If Shoppers Pull Back, It’s Time to Target Premium Buyers

As shoppers cut back on unnecessary expenses, some businesses are promoting their higher-priced goods and services.

And no, that’s not counterintuitive: yes, recessions are times when budget-friendly businesses, like dollar stores, tend to thrive, Jorge A. Guzman, associate professor of business management at Columbia Business School told Inc.com in May. But shifting your focus to a premium customer–one who might not feel the impact of inflation so intensely –may be a smart move for businesses that just can’t cut their prices, even if demand continues to lag. Excluding sales of gasoline and cars, retail sales increased by just 0.7 percent in July, the U.S. Census Bureau announced on August 17–a sign that inflation is still dampening customer demand.

“There was no way I could compete with the big box stores in terms of pricing,” says Jocelyn Ho, founder of the Detroit-based houseplant shop Rare Plant Fairy. Ho recently appeared on stage at a Meta Small Business Studios event in Detroit, where she discussed her unique sales strategies. With a botany degree (which went largely unused in her career in merchandising and quality control at a luxury brand), Ho cultivated a hobby of growing rare houseplants and started her business in the early days of the pandemic by selling plants out of her second bedroom. Today, she operates the business out of a 5,000-square-foot showroom. 

“There are customers who don’t mind spending $1,000 or $2,000 on a couple of plants,” she says. A single plant can fetch a price in the thousands–though Rare Plant Fairy also offers more “affordable luxury” options, like rare philodendrons for $75. While lower-ticket plants allowed Ho to start her business, it’s the higher-end options that really helped her to blossom. “As soon as I had the capital to buy rarer plants that could sell for around $100, that’s when I started to scale,” she says. “If I could sell 100 $10 plants or 10 $1,000 plants, of course I’d rather sell the 10.” In spite of growing economic pressures, Ho says that her high-end customers have kept buying plants. 

There’s something to be said for making a lot with a little: That’s been the approach that Fair Haven, New Jersey-based interior designer Carol Lang has leaned into over the past few months. Lang, who launched her business in 2013, recently rebranded her interior design business to cater primarily to luxury clients, who tend to hire her for more extensive, full-service design work.

Previously, Lang offered a one-day design service, which entailed about two hours of in-person consultation with the client followed by six to eight hours of sourcing and ordering back in her studio. The service, designed as a more accessible option for customers, was set at an “entry-level price point” that was considerably lower than the cost of a full-service project.

But snarled supply chains in the home industry made it more difficult for Lang to continue this service profitably. “In the past six months, the amount of time it’s taken me to service those clients at the level that I would like to hasn’t been balanced with the fee that was right and fair to charge,” she says. She would have had to double or triple the price of this offering to adequately compensate for the more complex logistical challenges that now come with ordering home goods, paint, and more, she says: “And raising the price that substantially, in my core, doesn’t feel right.”

The better option, she says, was to cut this lower-tier service and focus on clients willing to pay for more thorough and intensive design services. By rebranding her business, Lang says she’s been able to restore the income she lost by cutting her one-day service, which previously accounted for about 25 percent of sales. She hopes to restart the lower priced service in the future, but only when it’s once again feasible to do so. 

In the meantime, quality over quantity has kept her business going strong–the same mantra that has guided Erica Pietrzyk, founder of the Detroit-based Pietrzyk Pierogi. Pietrzyk, who also spoke at the Detroit Meta event, sells her Polish dumplings at her brick-and-mortar location, pop-up events, and select grocery stores, including Kroger. They’re a premium product; a package of a dozen pierogi sells for $15-to-$16. One mass-market alternative, the family-owned Mrs. T’s Pierogies, costs about $5 for a dozen. But Pietrzyk says that customers are willing to spend more for better quality. “Some people are looking to get more value out of what they’re spending on, versus having more of something,” she says. 

A premium price point can also help businesses avoid “over-selling,” she adds, which can be detrimental in the long-run. “If your product is someone’s favorite food and you’re constantly out of stock at their grocery store, the customer is going to replace your product with something else,” she says. “So, it can be beneficial for luxury brands to focus more on quality instead of mass-marketing their products.” Pietrzyk admits that her business is currently operating at capacity with its wholesale, storefront, and pop-up offerings. Next, she’s looking to expand her kitchen space so that she can increase production and make it more efficient. 

Pietrzyk anticipates that strong demand will continue. She saw a brief dip in sales when gas prices spiked earlier this summer, as customers likely cut back on their shopping trips. When she started doing more pop-up events to bolster sales around the same time, she saw that customers in the vicinity were more than willing to purchase her pierogi.