The Coronavirus-Era Shopping Response to a Downturn: Trade Up

Shoppers have a new mantra this year: Treat yourself.

Stuck at home and spending far less on travel, experiences and dining out, consumers are trading up on everything from designer handbags to diamond jewellery, according to industry executives and market-research firms.

The splurging defies the norms of past economic downturns, when consumers traded down to less-expensive items. And it isn’t only the well-off taking part. Less-affluent shoppers are buying items like premium spaghetti sauce or salon-worthy shampoo that was previously out of reach or thought to be not worth the price before the coronavirus pandemic forced people to curtail activities and isolate.

Stephanie Moon bought a Chloé handbag on sale for around A$890 this summer as a reward for signing her first client to her newly launched consulting firm. The 38-year-old San Francisco resident said she doesn’t usually buy designer bags, but felt like she could afford one now.

“I’m saving so much money, because I’m not going anywhere or doing anything,” she said. “Normally, I’d treat myself to a night out with my girlfriends, but that wasn’t an option this year.”

Millions of Americans remain out of work, and jobless claims are at their highest level since September. Yet despite some signs of slowing growth in November, retail spending has been strong relative to the broader economic outlook, boosted by a surge in online shopping. The National Retail Federation predicts holiday sales will rise 3.6% to 5.2%. Shoppers have been loading up on Christmas decorations, which are in short supply, as they try to brighten dreary, pandemic days.

After years of watching consumers, especially young ones, shift their spending to experiences, retailers across the spectrum say they have noticed more splurging on things, from luxury chains like Neiman Marcus Group Inc. and Saks Fifth Avenue to Macy’s Inc. and Signet Jewelers Ltd., owner of the Jared chain.

“Over the past few years, consumers have been making choices, ‘Do I take a trip to Rome or buy a handbag?’ ” said Marc Metrick, the chief executive officer of Saks Fifth Avenue. “This year, the decision has been eliminated.”

Mr Metrick said the biggest burst of demand is from shoppers who crave luxury products but can’t regularly afford them.

Neiman Marcus Chief Executive Geoffroy van Raemdonck said wealthy shoppers are buying more-expensive jewellery, shoes and handbags. “The same customer who would have bought one handbag last year is buying two this year, or is buying a more-expensive bag,” Mr. van Raemdonck said.

Neiman Marcus, which emerged from bankruptcy in September, has also attracted “entry-level” consumers who rarely, if ever, shopped with the luxury chain before Covid-19, he said. To appeal to them, it recently announced a partnership with payments company Affirm to offer instalment payments over six to 36 months at no extra charge.

NPD Group Inc. found that customers across various income levels, from those making less than $25,000 a year to those making more than $100,000 annually, are spending more on retail purchases than they did a year ago. Notably, for lower-income consumers, that spending didn’t dissipate after the stimulus checks ran out this summer.

“The growth rate in retail sales at the low end is higher than at the high end,” said Marshal Cohen, NPD’s chief industry adviser. “Consumers are gilt gifting, sending bigger, better gifts and rewarding themselves.”

Signet’s Jared chain is seeing the most growth at the highest price points, including items costing more than US$5,000, according to Bill Brace, Signet’s chief marketing officer. At Jared, sales of 2-carat loose diamonds and luxury watches are up 30% from Nov. 1 through mid-December, compared with the same period a year ago. Over the same period, sales of 1.25-carat diamond stud earrings have climbed 40% compared with last year.

Mr Brace said sales in those categories are growing at a rate of two to four times Signet’s overall sales growth in the most recent quarter. The company also owns the Kay Jewelers, Zales and Piercing Pagoda chains.

“Women are looking for zoom-worthy jewellery,” Mr Brace said. “They are going bigger on diamond studs.” He added that one Signet customer in Colorado recently bought three special-edition watches that cost more than US$10,000 each. “It’s unusual for someone to buy three at one time,” he said.

Macy’s customers are buying more-expensive jewellery, handbags and sleepwear, with shoppers spending more on each item than they did on similar purchases in the past, according to a spokeswoman. At the company’s Bloomingdale’s chain, affluent customers are snapping up luxury products.

“It’s not just because people are buying the snob apparel,” said Tony Spring, Bloomingdale’s CEO. “People realize you can have really nice things that don’t come close to costing what experiences cost.”

The strong demand has allowed some luxury brands to raise some prices, according to Erwan Rambourg, HSBC Holdings PLC’s global co-head of consumer and retail research. This spring, Louis Vuitton raised prices about 8% globally, while Chanel instituted a roughly 5% price increase, he said.

A Chanel spokesman said the brand, like most other luxury labels, regularly adjusts prices to reflect changes in production costs, raw-material prices and currency fluctuations, and also to help avoid price discrepancies between countries. Louis Vuitton declined to comment.

“Since Covid hit, you’ve had a tendency from consumers to buy less, but buy better,” Mr Rambourg said. “Unlike after 9/11, which made spending on luxury seem vulgar and inappropriate, today there is no stigma.”

Sarah Johnson has been buying Givenchy lipstick, Chanel blush, and Yves Saint Laurent eye shadow, often spending $200 in one shot. Before the pandemic, the 52-year-old New York City resident, who works in public relations, would have been satisfied with drugstore brands.

Now she is considering buying a designer handbag as a holiday gift for herself. “I would never have bought a designer bag in the past, but maybe I’ll use the money I saved for vacation to buy that Balenciaga bag I’ve always wanted,” she said, referring to the brand’s bags, which cost upward of $1,000.

Shoppers of all incomes are also trading up in everyday purchases like bottled water and spaghetti sauce, according to IRI, a market research firm that tracks $1.1 trillion in consumer-products spending.

“We expected low-income shoppers to buy more value brands,” said Krishnakumar Davey, president of IRI’s Strategic Analytics practice. “But they are buying higher-end products.”

Roy Cohen says he is saving $2,000 a month since he stopped paying rent on his Manhattan office in June. The 65-year-old career counsellor cancelled his vacation and is dining out less.

Instead, the East Hampton, N.Y., resident says he is donating more to charity and splurging on things like premium olive oil. In the past, he said he would have bought the generic version at Costco Wholesale Corp.

“I’m very value-oriented,” Mr Cohen said. “Before, I never would have thought expensive olive oil was worth the money.”

A wave of corporate warnings and technical disclosures has flooded the media, with headlines worrying over “swarms” of rogue artificial-intelligence agents launching “unprecedented” cyberattacks, outsmarting their makers, and inching toward a terrifying autonomy. The most revealing part of this narrative isn’t what the software did. It’s who is telling the story—and why. When corporate leaders publicly insist that the systems they financed, engineered and deployed are suddenly beyond their power to contain, skepticism isn’t only healthy; it is essential.

For years, Silicon Valley has drawn scrutiny from civil society and global regulators over tangible harms such as youth mental health deterioration and systematic privacy violations. Today, industry figures seem to be trying to change that public image. Loudly blowing the whistle on their own systems—just as two of the leading companies were preparing for massive initial public offerings—lets AI executives position themselves as a new generation of leaders who have come to terms with their societal responsibilities. They seem to want us to believe that they no longer want to “move fast and break things” but will instead stand as vigilant guardians between humanity and a technological apocalypse.

There is one glaring problem: Software doesn’t rebel. A mathematical model possesses neither intent, malice nor the will to defy its creators, let alone extinguish our species. AI is a human artifact, engineered for profit.

When an agentic model in an evaluation sandbox connects to an unauthorized server or executes an exploit, it hasn’t staged a coup. It has tried to meet the human-defined objectives set out before it through a path its designers failed to constrain. It’s the digital equivalent of the King Midas myth, in which the king’s ill-defined wish turns even his food and drink into gold.

That powerful experimental models were able to discover novel vulnerabilities and breach external systems isn’t a sign of a dangerous superintelligence but of human error or negligence. There is no sentient actor lurking in the weights to be reasoned with, feared or pacified. There are only human software engineers, product managers and corporate boards deciding which guardrails are worth the latency cost and which permissions can be skipped in the race to market.

Policymakers and voters need to resist AI exceptionalism. In any other discipline—from civil engineering to pharmaceuticals—courts and regulators treat a system failure as evidence of bad product design and inadequate safety testing. If an aircraft crashes, we focus on finding the engineering defect, correcting it, and enforcing established liability standards for the damage created.

By leaning on an anthropomorphic narrative, Silicon Valley attempts to repackage its specific human choices that led to experimental, powerful models behaving unexpectedly during tests as an existential peril. Elevating the issue to a cosmic scale leaves the public paralyzed and takes ordinary product accountability off the table.

In the cutthroat race for venture capital and market dominance, building guardrails slows down deployment. Grandstanding about uncontrollable power costs nothing and generates billions of dollars in free publicity, justifying stock prices, all while cultivating an aura of technological capability not only to build the frontier but also ultimately to rein it in.

Governments need to recognize regulatory capture when it stares them in the face. Tech leaders’ strategy looks transparent: Alarm Washington and Brussels into creating a regime in which only trillion-dollar incumbents with fully staffed compliance and safety departments can legally operate. By sitting at the policymakers’ tables before anyone else, these companies can help draft rules digging an impassable moat protecting them from open-source developers and upstart competitors, domestic or international. The real danger is in further concentrating the tech industry into the hands of only a few companies with deep pockets.

Beijing and Washington have brushed off those tech leaders’ calls, albeit for very different reasons. Chinese state media dismissed them as part of the “Cold War playbook” and intended to preserve U.S. dominance. Xi Jinping argued for exactly the opposite at the Brics Summit on Sept. 12, calling on Brics countries to “strengthen cooperation in the field of AI, encourage open source, openness, collaboration and sharing, and break new grounds and scale new heights.” President Trump, steeped in a doctrine of unfettered capitalism and technological supremacy, called fears that AI could destroy humanity a “hoax.” Vice President JD Vance warned that AI companies “begging the government to regulate them” looked like a “Trojan Horse.”

Striving to pursue its “European way” on AI and assert regulatory leadership, Europe, by contrast, welcomed the call. European Union President Ursula von der Leyen made this clear at the State of the EU speech last Wednesday and announced that the EU will invite “the main frontier labs for a discussion on how we can support ongoing industry efforts to pace the frontier.”

Europe has been here before. In an effort to lead global regulation and react to fears borne from ChatGPT, Europe rushed its landmark AI Act into law in 2024. Already the world’s most restrictive rulebook, the framework quickly proved too broad and complex to enforce. Stalled by implementation delays and concerns about European competitiveness, the EU postponed the law’s full rollout, leaving regulations uncertain.

AI should be regulated—risks exist and should be taken seriously. But governments need to act based on available evidence and verified facts, not corporate PR panic, the views of industry insiders, or the desire for quick political wins. The greatest danger facing society isn’t that software will awaken and overthrow its human masters. It is that we will allow the creators of the software to abdicate human responsibility for the systems they choose to build and help them pull up the ladder to market access behind them.

The Coronavirus-Era Shopping Response to a Downturn: Trade Up

AI doesn’t rebel—people design, deploy and profit from it. The real danger lies in allowing tech companies to escape accountability while shaping regulations that protect their dominance.