Any major market change triggered by an economic downturn automatically brings with it an increased demand for premium products and services. This was demonstrated after the Great Recession of 2008, and if that were not proof enough, we are seeing it even more dramatically in markets that have been restructured due to COVID-19. One of the key elements of the term “premium” as a definition of consumers’ spending needs is the significant emphasis on appearance, packaging, and “frills”. This fact is a clear driver for the conscious planning and execution of the creation of a truly premium shopping environment, i.e. the premiumisation of the shopping experience.
Psychology of the shopper
When consumers have less money to spend, they think more about what they spend it on. This is a natural process when shopping. The impact of a crisis always has specific economic events and effects, but what is most dangerous for trade is the so-called psychological aftermath. The latter is always a deeper-rooted process and takes longer to recover from. Moreover, while the cessation of negative economic events and the shift in trends in a positive direction can be demonstrated with facts, the psychology of the customer is not so simple. If we think only of the recent crisis, we have seen perfectly well that, due to differences in communication between countries, governments, and companies, there were regions and economic sectors where the psychological crisis lasted for years, and there were others where life started again after about a year. In addition, one of the inherent characteristics of recessions is that if they are large enough, the market never fully recovers. Awareness of this fact affects precisely the area with the greatest potential for growth, the premium world, as buyers in this target group are more informed. If this is true of crises in general, it is even more true of the pandemic. Since we are talking about a mental, economic crisis, which has its origins in the private lives of consumers and households – since the virus has threatened and is threatening people’s lives – its psychological effects will be more profound than those of any past economic crisis. But retailers need to be prepared for this and to pull consumers out of the apathy caused by long closures. They must be convinced that they are allowed to spend money, and it is worth it to do so. These processes will only automatically start for a very small proportion of shoppers. Companies know this well, and there has been serious strategic planning over the last year on how to come out of this pit not only losing, but perhaps even improving. But, unfortunately, understanding and accepting the product and service side of the premium world is one thing, but developing the sales side of it is another. Most companies with premium products already perceive that they need something different from the traditional, and it is certain that even “luring” an affluent customer into the store is not a success. The in-store impact will determine whether there is a deal. After all, the most important need of a customer who is recovering from a psychological crisis is to “feel good” while spending their money. Of course, this has always been an important expectation, but it could simply be overcome by “traditional tricks”.
Changing premium needs
The premium business environment – whether it’s a product sale or the venue for a business meeting – has changed, at least in terms of expectations. Traditionally, it has been an area that has required more interior design expertise and the need to be in tune with the most modern design trends to feel comfortable. Although the often over-designed, “over-diluted” environment has tended to arouse resentment from younger premium consumers in recent years, it has been a trend that companies and businesses have followed in order to please traditional consumers. One of the major effects of COVID-19, however, is that younger premium buyers are the most likely to wake up and are the ones who have the greatest opportunity to emerge victorious from this crisis. In other words, their numbers and, therefore, their share of the premium target group will continue to grow. It is therefore not at all irrelevant what they think about the premium environment. Who are they? There are two aspects to defining them. Firstly, in terms of age, we are talking about the Diplomats – born between 1973 and 1984 – and the Ambitionists – born between 1985 and 1996 –i.e. people under 49. During the last crisis, this target group seemed much less important in quantitative terms, because then we were talking about people under 37. Obviously, these 12 years have changed the situation in many ways. The other important aspect is that a large number of these generations have entered the luxury segment, having built up their own careers and developed the background to become premium customers.