That being said, trust is a key component of convincing people to open their wallets. “In 2007, we saw a group who were more adventurous and willing to take risks with brands that have limited awareness, such as niche brands,” says Karen Grant, vice president and global beauty industry analyst at NPD. “They are less apt to do that today. People are looking for brands they trust and recognize. It is about the more meaningful purchase. While price is important, it is secondary.”
The desire to find a deeper meaning is also evident in how people spend their time. Americans are spending more time at home with friends and family, and less out socializing and shopping. That has led to a direct rise in online sales, say the experts. NPD’s data shows 14 percent of women are shopping online, a 3 percent increase in the past 12 months. “Online is being driven by ease, convenience and return policies that are a lot less prohibitive,” says Grant, noting that the top sites in terms of awareness are Avon, Bath & Body Works and Sephora; the top sites in terms of where people shop for beauty are Sephora, Amazon and Avon, and that Amazon, Sephora, Drugstore.com and Ulta rank highest in terms of online conversions. “What’s interesting is that none of the big retailers come up,” says Grant. “It’s the pure plays and Sephora. The Internet is an area where the bigger retailers have a real opportunity.”
Grant notes that Wal-Mart is conspicuously absent from the list (although if you segregate out the 18- to 24-year-old age group, it does rank third in terms of awareness, behind Target and Avon), a fact that underscores the retailer’s current troubles. Although the majority of women across all income levels still buy their beauty products there, the retail behemoth has posted eight quarters of negative comp-store growth. In August, WSL published a report, “Where Did the Wal-Mart Shopper Go?” and the results were startling. “Wal-Mart has lost is credibility for everyday low prices,” Liebmann says. “During the recession, everybody learned how to compete against price. And while there are still a lot of shoppers in the store, they don’t have as much money to spend, they are not shopping as often and they’re not buying everything at Wal-Mart.”
There is a group that does have a lot of money to spend, and seems to be shopping again, however: the affluent. NPD data shows that the average spend on beauty for those earning $75,000 and over is $185. That group is coming back and is more important than ever. “The value of the affluent shopper can not be overstated,” says Liebmann. “They are the people with money who are comfortable enough—despite the roller coaster of the stock market, gas prices and unemployment—to shop. They’re not blithely throwing away money, though. They, too, are making a list and checking it twice.”
When it comes to defining rich, the recession has resulted in a new ceiling of true affluence, widening the divide between the haves and the have-nots. The era of mass affluence is gone. Whereas prior to 2008, marketers generally classified those with household incomes of $75,000 and above as being affluent, today the number has risen dramatically. When George Scribner, the senior vice president of people planning at Digitas, realized that the old classifications no longer produced reliable results, he tasked a team with redefining the affluent and their lifestyle. In terms of household income, Scribner found that statistically speaking, today a household income of $200,000 marks the beginning of true affluence. His group identified five tiers of affluence: The Aspiring, those age 35 and over, with household incomes (HHI) of $100,000 to $199,00. (This is the group least likely to move into true af- fluence.) The Emerging, those 35 and under with HHIs of $100,000 to $199,999. (This group is very likely to move into true affluence as they get older.) The Affluent, those with HHIs of $200,000 to $499,000; The Wealthy, with HHIs of $500,000 to $999,000, and The Rich, with HHIs of $1 million or more.
According to Steve Kraus, vice president and chief research and insights officer of Ipsos Mendelsohn, the research firm upon whose data Digitas created its new classification, about 20 percent of the population (44 million people) in the U.S. has a household income of $100,000 or more, but they represent 60 percent of the income and 70 percent of the net worth.
One of Digitas’ major findings was that marketing is no longer a numbers game. “We can’t think about scale any longer simply by head count,” says Scribner. “We need to think about scale according to where the assets exist, and they exist among the 8.5 million people who represent the top three tiers of affluence, not the 30 mil- lion people who belong to the aspiring or middle class.”
Scribner had another “aha!” moment when he analyzed the geographic break- down, which showed that the south has the largest population of affluence, driven by Florida and Texas but with Virginia also playing a strong role. According to recent census data, Scribner says, the state’s Fairfax, Loudoun and Falls Church coun- ties have the highest median incomes in America.