Reimagining Retail: The shopping habits of high-income consumers and how best to market to them

Audio by Sara Lebow, Sky Canaves, and Paola Flores-Marquez | Nov 20, 2024

Episode Transcript:

Sara Lebow (00:00):

B2B marketing teams rely on eMarketer Media solutions to elevate their thought leadership and build meaningful relationships through exclusive webinars, guides, infographics and more. Visit eMarketer.com/advertise to learn more about our proven approach. Hello, listeners. Today is Wednesday, November 20th. Welcome to Behind the Numbers Reimagining Retail, an eMarketer podcast. This is the show where we talk about how retail collides with every part of our lives. I'm your host, Sara Lebow. Today's episode topic is how high-income consumers shop. Before we jump into that, let's meet today's guests. I have two of our analysts with me. Joining me is Retail podcast regular Sky Canaves. Hey Sky.

Sky Canaves (00:50):

Hey, Sara. It's great to be back.

Sara Lebow (00:51):

Good to have you. Also with us is someone who's on the Retail podcast a little less often, but we love her all the same. Paola Flores-Marquez. Hey Paola.

Paola Flores-Marquez (01:00):

Hi Sarah. Thanks for inviting me.

Sara Lebow (01:02):

Thank you for being here. Okay. Let's kick off this conversation by defining what we're talking about. Paola, you wrote our report on US high-income consumers path to purchase in 2024. In that survey, what is considered a high income shopper?

Paola Flores-Marquez (01:20):

So typically the US Census defines a high-income shopper as the top 20% of the nation's income as someone who's within the top 20% of nation's income earners. And it's typically estimated to be between 130K and 160K in 2024. So we defined it as 150K and up because that's where we saw the greatest differences in the primary survey that we conducted when evaluating 100 and K up and then everyone else.

Sara Lebow (01:47):

Okay, that makes sense. So shoppers who are earning 150K and up.

Paola Flores-Marquez (01:51):

Yes. Yes.

Sara Lebow (01:53):

So let's talk about what that survey found. I know that physical stores are a top channel for discovery among high income shoppers. I'm not surprised by that because 80% of shopping still takes place in stores. What are some other habits or expand on that habit of high-income shoppers?

Paola Flores-Marquez (02:11):

Right. So first I'd like to clarify that this primary survey focused specifically on just new product discovery and new brand discovery. So we're not talking about what they buy on a regular basis or what's habitual, but one of the biggest things to note is that the high-income path to purchase starts in store and it ends online. And so when we think about this group, we want to think about them as they are typically older. They have obviously a very high-income and they have more experience with technology and the internet and handheld devices and online shopping than a lot of their peers may have had. Right. Because they were the ones who were able to get their hands on it early and able to be introduced to it early. So because of that, they tend to be more open to discovering products through digital channels than other groups.

(02:56):

So for example, we see that through digital. They're more willing to find items directly on multi-brand retailer websites like Amazon, which is true of everyone, but to a much higher and more frequent degree. They'll look directly on brand official websites. We have that at 27.5% of high-income shoppers compared to 19.4%. So it's quite a jump. And they're more open to streaming service ads and connected TV, which are successful. But it's quite notable that they seem to trust these venues more.

Sara Lebow (03:25):

Are there anywhere that the high-income shoppers are less likely to discover products than the average consumer?

Paola Flores-Marquez (03:31):

Ooh. I mean, I wouldn't say less likely, but I would say not in digital channels at least. They over-index pretty high on a lot of the digital channels that we track. One thing that was surprising is that they're kind of neck-to-neck with the general population on social media. So it's not a big difference when it comes to social media, but one big difference when we compare them to other high online shoppers like Gen Z is that they much more prefer Instagram than TikTok. So they feel a lot more comfortable exploring and finding products.

Sara Lebow (04:02):

Makes sense. That probably lines up pretty equally with the age range that we might expect high-income earners to be versus Gen Z.

Paola Flores-Marquez (04:11):

Right. Especially when we think about the way that Facebook kind of pushes you to sort of make an Instagram if you have a Facebook account and link them all up. And I mean, as you said with a lot, at this point, we've been on social media for 20 years, so old habits are set.

Sara Lebow (04:25):

So what happens during the high-income path to purchase?

Paola Flores-Marquez (04:29):

Right. So it starts in-store and one of the biggest differentiations from the general population when we think about in-store shopping is that they really love product samples. The product samples are much more influential for them than other groups. Product samples and product demonstrations. And I think I cannot mention this or make this point without mentioning Costco because high-income shoppers love Costco. I mean, who doesn't love Costco?

(04:51):

We talked about this a little bit in the pre-show discussion. But yeah, I mean I think that Costco's a really great example of a very popular avenue where customers are able to sort of see the product, test out the product or taste the product, and it's a reliable bit of quality because the other thing that we found in the survey is that discounts and sales don't have as much of an influence on them, I mean as expected, as quality and price comparison. Right. So when we talk about this group, they have more flexibility in their budget, which means that they're able to take their time in figuring out whether or not they actually want to invest in a product that's going to be a long-term product like furniture.

Sara Lebow (05:31):

Yeah. They don't have the same urgency. Sky, is this what you've found in your research?

Sky Canaves (05:36):

Yeah, I thought it was interesting from the survey that when we looked at the general population, that in-store discovery most frequently led to an immediate purchase in-store, but with the higher-income shoppers, they know they can buy it online and get it conveniently later once they've had a chance to think about it. So maybe they are a more high consideration. And on that point of sampling and how important it is, and it's not just food, but I think there are opportunities in beauty products, healthcare products, household products. There are so many categories where a package sample can be offered to a customer to use at home and try at home maybe with a coupon.

(06:16):

And one touch I've really appreciated, and I'm surprised by how rare it is, is getting a sample in an order like a curbside or home delivery grocery order. It's happened a few times with a little note or coupon. And it does have the ability to surprise and delight and possibly inspire later purchase, even a digital coupon or a QR code that could then spur an online purchase. But I think those are definitely ways to appeal to a higher income shopper that isn't just looking for the discount but maybe still wants to try something new and is really looking for quality above all in most categories.

Paola Flores-Marquez (06:54):

I've gotten not a product sample, but yeah, I ordered clothing, I think it was Old Navy once and I mean I love Old Navy in general, but they threw in an extra pair of shorts that I hadn't ordered.

Sara Lebow (06:54):

That's nice.

Paola Flores-Marquez (07:06):

And I never would've bought myself, and it was kind of like a, here try this. And now I'm like, wow, these are surprisingly well fitting and I think, yes, I will come back and buy more of these. Thank you.

Sara Lebow (07:14):

This just happened to me at the Glossier store. We could do a whole episode on the Glossier store experience, which is very unique, but they threw in a whole bunch of swatches, which is great, slightly wasteful because they threw them in, in every skin color, which makes sense. They're not going to match them to me. But now if anyone needs a whole bunch of different swatches of Glossier products, I have them.

Paola Flores-Marquez (07:36):

This is a little bit of a side note, but I'm writing the mom's reports now and wrapping up the mothers 2024 report, and I interviewed a woman who works heavily in marketing to mothers, and she was saying that one of the ways that people are tapping networks of moms is to give them all of those samples the way they did to you, and then they hand them out to their friends that they know are relevant,-

Sara Lebow (07:55):

Oh, like a Tupperware party.

Paola Flores-Marquez (07:56):

Exactly, yes. And so that way they're spreading the word and it's much more organic and yeah, it builds reputation.

Sara Lebow (08:04):

I don't want to go down this tangent, but spreading the word, entering the group chat, word-of-mouth marketing is, I feel like a huge trend right now.

Paola Flores-Marquez (08:15):

Yeah.

Sara Lebow (08:16):

But while we're talking about marketing tactics, we talked about sampling. I mean, we know all this data now on the high-income path to purchase. How do you market to a high-income shopper? How do you market expensive versus inexpensive products to that shopper?

Paola Flores-Marquez (08:32):

Sky, back me up on this because this is the assessment I made based on the data that I saw, but right, so because they don't feel pressured to make an immediate purchase, you really want to make sure and give them opportunity to confirm the quality of whatever you're selling. And yeah, that includes giving them the opportunity to see the product in some physical way, but it's also about making sure that all of the data is available on your website in an easy way. Right. And we're not just talking a generic sort of like click out and a pop-up window, and it gives you standard details that may or may not apply to the product you're looking for.

(09:03):

We're talking about making sure that the measurements are easy to find, the type of materials easy to find, that you're encouraging reviewers when they leave a review to sort of input how they used it or their own measurements because people cross-reference that a lot. So it's making sure that the website is both easy to navigate and that all of the information is not hidden because when you hide it, it kind of makes the consumer be like, what's wrong with it? What am I missing?

Sara Lebow (09:27):

Yeah, I just went through this exact path to purchase with a Costco TV. Bought a TV from Costco because they have the longest warranty I could find on TVs. Needed a TV because mine was broken. Now I did get a budget TV, I'll admit, but I researched the TV. Then I don't live near a Costco, so my parents were at Costco. I had them look at the TV I was interested in, and then I ended up ordering it online. So this sort of exact path to purchase.

Paola Flores-Marquez (09:55):

Yeah. And I think a lot of us do it, but it's one of the number one things that whenever high-income shoppers take a step back and they're like, do I really want this? I worked on a really cool graphic image with Emma that tracks the path to purchase of high-income shoppers based on the rank of their responses. And yeah, immediately when they find a product in store, the first thing they do is they look up the brand on a search engine. They want to compare it and they want to see how it stands up and can they find it cheaper and should they wait, everything.

Sara Lebow (10:22):

Something that I think should be standing out to marketers here is that when it comes to high-income shoppers, you may be looking at a longer conversion window. So you need to be accounting for that in your metrics. If you're not seeing an immediate click in conversion, that doesn't mean that your marketing isn't working. It means that consideration is happening and you need to be accounting for that.

Sky Canaves (10:42):

Right. And it starts with understanding the channels where the higher income shopper is discovering products. In addition to the store, we talk about the digital channels, the streaming video and CTV are growing in importance. Social engagement in online communities I thought was important. For example, Reddit is now drawing more brand and advertiser attention.

Sara Lebow (11:04):

That's where I researched that TV.

Sky Canaves (11:06):

Exactly, because there are people always talking about everything you can find. You can go to Costco and the Costco Subreddit and hear about people's experiences, what products they're discovering and really engage and ask questions and get very direct feedback. But then I thought it was also interesting that when a lot of the high-income consumers are discovering products on brand official channels, instead of researching on a search engine, they then go multi-brand to the multi-brand retailer, which I think in a lot of cases is Amazon,-

Paola Flores-Marquez (11:37):

Yeah.

Sky Canaves (11:37):

Maybe to see if they can get it fast and free with free returns because nowadays fewer brands are able to offer free shipping with no minimums. The thresholds are getting higher and returns policies are becoming more stringent, and Amazon still offers that pretty conveniently for consumers. In a separate survey we ran earlier this year on marketplace shoppers, we also asked about Amazon, and you can really see that there's a skew towards higher income shoppers shopping more frequently on Amazon. We had asked specifically about frequency of shopping on different platforms, and it topped out at 30 times or more over the previous six months because that's your regular weekly shopper and the high-income, 150K plus demographic was more than twice as likely as average to be shopping weekly on Amazon. About 22% were power users of Amazon, and then they spend more and they spend more on categories that Amazon is really prioritizing growth in like beauty and health and personal care.

Sara Lebow (12:45):

Do you know what percent of them were shopping weekly on Amazon?

Sky Canaves (12:48):

Overall, it was less than 10%,-

Sara Lebow (12:49):

Okay.

Sky Canaves (12:51):

Of the general population, but among the high-income consumers, it was more than 22%.

Sara Lebow (12:56):

That's wild. That's so often, and obviously we should acknowledge that we're talking about a huge range here. There's a big range in and above 150,000. And also high-income does not necessarily indicate a high net worth. They almost have very little to do with each other, but that's so much shopping on Amazon.

Sky Canaves (13:14):

Right. Right. One thing to keep in mind is that when we say high-income, we're only counting income. We're not counting assets or debt, so yes.

Sara Lebow (13:21):

Yeah. So we've been talking about this high-income shopper as this older shopper who's established in their career, but there are plenty of Gen Zers out there that are probably already at that 150K income, and there are certainly many that are going to hit that within the next five to 10 years. What do you think the high income Gen Z shopper will look like?

Paola Flores-Marquez (13:48):

Oh. I mean, I think it's going to definitely, it's already revolving around social media. Right. That's going to continue to play a big, big role, especially as Gen Alpha enters and gets online, and I think that there is more risk taking when it comes to Gen Z shoppers. I don't think the conversion is as long. Right. If they feel confident and they trust the source, they're willing to buy it.

Sara Lebow (14:10):

I just did this with an expensive item where from a marketer standpoint, my conversion was zero days, but my own consideration was a few months. My suitcase broke. I borrowed a friend's suitcase. I really liked it. I did not bother looking it up or buying it, but now I have a trip coming up, so I just searched that suitcase and bought it from the brand website. That's really hard from a marketer standpoint to monitor at all how that happened. It's that word of mouth again.

Paola Flores-Marquez (14:36):

Yeah, I think, and it's also like you see it on social media once and you're like, okay, whatever. And then you see it again and you're like, okay, now I know what it is. And then by the time it's actually inception into your mind later, you're like, oh, I know where I can get this product. So yeah.

Sky Canaves (14:50):

I think it's going to come down to preparing for much higher levels of digital savvy in consumers because we have higher income consumers who tend to skew older, who are already very digitally savvy, researching, discovering products across channels, and we see similar behaviors in Gen Z, and it's going to be hard to pull the wool over their eyes because they're looking for product quality. They're already well versed in dupes and looking for the best possible quality at the lowest possible price, and they're going to continue to carry that over into their spending. Even as they spend more, they're not going to be willing to accept lower quality or same quality for much higher prices.

Sara Lebow (15:33):

Yeah. I expect high highs and low lows. I can see high income Gen Zers splurging on expensive items, for example, expensive TVs that are high quality since gaming is so popular in that generation. But I can also see for any item where they don't think it's necessary to splurge, really looking for those bottom of the barrel prices because at this point, they're used to seeing the TikTok Shop, the Temu, the Shein prices. Now the Amazon, what is Amazon calling their Temu product?

Sky Canaves (16:02):

Haul. Amazon Haul. Very much inspired by Temu and Shein hauls, right?

Sara Lebow (16:07):

So they're used to seeing those prices. That's what Gen Z considers a low price. That's what many of us might consider an impossible price, but that's what they expect to see.

Paola Flores-Marquez (16:17):

Yeah. And they're not just, well-versed in looking out for these deals or these short-term low prices, but they're also looking at patterns. Right. I went to Costco the other, Costco again, sorry, but I went to Costco with a friend the other day and she was looking at the prices and she pointed out this little asterisk on the pricing sign, and she was like, "That means it's going to go on sale soon, so we should just come back in a week and come look for this." So they're learning, like because of the internet and their ability to research and their comfortability in researching, they're learning how these systems work. Right. And they're using it to their advantage.

Sky Canaves (16:49):

They know all the hacks for best pricing and deals and discounts and when to buy products and when to wait. And so,-

Sara Lebow (16:56):

This is Reddit again. This is the importance of Reddit again.

Paola Flores-Marquez (16:59):

1000%. Yes.

Sara Lebow (17:01):

Wow. We sort of went a direction I wasn't expecting us to go, like leaning into word of mouth and Reddit, but I'm convinced those are very important for marketing to high-income consumers.

Sky Canaves (17:12):

Sure. And we see this right now, there's a bit of a crisis in the luxury fashion sector because prices have gone up so much over the last couple of years from some brands that consumers are no longer willing to pay. They don't see why a handbag should be 70% more than it was five years ago when it's essentially the same product. There's no new quality, no new innovation, and that's in addition to other economic factors, is hitting the luxury sector pretty hard.

Paola Flores-Marquez (17:41):

That's the first thing I thought of when you said that Sky, is that luxury handbags are one of the specific examples I've seen on a Subreddit that was like, does anybody feel like this is worth it anymore? I feel like it doesn't last as long, or the quality's going down and if I can get a good enough dupe, why would I bother?

Sara Lebow (17:58):

Or a used one because then you have sort of the vintage appeal and also it's a handbag. So for folks that may be hesitant to wear vintage clothing or vintage shoes, it doesn't have that same sort of used,-

Paola Flores-Marquez (18:11):

Yeah. And it promotes sustainability.

Sara Lebow (18:13):

Yeah.

Sky Canaves (18:13):

Right.

Paola Flores-Marquez (18:14):

Which is also a big deal, especially right now.

Sara Lebow (18:15):

Okay. We've effectively hit almost every point of conversation. That puts us at time. Any final takeaways?

Paola Flores-Marquez (18:24):

I guess one thing to note is that just because high-income consumers have a more flexible budget, doesn't mean they don't want to save money. And the key takeaway is to convince them that your product is worth investing as much as they need to in it.

Sara Lebow (18:37):

Sky, anything to add?

Sky Canaves (18:38):

Yeah, I think value is very important to high-income consumers, so is convenience, and that's why they turn to Amazon so frequently. And especially for those categories like beauty, and health, and personal care, premium brands should really be looking at having some presence on the platform, especially as it's offering more opportunities for these brands to reach and target consumers through its advertising offerings.

Sara Lebow (19:04):

Okay. On that note, that is all we have time for, so thank you for being here, Pao.

Paola Flores-Marquez (19:09):

Thank you so much, Sara.

Sara Lebow (19:11):

And thank you Sky.

Sky Canaves (19:12):

Thanks again, Sara.

Sara Lebow (19:13):

Thank you to our listeners and to Victoria who edits the podcast and who we value immensely. We'll be back next Wednesday with another episode of Reimagining Retail, an eMarketer podcast, and tomorrow join Marcus for another episode of the Behind the Numbers daily.