Luxury Consumers on Spending Spree

But their spending on luxury goods is growing at a modest rate, while spending on experiences is booming.

Spending on luxury goods rose last year, and will grow more in 2006 as middle-income shoppers opt for high-class brands and wealthy consumers turn to luxury experiences.

In a speech at the National Retail Federation's Annual Convention in New York in January, Pam Danziger, president of Unity Marketing, announced the results of Unity's luxury consumer survey. He said that the average amount spent by affluent households on luxuries rose 3.8% last year. But their spending continues to shift towards the experiential, while they are spending about the same or slightly less in traditional luxury goods categories.

The first Baby Boomers turn 60 this year, and they are trying to enrich their lives as they begin to realise that life is short. "Americans already have enough stuff. They crave life-changing experiences. They're ready to climb the Himalayas," says Danziger.

For luxury goods marketers and retailers, the challenges are daunting in the face of this trend toward experiences. Luxury consumers are spending much more on life-changing experiences while their need for luxury goods is waning.

From Prestige to "Masstige"
"Masstige" has yet to show up in the dictionary, but the democratisation of luxury, or prestige for the masses, is already transforming the luxury landscape.

Increasingly more middle-income shoppers are reaching up to luxury brands, and many mid-level brands are offering signature products, meaning that even consumers who shop at discounters like Wal-Mart and Target can have items that feel luxurious.

Near-affluent households are buying luxuries at about the same rate as super-affluent households, only they are spending less. It's the difference between buying last season's Coach bag in the Coach outlet store as compared with the latest Dolce & Gabbana number at Saks Fifth Avenue. Both are luxurious to the individual consumer.

Another factor contributing to the democratisation of luxury is the fact that about 90% of millionaires in the United States did not grow up wealthy, but became wealthy. They spend money differently and tend to look different from older generations of luxury consumers. No longer can you judge people's spending power by what they look like.

Blatant plug: If you'd like to discuss your "masstige" marketing strategy, please phone Evolve on 3600-120 or email brandon@evolve.co.nz
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