A funny thing happened on the way to the department store: luxury goods became accessible to consumers online and at increasingly deeply discounted prices. Thanks to a spate of discount websites offering “flash sales” or exclusive, limited-time offerings, the flash sale phenomenon has revolutionized the way consumers shop, offering an entry into the luxury market at a fraction of the price.
One particularly desirable side effect of this trend is that luxury retailers are benefiting by way of consumer demand for more access to luxury products online – so much so that they are willing to pay full-price to attain the brands they love.
As expected during uncertain economic times, consumers are trying to save money at every corner and are understandably more price-conscious. Retailers, on the other hand, are doing everything they can to lure customers in by dropping prices, running promotions and rewarding loyalty. Particularly in the apparel sector, flash sale sites have provided a solution for consumers and retailers alike. Shoppers could now enjoy exclusive offerings on high-end labels – something they might have never been able to afford before – while for retailers, their inventory reached an entirely new audience and was moved quickly.
The initial popularity of apparel and accessory flash sale sites spurred the entry of countless others. These sites provided a chance for fashion enthusiasts to buy their favorite brands at more affordable price points, and with the added convenience of online – and even mobile – accessibility. According to actual, aggregated spending data from American Express Business Insights, spending on online discount luxury fashion increased significantly across all consumer groups in 2010, compared to 2009. Average consumers increased spending on online discount luxury fashion by 92% and “Top Spenders” – accounting for the top 10% of spend in the luxury fashion category – followed the same trend, posting an impressive 96% spend growth over the year prior.
Flash sales also opened up the world of luxury fashion to a much larger consumer base. Consumers, who may never have previously owned a designer bag or heels, now had the opportunity to do more than window shop at their local mall. Flash sale sites lowered the entry point to designer brands and provided shoppers across a range of demographics and affluence levels with a taste of designer fashion. In fact, one of the most unexpected groups to subscribe to the flash sale craze included Seniors, who increased spending on these sites in 2010 by a whopping 122%. Compared to other generations, Gen Y followed by a still impressive 100% spending increase for the same period, Boomers fell just shy of that with an increase in spend on discount online luxury fashion by 99% and Gen X consumers increased spending by a very strong 86%.
The initial explosive growth of flash sale sites has evened out a bit, though data shows spend is still growing, and more importantly, the massive initial popularity stimulated consumers’ appetites for luxury fashion to such a degree that consumers are willing to pay a much higher price tag to get their luxury fix.
In 2011, spending on flash sale sites did continue to grow, but by not nearly as much as the year prior. Average consumers increased spending on online discount luxury fashion by a more moderate 21%, when compared to 2010. Top Spenders also slowed spend growth, increasing by just 5% over the same period. Seniors outperformed the younger generations, increasing spend on online discount luxury fashion by 28%. Gen Y and Gen X consumers boosted spending by 19% and 12%, respectively, while the Boomer generation posted a slimmer 9% increase in spending on online discount luxury fashion.
Although there has been some slowdown in online discount luxury fashion spend growth, interest in designer brands hasn’t been lost. As economic conditions improve, flash sale sites are proving to be the catalyst for growth in spending as the daily deal enthusiast transitions into a full-price luxury consumer. The former discount shoppers are now showing a willingness to pay full-price for the luxury brands, which they have grown accustomed to, and are shifting their spending from discount to full-price.
In fact, American Express Business Insights data shows that average consumers increased spending on full-price online luxury fashion by 20% in 2010, and in 2011, this same group posted a 25% increase in spend. When looking closer at generational spend on full-price online fashion, younger consumers were more willing to make the jump from flash sale sites during this period. Leading the boost was Gen Y consumers with increased spending by 31%, followed by Gen X who bumped spending by 23% over the previous year. Boomers, though also more reserved than the younger generations, increased spending by 19% for this period. Seniors trailed their younger counterparts in full-price online luxury fashion, increasing spending by 6%.
Moving into 2012, we are continuing to see a growth in the full-price online fashion space while discount online luxury spending remains flat in comparison to the booming popularity witnessed in 2010. Gen Y consumers led