Shift to Alternatives โ€“ Spending in the Pandemic ๐Ÿ›’

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Shift to Alternatives โ€“ Spending in the Pandemic

One major beneficiary of the pandemic was luxury goods, something that was completely unexpected to analysts and economists alike. Although weird, the reasons behind it made sense. The government worked hard to keep disposable income levels as high as possible in the early stages of the pandemic through things like stimulus checks, but this disposable income could not be spent on things like travel for obvious reasons. As a result, consumers turned to luxury goods and merchandise, especially as companies started to utilize the Internet more to sell goods. This led to surging demand for luxury brands, and they came out as big winners until inflation arrived at the party.

Inflation has absolutely destroyed the basis for purchasing luxury goods by attacking disposable income. In the current economic climate, families donโ€™t have an adequate amount of disposable income to sustain elevated levels of spending, instead prioritizing necessities like food and gas. The money that went toward these luxury items is now spent on cheaper alternatives, leading to the rise of these cheaper brands to the detriment of luxury brands. A survey conducted by Morning Consult found that 72 percent of consumers plan to look for alternative brands in this upcoming holiday season because of inflation, and the decline in the stock market is serving as a hit to the middle class and the rich. Spending on credit cards has declined rapidly in the last few months, which is a great indicator of how luxury spending is doing, and brand switches can be as simple as going from a name brand to a private label. Capri Holdings and Ralph Lauren release their earnings this week, and they will provide us with deeper context as to how the industry is really doing.

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I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.

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