Big box retailers and purveyors of luxury goods can expect strong sales this holiday season as the economy shows continued signs of recovery, according to a pair of USC business professors.
“People are starting to buy again and feel more confident that, if they haven’t lost their job yet, they may not lose it,” said Joseph Nunes, associate professor of marketing at the USC Marshall School of Business. “Employment may not be rising at a rate that we’d like it to, but the negative trajectory isn’t there the way it was.”
Nunes tracks the sales of luxury goods, such as jewelry, watches, leather goods, wine, spirits, perfume and apparel — a $525 billion market in the United States last year.
Luxury goods fall into two categories: accessible luxury and true luxury, he explained. True luxury items, such as Breguet watches, are purchased and used by a small, select group of consumers worldwide. They’re usually immune to the ups and downs of the economy, he said. But affordable luxury items, such as TAG Heuer watches, are more accessible to the public for special occasions, including the holidays. Their sales are also more likely to ride the waves of the economy’s fluctuations.
Many fragrances, wines and spirits fall into the affordable category, so they’ve had especially rough times due to the recession, Nunes said. Now they’re coming back.
“This holiday season I expect affordable luxury to boom as the mildly affluent step out to splurge or chip in and get the extra special gifts for their loved ones,” he added. As an example, Nunes points to jewelry seller Tiffany & Co., which has struggled. Because Tiffany gets about one third of its sales from holiday purchases, he expects the company to rebound this season.
Big box business, meanwhile, can expect strong revenues this year, particularly department stores, such as JCPenney and Sears, which suffered disproportionately during the recession than discount counterparts Target and Walmart, said Anthony Dukes, also an associate professor of marketing at USC Marshall.
Some big box retailers are concerned that online sellers will dent their profits in what is a $200 billion industry.
“It’s hard to say one way or the other whether the holiday season is particularly subject to the online effect or not,” Dukes said. “Even though big box merchants are growing, the growth may be slower than it would be otherwise without the threat of Amazon.”
The world’s largest online retailer is building more distribution centers near large cities to speed deliveries and better compete with brick-and-mortar stores. But big box retailers and Amazon share an advantage that helps both, despite the recession: They sell electronics and toys.
“Those are reliable items during the holiday season,” Dukes said.