The Coronavirus-Era Shopping Response to a Downturn: Trade Up
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The Coronavirus-Era Shopping Response to a Downturn: Trade Up

By Suzanne Kapner
Thu, Dec 17, 2020 6:13amGrey Clock 4 min

Shoppers have a new mantra this year: Treat yourself.

Stuck at home and spending far less on travel, experiences and dining out, consumers are trading up on everything from designer handbags to diamond jewellery, according to industry executives and market-research firms.

The splurging defies the norms of past economic downturns, when consumers traded down to less-expensive items. And it isn’t only the well-off taking part. Less-affluent shoppers are buying items like premium spaghetti sauce or salon-worthy shampoo that was previously out of reach or thought to be not worth the price before the coronavirus pandemic forced people to curtail activities and isolate.

Stephanie Moon bought a Chloé handbag on sale for around A$890 this summer as a reward for signing her first client to her newly launched consulting firm. The 38-year-old San Francisco resident said she doesn’t usually buy designer bags, but felt like she could afford one now.

“I’m saving so much money, because I’m not going anywhere or doing anything,” she said. “Normally, I’d treat myself to a night out with my girlfriends, but that wasn’t an option this year.”

Millions of Americans remain out of work, and jobless claims are at their highest level since September. Yet despite some signs of slowing growth in November, retail spending has been strong relative to the broader economic outlook, boosted by a surge in online shopping. The National Retail Federation predicts holiday sales will rise 3.6% to 5.2%. Shoppers have been loading up on Christmas decorations, which are in short supply, as they try to brighten dreary, pandemic days.

After years of watching consumers, especially young ones, shift their spending to experiences, retailers across the spectrum say they have noticed more splurging on things, from luxury chains like Neiman Marcus Group Inc. and Saks Fifth Avenue to Macy’s Inc. and Signet Jewelers Ltd., owner of the Jared chain.

“Over the past few years, consumers have been making choices, ‘Do I take a trip to Rome or buy a handbag?’ ” said Marc Metrick, the chief executive officer of Saks Fifth Avenue. “This year, the decision has been eliminated.”

Mr Metrick said the biggest burst of demand is from shoppers who crave luxury products but can’t regularly afford them.

Neiman Marcus Chief Executive Geoffroy van Raemdonck said wealthy shoppers are buying more-expensive jewellery, shoes and handbags. “The same customer who would have bought one handbag last year is buying two this year, or is buying a more-expensive bag,” Mr. van Raemdonck said.

Neiman Marcus, which emerged from bankruptcy in September, has also attracted “entry-level” consumers who rarely, if ever, shopped with the luxury chain before Covid-19, he said. To appeal to them, it recently announced a partnership with payments company Affirm to offer instalment payments over six to 36 months at no extra charge.

NPD Group Inc. found that customers across various income levels, from those making less than $25,000 a year to those making more than $100,000 annually, are spending more on retail purchases than they did a year ago. Notably, for lower-income consumers, that spending didn’t dissipate after the stimulus checks ran out this summer.

“The growth rate in retail sales at the low end is higher than at the high end,” said Marshal Cohen, NPD’s chief industry adviser. “Consumers are gilt gifting, sending bigger, better gifts and rewarding themselves.”

Signet’s Jared chain is seeing the most growth at the highest price points, including items costing more than US$5,000, according to Bill Brace, Signet’s chief marketing officer. At Jared, sales of 2-carat loose diamonds and luxury watches are up 30% from Nov. 1 through mid-December, compared with the same period a year ago. Over the same period, sales of 1.25-carat diamond stud earrings have climbed 40% compared with last year.

Mr Brace said sales in those categories are growing at a rate of two to four times Signet’s overall sales growth in the most recent quarter. The company also owns the Kay Jewelers, Zales and Piercing Pagoda chains.

“Women are looking for zoom-worthy jewellery,” Mr Brace said. “They are going bigger on diamond studs.” He added that one Signet customer in Colorado recently bought three special-edition watches that cost more than US$10,000 each. “It’s unusual for someone to buy three at one time,” he said.

Macy’s customers are buying more-expensive jewellery, handbags and sleepwear, with shoppers spending more on each item than they did on similar purchases in the past, according to a spokeswoman. At the company’s Bloomingdale’s chain, affluent customers are snapping up luxury products.

“It’s not just because people are buying the snob apparel,” said Tony Spring, Bloomingdale’s CEO. “People realize you can have really nice things that don’t come close to costing what experiences cost.”

The strong demand has allowed some luxury brands to raise some prices, according to Erwan Rambourg, HSBC Holdings PLC’s global co-head of consumer and retail research. This spring, Louis Vuitton raised prices about 8% globally, while Chanel instituted a roughly 5% price increase, he said.

A Chanel spokesman said the brand, like most other luxury labels, regularly adjusts prices to reflect changes in production costs, raw-material prices and currency fluctuations, and also to help avoid price discrepancies between countries. Louis Vuitton declined to comment.

“Since Covid hit, you’ve had a tendency from consumers to buy less, but buy better,” Mr Rambourg said. “Unlike after 9/11, which made spending on luxury seem vulgar and inappropriate, today there is no stigma.”

Sarah Johnson has been buying Givenchy lipstick, Chanel blush, and Yves Saint Laurent eye shadow, often spending $200 in one shot. Before the pandemic, the 52-year-old New York City resident, who works in public relations, would have been satisfied with drugstore brands.

Now she is considering buying a designer handbag as a holiday gift for herself. “I would never have bought a designer bag in the past, but maybe I’ll use the money I saved for vacation to buy that Balenciaga bag I’ve always wanted,” she said, referring to the brand’s bags, which cost upward of $1,000.

Shoppers of all incomes are also trading up in everyday purchases like bottled water and spaghetti sauce, according to IRI, a market research firm that tracks $1.1 trillion in consumer-products spending.

“We expected low-income shoppers to buy more value brands,” said Krishnakumar Davey, president of IRI’s Strategic Analytics practice. “But they are buying higher-end products.”

Roy Cohen says he is saving $2,000 a month since he stopped paying rent on his Manhattan office in June. The 65-year-old career counsellor cancelled his vacation and is dining out less.

Instead, the East Hampton, N.Y., resident says he is donating more to charity and splurging on things like premium olive oil. In the past, he said he would have bought the generic version at Costco Wholesale Corp.

“I’m very value-oriented,” Mr Cohen said. “Before, I never would have thought expensive olive oil was worth the money.”



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Should AI Have Access to Your Medical Records? What if It Can Save Many Lives?

We asked readers: Is it worth giving up some potential privacy if the public benefit could be great? Here’s what they said.

By DEMETRIA GALLEGOS
Tue, May 28, 2024 4 min

We’re constantly told that one of the potentially biggest benefits of artificial intelligence is in the area of health. By collecting large amounts of data, AI can create all sorts of drugs for diseases that have been resistant to treatment.

But the price of that could be that we have to share more of our medical information. After all, researchers can’t collect large amounts of data if people aren’t willing to part with that data.

We wanted to see where our readers stand on the balance of privacy versus public-health gains as part of our series on ethical dilemmas created by the advent of AI.

Here are the questions we posed…

AI may be able to discover new medical treatments if it can scan large volumes of health records. Should our personal health records be made available for this purpose, if it has the potential to improve or save millions of lives? How would we guard privacy in that case?

…and some of the answers we received. undefined

Rely on nonpartisan overseers

While my own recent experience with a data breach highlights the importance of robust data security, I recognise the potential for AI to revolutionise healthcare. To ensure privacy, I would be more comfortable if an independent, nonpartisan body—overseen by medical professionals, data-security experts, and citizen representatives—managed a secure database.

Anonymity cuts both ways

Yes. Simply sanitise the health records of any identifying information, which is quite doable. Although there is an argument to be made that AI may discover something that an individual needs or wants to know.

Executive-level oversight

I think we can make AI scanning of health records available with strict privacy controls. Create an AI-CEO position at medical facilities with extreme vetting of that individual before hiring them.

Well worth it

This actually sounds like a very GOOD use of AI. There are several methods for anonymising data which would allow for studies over massive cross-sections of the population without compromising individuals’ privacy. The AI would just be doing the same things meta-studies do now, only faster and maybe better.

Human touch

My concern is that the next generations of doctors will rely more heavily, maybe exclusively, on AI and lose the ability or even the desire to respect the art of medicine which demands one-on-one interaction with a patient for discussion and examination (already a dying skill).

Postmortem

People should be able to sign over rights to their complete “anonymised” health record upon death just as they can sign over rights to their organs. Waiting for death for such access does temporarily slow down the pace of such research, but ultimately will make the research better. Data sets will be more complete, too. Before signing over such rights, however, a person would have to be fully informed on how their relatives’ privacy may also be affected.

Pay me or make it free for all

As long as this is open-source and free, they can use my records. I have a problem with people using my data to make a profit without compensation.

Privacy above all

As a free society, we value freedoms and privacy, often over greater utilitarian benefits that could come. AI does not get any greater right to infringe on that liberty than anything else does.

Opt-in only

You should be able to opt in and choose a plan that protects your privacy.

Privacy doesn’t exist anyway

If it is decided to extend human lives indefinitely, then by all means, scan all health records. As for privacy, there is no such thing. All databases, once established, will eventually, if not immediately, be accessed or hacked by both the good and bad guys.

The data’s already out there

I think it should be made available. We already sign our rights for information over to large insurance companies. Making health records in the aggregate available for helping AI spot potential ways to improve medical care makes sense to me.

Overarching benefit

Of course they should be made available. Privacy is no serious concern when the benefits are so huge for so many.

Compensation for breakthroughs

We should be given the choice to release our records and compensated if our particular genome creates a pathway to treatment and medications.

Too risky

I like the idea of improving healthcare by accessing health records. However, as great as that potential is, the risks outweigh it. Access to the information would not be controlled. Too many would see personal opportunity in it for personal gain.

Nothing personal

The personal info should never be available to anyone who is not specifically authorised by the patient to have it. Medical information can be used to deny people employment or licenses!

No guarantee, but go ahead

This should be allowed on an anonymous basis, without question. But how to provide that anonymity?

Anonymously isolating the information is probably easy, but that information probably contains enough information to identify you if someone had access to the data and was strongly motivated. So the answer lies in restricting access to the raw data to trusted individuals.

Take my records, please

As a person with multiple medical conditions taking 28 medications a day, I highly endorse the use of my records. It is an area where I have found AI particularly valuable. With no medical educational background, I find it very helpful when AI describes in layman’s terms both my conditions and medications. In one instance, while interpreting a CT scan, AI noted a growth on my kidney that looked suspiciously like cancer and had not been disclosed to me by any of the four doctors examining the chart.

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