Companies confront ‘trade down’ economy

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US economic data may still be humming along, but consumer companies like Nespresso say they’ve had to try harder to convince shoppers to pony up hundreds of dollars for coffee makers.
“We really know about our consumers that they’re facing pressure and impact on their wallets as gas prices rise,” said Nespresso’s US marketing chief Jessica Padula at the Semafor Business on Luxury event this week. “If we’re in a trade-down economy, which we all recognize we are in,” she said, then you could see a consumer trading down from Nespresso to drip coffee and “we’re somewhat irrationally asking you to pay double.” But if you refashion that frame of reference as trading down from your $8 or $9 coffee shop latte “to make faster, easier and exactly what I want then it’s actually a whole lot less expensive.”
Likewise, Lisa Sequino, president of makeup brands at Estée Lauder, said shoppers’ expectations are rising: It’s no longer enough to make a lipstick that looks nice, so it’s increasingly investing to make its lipsticks both smell and taste good, too. When I asked why I need my lipstick to taste good, Sequino said it’s all about making your purchase feel like a luxurious experience and called up Leonard Lauder’s famous lipstick index. “When the economy is down, lipstick sales go up” because people want that tiny slice of luxury, she said.

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