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“Trading
Up”: What Does It Mean for the Industries NPD Monitors?
In a recent meeting of NPD’s team of Industry Experts,
a common theme emerged: as consumers begin to spend again, many
are “trading up” from value prices to higher-priced
products than they would have chosen in the past. As a result,
these pricier items are driving growth in many of the industries
NPD tracks. What impact will “trading up” have in
your segment of the marketplace?
“Trading up” in consumer technology categories is
a long-standing and well-established consumer behavior. The
PC market provides a great example of consumers’ tendency
to trade up. “Build your own” Web sites or in-store
“configurators” allow the customer to select the
components for a PC. Manufacturers inevitably get a higher average
price as the customer chooses incremental upgrades as he builds
his computer. For technology categories where there is no opportunity
to create a custom product, the digital world offers improved
“speeds and feeds” to entice consumers to trade
up. In a market obsessed with falling prices and opening price
point merchandise, the key to profitability is delivering increased
perceived value in step-up products and technologies.
Stephen Baker
NPD Techworld Director of Industry Analysis
While the overall average price of a toy fell in 2003, to $6.05,
down from $6.39 in 2002, we saw average retail prices increase
in several of the industry’s top-growth segments. This
indicates that it was higher-priced items that drove growth
in toys last year. For example, the average price of a fashion
doll increased by $1.77 over 2002’s average price, driven
by large gift items and gift sets. Other categories where recent
growth has been driven by higher price points are mini-dolls
& accessories and spinning tops, where newly introduced
remote-control tops contributed to increased sales and higher
retailer prices in the category.
Christina Charasse
NPD Funworld Industry Expert
When it comes to the concept of “trading up” in
the food industry, there’s generally a “trading
down” associated with it. Food and beverage expenditures
are a zero sum game. If consumers trade up to more expensive
foods or beverages, then they also tend to trade down somewhere
else to keep their food budgets in check. For example, Americans
are now visiting upscale casual dining restaurants and quick-service
restaurants more often, so mid–priced restaurants are
getting squeezed in this shift. Trading up is also apparent
in the premium coffee arena: Americans ordering more expensive
coffee beverages these days, but overall we’re ordering
coffee less frequently than we did 10 years ago. There always
seems to be a movement to higher priced foods and beverages,
but the reality is that for more than 60 years U.S. consumers
have not allowed their food budgets to rise faster than their
incomes do.
Harry Balzer
Vice President, NPD Foodworld
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Copyright The NPD Group, Inc. 2004. All rights reserved.
Contents may not be reproduced in whole or in part without permission from The
NPD Group, Inc.
TRADEMARKS NOTICE:
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trademarks or service marks of The NPD Group:
Aftermarket Industry Monitor, BeautyTrends , CREST, FragranceTrack,
National Eating Trends, NET, npd.com, NPD Insights, NPD Fashionworld,
NPD Foodworld, npdfoodworld.com, NPD Funworld, NPD Techworld, NPD Houseworld,
Solution Folders, NPD Sports Tracking Europe.
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