This year, opposites attract holiday shoppers

"This is going to be an `A' Christmas for the new luxury companies and for the value providers, and a `D' Christmas for the companies caught in the middle -- the companies who are neither the best nor the least expensive," predicted Michael J. Silverstein, senior vice president at the Boston Consulting Group and leader of its global consumer and retail practice.

The reason is what Silverstein and his colleagues have defined as the biggest trend reshaping the consumer landscape: trading up.

According to their research, 96 percent of consumers trade up, or spend more, for quality products that engage them emotionally. It's as much a matter of psychology as income. A construction worker on a tight budget may splurge on a $3,000 set of Callaway golf clubs, just as an otherwise frugal real estate developer might spring for a BMW. Anyone who has passed a Dunkin' Donuts to duck into a Starbucks recognizes the phenomenon.

For brands that have smartly positioned themselves, from Victoria's Secret to Williams-Sonoma, trading up is paying off. "'It's a $400 billion business today, and it's growing to $1 trillion by the end of the decade," said Silverstein. He explores the trend in a book published this fall, "Trading Up: The New American Luxury," written with Neil Fiske, an ex-colleague who is now chief executive at Bath & Body Works.

Unlike "old luxury" goods, often out of the price range of middle-class consumers, "new luxury" goods offer superior technical or functional benefits but are priced within reach of a mass market. Silverstein divides them into four categories: taking care of me (health care, spas, in-home gourmet food, linen); connecting (clothing, dining out, home theater, cruises); questing (travel, cars, sports equipment, computers); and, individual style (watches, shoes, jewelry, lingerie).

Women, who have accounted for all the growth in real family income in the past 30 years, tend to be the chief decision-makers in family buying, Silverstein noted. "Eighty-five percent of new luxury goods are purchased by women," he said. "This is the real women's movement. It's a consumer movement."

The movement has been fed by several factors: low interest rates and the refinancing boom, the spread of specialty retailing, and the proliferation of discounters like Wal-Mart, Costco, Target, and Home Depot that now save Americans about $100 million annually on value products, Silverstein said. "That savings is not saved, it's consumed," he said. "And it's consumed on the new luxury goods."

Such a dynamic may be real, but it's not the only trend to be seen in the shopping malls, suggested Duncan Simester, a marketing professor at MIT's Sloan School of Management. Retailer strategy can play as important a role as consumer taste, he said.

Simester said he doubted, for instance, that discounting will be a significant factor in Christmas sales this year. "There's really aggressive discounting when demand is low," he said. "You're not going to see discounting to the extent that you did last year, when retailers' expectations were a lot higher and there was more inventory."

The largest share of sales continues to be in the middle market, he said. "If you walk into a department store like a Macy's or a Filene's, most of the market is moderately priced goods," Simester observed. "There may be some Prada there, but the volume is low."

As retailers struggle to come to terms with changing shopper habits, some are pursuing discount and luxury niches at the same time. Exhibit A: Silverstein recently bought a BMW through Costco.

Which underscores a point: Many people who think of themselves as value shoppers still trade up for certain products.

"We had one woman in our Boston office who said she never traded up," recalled Silverstein, who is based in Chicago. "After we talked for about 20 minutes, she agreed that she trades up for education for her kids, luxury vacations with her husband, her husband's audio equipment, and fresh pasta."

Robert Weisman can be reached at weisman@globe.com.