How can middle-class families afford to buy so many expensive items?
They trade up and trade down. They trade up in a few categories that are important to them, but in the vast majority of categories they trade down. They’re saying: “For this item I can buy private label and feel just as good as if I bought the name brand.” It’s a budget-balancing exercise. It’s not about profligate spending. It’s about getting emotional satisfaction from the purchase of better-quality goods. Q: You say this behavior is only five years old. What brought it about? A: There are six things contributing to the growth of new luxury. The first is powerful growth in real income. For the top 40% of households, real income doubled in the last 30 years. Secondly, there has been a tremendous gain in home values, increasing families’ net worth. Thirdly, growth in discount shopping at department stores like Wal-Mart (WMT ) and Target (TGT ) has put a windfall into consumers’ pockets, freeing up cash for consumption in other categories. The fourth and most important trend is that all
