in Western Civ., starting with the Greeks and touching briefly on all the biggies: Calvin, Marx—"It would be hard to make the case that Marx was an advocate of trading up or that New Luxury signals the end of capitalism"—Thorstein Veblen*, John Kenneth Galbraith, David Reisman. Amazingly, they left out Christopher Lasch. His devastating 1979 book, The Culture of Narcissism, looms over their entire project. The American narcissist, Lasch wrote, "does not accumulate goods and provisions against the future, in the manner of the acquisitive individualist of nineteenth-century political economy, but demands immediate gratification and lives in a state of restless, perpetually unsatisfied desire." The impulse driving the New Luxury isn't so new.