Cheap Chic, Meet Lux

Ah, the American Consumer and the Income Effect.

While customers begin to rebound in their spending habits from the Great Recession, the income effect The Fashionomist alluded to earlier has come back with a vengeance - and a twist.

CNN Money reports today that luxury goods are in hot demand (http://money.cnn.com/2011/03/09/pf/consumers_prefer_luxury/index.htm).  This, despite consumers making, on average, less than they were prior to the recession.  Translation:  luxury goods retailers are on cloud nine, with goods selling at 10-12% higher than they were last year.  Glance over at the retail club, however, and you see a sulky bunch, boasting a mere 6% growth over the past year.

The twist?  Those coupon-cutting, discount-seeking, deal-brandishing ingenues born out of the recession haven't quite lost their touch:  discount designer goods are seeing a huge boost, with stores catering to the middle class fashionista bringing in a healthy profit comparable to those of luxury retailers.  So who loses?  Mid-tier retail stores found at your local mall, such as JCPenney's and the like, aren't grinning from ear-to-ear.  It seems that people want to invest in quality goods that last awhile rather than the cheap fast fashion that made Target an industry leader a few years ago.  The shift is on "quality versus quantity," according to Erika Maschmeyer, retail analyst at Robert W. Baird & Co.  So while consumers are much more willing to spend on luxury fashion than they were a few years ago, habits die hard - they won't be willing to part with a pretty penny easily unless they can justify it.  (The Fashionomist would like to remind you that cost-benefit analysis is an everyday phenomena.)

Will mid-tier fashion make a comeback, or will luxury reign supreme?

*The Fashionomist*