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Consumers are spending more money on luxury items to 'feel good'

MadaLuxe Group CEO Adam Freede joins Yahoo Finance’s On The Move panel to discuss how the company has seen a surge in consumer spending for luxury retail products.

Video Transcript

JULIE HYMAN: Let's talk about the state of luxury and of fashion during this coronavirus pandemic. We want to bring in to the program Adam Freede. He is MadaLuxe CEO. He's joining us from Los Angeles, California, to talk about what's going on in the luxury market. And, Adam, you would think, with most people at home, although people are starting to go out-- you would think there would be less demand for luxury products-- handbags and whatnot. But what are you seeing?

ADAM FREEDE: Well, good morning, Julie-- or afternoon on the East Coast. It's an interesting question. I think the first piece that I always lean toward right now is if you think of a traditional luxury consumer, the amount of their wallet share that they spend on travel, experiences, restaurants, nightlife-- can't do any of it right now. Course, you can do some, but really it's eliminated. So a disproportionate amount of people's disposable income right now is going toward luxury goods and products that make them feel good, which would be watches and eyewear and handbags and things of the like.

JULIE HYMAN: But if they aren't investing in those fancy trips, going abroad, having a [? bougie ?] vacation house with their friends-- but perhaps all those things are still happening, right? I guess, where would these people be flaunting all of their newly purchased goods?

ADAM FREEDE: It's a good question. I don't think it's necessarily a game of flaunting. I think it's-- people fight for some semblance of normalcy right now, right? So if a lot of your life's been stripped away and you have the ability to buy yourself a new watch or a new car, you're doing it. It makes you feel like life.

I mean, I looked at myself. I probably spend less in this entire pandemic, personally, than I do on a regular month of the year. I'm not doing anything. So I'm spending it on other things to feel good about having some normalcy in my life.

DAN ROBERTS: Adam, Dan Roberts here. To piggy off Melody's point, there is a lot of sharing amid this time, whether it's on Instagram-- maybe its TikTok videos-- about look at the luxury goods I purchased, or, in many cases, look at our beach house where we're quarantining, look at our pool where we're quarantining-- there's a little bit of that showmanship. And I talked about this recently with a guest who is on to discuss how the expensive baseball card collectible business is doing quite well during the pandemic, which maybe isn't so surprising. If you have money, you still want to spend it, pandemic or no pandemic.

But all that said, I do just want to push you a little bit more. I mean, isn't there a little bit of the hesitation-- do you see any of it with your customers to-- even if they're making these purchases, is there a hesitation right now considering the optics of everything going on in the country?

ADAM FREEDE: I think there's a pretty good divide between people and their own moral fiber, if you will. I think, for a lot of us, you don't want to be in a position to flaunt anything right now, 'cause a lot of the country's hurting. A lot of people are hurting. It doesn't feel right.

So I think you have certainly a portion of people that are buying and spending for their own personal enjoyment. And like normal times, you always have people that are buying products or items or things that they can show on their social media or otherwise, because unfortunately, in a lot of ways, it's a show me world and people want their content and their publicity.

JULIE HYMAN: Adam, finally, I want to ask you what some of the most popular products have been right now? And also, are you having any trouble keeping stuff in stock? We've definitely heard about some supply chain issues in other industries.

ADAM FREEDE: So good question. I'll answer the first one first. So product-wise, we've seen a huge amount of demand for sunglasses, optical frames-- people spending a ton of time at home on their computers looking at their screens. We've seen a very big spike, which is a stranger one, but a big spike in timepieces-- and a lot in footwear, particularly sneakers and more casual footwear.

So I think that's one big piece. And then, when you ask about the supply chain, I'll speak to luxury specifically. They're the best brands in the world in terms of strategy. They're so far ahead of their game plans compared to everybody else. They were the first to adjust their supply chain.

So I wouldn't say a problem. I would say a strategic approach to the inventory and what they're making. They're making core prod-- they're going more into core products that live season over season. They're extending the seasonality of some of their products right now. And they're smoothing out that kind of demand versus supply issue to get it back in check as quickly as possible.

JULIE HYMAN: Adam Freede, MadaLuxe CEO. Thanks so much, Adam. Appreciate it.

ADAM FREEDE: Thanks for having me.

 

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