The NPD Group Offers Insights into Handbag Market

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New York—“Basics maintain volume but innovation drives growth.”

Such was the main message underscoring a lively presentation of “Inside the Handbag Market,” given by Marshal Cohen, chief industry analyst of The NPD Group, Inc. to a group of more than 60 executives from leading handbag companies and retailers. The special presentation, which was co-sponsored by Accessories Magazine and FASA, was held Thursday at FASA’s new offices on West 25th Street.

One point Cohen drove home is to not just accept government numbers and sales reports, but to carefully dissect what they mean and put them in broader context. “I don’t think we’re in a ‘new economy’ like everyone says, but rather a new area of ‘calculated consumption,’” says Cohen. “This calculated consumption consumer is constantly asking the question: if I buy this today, what am I not buying tomorrow?”

Another area to watch is not just who is buying handbags, but who is wearing them. A look at the chart on the right shows that while the biggest buying group is ages 45 to 54, the largest wearing group is 35 to 44 year olds, indicating that women are buying bags as gifts.

Cohen also advised handbag retailers and vendors to take advantage of 2011’s brand renaissance, as consumers turn to recognizable, tried-n-true, trusted brands. “Handbags are experiencing growth in the bridge category, and have the opportunity to play up that designer card,” says Cohen. Consumers don’t necessarily care about brand heritage in apparel, where they’re more price conscious, but they do in handbags. “Yet companies aren’t taking advantage of this fact. It’s the perfect time to exploit this brand renaissance.”

Are You Maximizing Online?

Cohen also pointed out that online sales are a missed opportunity in handbags. Online growth continues to outpace other traditional outlets, with market share improving by 8 points (5%), but the handbag industry isn’t keeping up, he noted.

To drive home the point–and show audience members that their preconceived notions of the online market might be incorrect–Cohen had executives to text their answers to the multiple choice question from their mobile phones: “How much handbag business is done online?” The correct answer was 13% but most audience members answered 19%, showing that handbags sales online aren’t as great as many in the industry believe.

“Handbags should be an easy sell online as there are no sizing or fit issues,” says Cohen. Considering footwear and jeans represent 17% and 12% online market share, respectively, handbags should be much higher than their 13%, which has remained flat for two years. Again, recognize potential.

Beyond online, the industry also needs to analyze retail market share shifts. “Department stores lost 5% market share in two years, and specialty stores grew 5%–essentially taking that department store business,” says Cohen. “Ask yourself: how do I divest my department store dependency?”

Another result of that shift? While average selling price of handbags at all retail outlets decreased by 1%, and decreased 8% at department stores, it actually increased 31% at specialty stores and increased 14% online. “Prices aren’t all falling across the board and consumers are obviously willing to spend more for the right product.”

Entice with Dramatic Change

Handbags need to create drama to keep consumer interest high and spark growth. Cohen used the footwear analogy of sky-high heels and dramatic flats for sparking consumer interest and showing them what’s missing from their wardrobe.

In another audience participation poll, most didn’t realize that 40% of handbags were purchased on impulse. “Retailers don’t merchandise the handbag department for impulse but rather for destination and that’s a mistake. You need to plan for impulse and planned purchases and you must drive impulse into the equation with color, eye-popping display and making bags more accessible to where she’s walking by,” says Cohen.

“In our research, handbags don’t have the price resistance that apparel does.” Cohen also faulted retailers for pushing too many black bags; a category that has declined in growth. “She wants color. And even if she doesn’t buy it, it will still entice her over to the department.”

Handbag marketers must also make sure they’re hitting the categories that are trending. For example, minibags are surging in handbag category market share but some companies are too entrenched in the traditional standby, satchels. “Look at what’s selling and make sure you’re hitting those categories,” Cohen advised.

Need more information and insights into the handbag market? The NPD Group, Inc. offers targeted point-of-sale and consumer research that it can customize to your needs. Packages start at $5,000 and up.

“Our client teams work closely with each company to understand their distinct business needs and then scope and develop solutions from our unique combination of information sources, NPD point-of-sale and consumer tracking data, as well as knowledge compiled from working with many leading retailers and manufacturers,” says Mike Kuhl, senior vice president fashion at NPD.

For additional information about The NPD Group, Inc.’s services in handbags and other accessories, contact Nancy Russo, vice president of business development at 516-625-2263.

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