In tough times, what's a 'luxury'?


At The Wine Rack, where sales from the $10-and-under shelves are booming, Jocelyn Vorbach says aloud what most of her customers won't: Friendships now have price tags, and dinner guests are gauged.

"There are friends who get the $300 Caymus and there are friends who get the $10 bottle," Vorbach says. "They're saying, 'I like them, but I don't like them THAT much.'"

Even wealthier customers are stocking up on bargain bottles, though they tend to purchase by the case.

"Before, they wouldn't be caught dead with a $9.99 bottle in their presence," she says. "But now they will. As long as I tell them it's a good one."

It's a matter of redefining luxury &

and redefining nonessential &

in an economy whose most consistent product may seem to be dismal daily headlines.

Ultimately, though, "essential" and "luxury" are personal definitions, choices driven not only by how much money remains when the bills are paid but also by our position on the social ladder, our sense of how to stay there and the feelings we get from the things we buy.

The numbers show Americans are already choosing: Starbucks is closing 100 underperforming stores. Sales of trucks, SUVs and roomy sedans are plunging. Retailers are slashing prices to lure shoppers back to the malls. Though 94 percent of us still pay our mortgages on time, some are giving up extras or tapping into savings to do so.

Even in a college town like this with a robust local economy, people are cutting back.

Jim Elliott, a prison chaplain, has taken up hiking over concerts and plays. Homemaker Debbie Copen is clipping coupons. Alice and Joe Thompson are carpooling to work at West Virginia University. Vicki Stemple, a registered nurse, buys only the basics at Sam's Club.

"This car needs a catalytic converter, and it's $800," she says, loading her silver Toyota Matrix with eggs and laundry detergent. "No way. It's not happening."

Notions of what's necessary and what's extra are always changing, says Juliet Schor, a sociologist at Boston College. Dishwashers, air conditioners, washing machines and color TVs were once indulgences. Today, they're basics.

Consumers now may be considering things like clothing labels and coffee brands or cooking at home versus dining out, says Schor, author of "The Overspent American: Upscaling, Downshifting and the New Consumer."

When times are trying, the focus turns to value. The "status premium" people are willing to pay shrinks, whether the product is a high-end lipstick or a gas-guzzling vehicle. And with awareness that neighbors are suffering, conspicuous consumption becomes less comfortable.

"So people postpone purchases. People take on less debt and pay off more debt. They just get more conservative," Schor says. "In the portion of the income ladder where people are doing a lot of discretionary spending, there's a lot more room for cutting back without getting into necessities."

James Twitchell, advertising professor at the University of Florida and author of "Living it Up: America's Love Affair with Luxury," argues most people shop to meet desires, not needs.

"Great chunks of the middle class have the needs down pat, so it's all shopping for emotion," he contends. "Now, instead of trading up, we're trading down. But we're still trading. It's not as if we all of a sudden went into voluntary simplicity."

And what we're buying, he argues, is often the story behind the product.

"Take a purse. You go to Gucci, Fendi, Prada, Louis Vuitton. These are simple objects...," Twitchell says. "But they have a very intense narrative overlay. ... It looks like the same bag, but it's not really a bag at all. It's how someone understands the story of that bag."

It's the reason consumers spend more for a bottle of vodka with great packaging or a clever ad campaign, though the best vodkas have little taste. It's why they buy Fiji or Evian water rather than fill a bottle from the kitchen sink.

"The feeling is, 'I'm saved. I'm special. I'm worth it,'" Twitchell says. "Deep down people know that tap water tastes the same as the bottled stuff."

Conventional wisdom suggests the rich are spared when the economy tanks. But that's wrong, says marketing expert Pamela Danziger, who studies the consumption habits of Americans earning at least $75,000, about 32 million households.

Those "comfortably off," with an average income of about $150,000, "really do the lifting when it comes to consumer goods," she says. "We're talking about the people who shop at Nordstrom's and Macy's and Nieman's and all the small specialty chains. And they feel a great lack of confidence, which is translating into significantly reduced spending."

Danziger, head of Pennsylvania-based Unity Marketing, has three drivers at home and a $900 monthly credit card bill for fuel.

"Something's got to give," she says. "But what gives? My budget for clothes, for shoes."

Danziger's latest quarterly report, the Luxury Consumption Index, found consumer confidence at historic lows, with more than two-thirds of affluent consumers believing the economy is in trouble.

The survey of 1,281 people (average income $155,700, average age 46) showed spending on luxury goods and services fell 20 percent in the second half of 2007.

"The idea that these people aren't watching their money, that's an illusion," Danziger says. "They didn't get to be affluent by throwing their money away. They're very value-conscious."

Fewer than half of those surveyed expect to fare better in the coming 12 months, and some 39 percent plan to spend less this year.

"They have money in the stock market, in mutual funds. The value of their homes is down. So the things that make affluent people feel wealthy are down," Danziger says.

But within her report are bright spots: Affluent Americans say they will continue to travel, though within the U.S. more often than overseas. They will take more short vacations, and businesses like cruise lines that trade in American currency could benefit.

Vacation rentals across North Carolina's Outer Banks are strong for the season ahead, with bookings of Hatteras Realty's 542 beach homes up 12 percent over last year, says president Stewart Couch.

"You can rent a great house, I mean a great house, for $5,000 a week," Couch says, contrasting that value with a luxury hotel suite in Florida that goes for $600 a night.

Steve Nelson, owner of The Inn on Pamlico Sound in Buxton, N.C., says his bookings are ahead of last year &

but he notes his own travel plans have changed. Rather than taking his family to Europe on a weak dollar, Nelson is opting for snowboarding in Colorado, a getaway to Florida and Christmas in the U.S. Virgin Islands.

"If you're traveling outside the dollar zone, you've effectively ceded half your vacation budget," he says.

Hawaii is among the thriving destinations, says Michael Sarka, executive director of the California-based Vacation Rental Managers Association.

"You can get a good value by going to this exotic place, which happens to be a state in the United States," he says.

Colorado Ski Country USA, a trade association representing 26 ski and snowboard resorts, says the weak dollar also appears to be boosting business in the West, with reports of a boom in international travelers.

After years of declines, even U.S. parks &

from Mojave in California to Gettysburg in Pennsylvania &

seem to be enjoying a bounce, says David Barna of the National Park Service in Washington, D.C.

But for Ann Lawson, a West Virginia school teacher driving the fuel-efficient Chevy Aveo she bought last year, vacation now means a visit with family. A beach house rental is a luxury she can no longer afford, along with the cable and Internet service that used to cost her an extra $100 a month.

And truck driver Johnny Shaffer will forgo the king-size bed and the big-screen TV he'd been considering. He already dropped his long-distance service, and last fall decided not to buy a long-coveted pickup. "That," he thinks now, "was a real good decision."

He hopes his income will stabilize soon because, if not, he may have to go back underground, to make money in the coal mines.

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