Unity Marketing's New Report on the State of the Luxury Market Is Released
Luxury Marketers Face New Challenges As The Economy Falters And Luxury Consumers' Hold Back On Lavish Spending
The market for luxury boomed in 2006, with the 22 leading global luxury companies reporting an industry-wide revenue increase of 10.2 percent over combined industry revenues in 2005. Topping the list of the fastest-growing luxury companies in 2006 were Giorgio Armani and IT Holding/Ittierre, both with revenues up over 30 percent; and Coach, LVMH and Swatch, posting revenue gains over 20 percent. This according to the latest report on the state of the luxury market published by Unity Marketing entitled Luxury Report 2008: The Ultimate Guide to the Luxury Consumer Market.
Yet when these luxury companies tally up their 2007 revenues and earnings, the results will be much more modest based upon a 4.4 percent drop in average luxury consumer spending in 2007. Affluent Americans backed off markedly in their pursuit of the luxury lifestyle, most notably in the second half of 2007. Going into 2008 their spending continues weak. This will place tremendous competitive pressure on luxury companies and retailers, as they face a newly-resistant affluent consumer with a mindset to hold onto their cash, rather than spend it, says Pam Danziger, president of Unity Marketing and author of Shopping: Why We Love It and How Retailers Can Create the Ultimate Customer Experience.
Luxury Report 2008 details the state of the United States luxury market
Unity Marketing's Luxury Report 2008 is the definitive study of the U.S. market for luxury goods and experiences. The total market for luxury contributed some $321.9 billion in consumer spending in 2007. The Luxury Report examines consumers' buying behavior and spending details on 22 luxury product and services, including where products were purchased and details of the types of products and services bought. This report provides vital market size, growth and demographics for any company that is in the business of luxury, including product marketers, advertisers, retailers, and service providers. It reports the results of a three-year longitudinal research survey of the luxury market conducted every three months. The results of the four 2007 surveys are compiled with those from 2005 and 2006 to provide vital trend analysis. In 2007 a total of 4,284 luxury consumers were surveyed, with an average income of $155,100; average age of 45.2 years and including 64 percent female and 36 percent male respondents.
Key findings reported in the latest Luxury Report 2008
Among the key findings from the latest state of the luxury market report from Unity Marketing:
Luxury spending down except in experiential luxuries -- The typical luxury consumer cut their spending on personal luxuries by 12 percent in 2007, the category where the heaviest budget cuts were made. But while they spent less on luxury goods in 2007, they increased spending on experiences by 5.2 percent. "Since experiences give affluent consumers their greatest source of happiness and satisfaction, they are more cautious in splurging on luxury goods which don't provide the same level of personal gratification," Danziger explains.
All affluent income segments cut their spending in 2007 -- Spending was down across all income segments in 2007, including among near-affluents ($75k-$99.9k); affluents ($100k-$149.9k); and super-affluents ($150k and above). "In this downturn luxury marketers can't depend upon their most affluent customers to see them through. No matter how much cash one has, people feel less flush and that means they are going to hold tight and resist temptation. In marketing, perception IS reality and the affluent feel less well-off now," Danziger says.
Bright spots amidst the gloom -- Luxury consumers were willing to spend more on certain luxury categories in 2007. For example, luxury consumers spent more on art and antiques and kitchen appliances, bath and building products last year, both categories that have potential investment value. In personal luxuries consumers spent more on cosmetics, fragrance and beauty products, fashion accessories, especially shoes, but not handbags this year; and watches.
Luxury consumers bought fewer luxury brands in clothing and fashion accessories -- Overall the trend in buying specific clothing and fashion accessories designer labels in 2007 tended to be off, with most of the more than 35 designer labels included in the surveys showing a decline from purchase levels in 2006. Danziger says, "This may indicate consumers have reached a saturation point when it comes to the high-priced luxury brands. Today there has never been such good quality competitive offerings at premium, even mass-market levels. So instead of spending $1,500 on a luxury handbag, affluent consumers can confidently trade down to a $350 premium brand that can carry the same amount of stuff and without a significant loss in quality. "
Conservative trend in jewelry -- Luxury consumers turned away way from gold and precious stones, toward sterling silver and semi-precious. Jewelry shoppers too trended away from specialty jewelry stores and more towards internet and other direct-to-consumer channels where prices are more competitive. Luxury consumers on average spent 10.8 percent less on jewelry in 2007.
Change in luxury consumer mindset away from luxury indulgence and toward a more conservative, less materialistic and ostentatious lifestyle -- Most significantly for luxury marketers in the future is a marked shift in people's propensity to indulge in an ostentatious luxury lifestyle. Rather a 'less is more' approach is emerging among the affluent consumers. Rampant materialism is on the decline as measured in this attitude statement, "While luxury experiences are nice, they are fleeting, so I prefer to buy luxury items I can keep and cherish." Back in 2003 nearly two-thirds of luxury consumers agreed with that statement. In 2007 only 41 percent of luxury consumers agreed, a drop of 22 percentage points.
The Luxury Report 2008: The Ultimate Guide to the Luxury Consumer Market (225+ pages) is available by subscription through Unity Marketing. For subscribers to the Luxury Report 2008, attendance at "The Coming Luxury Drought" webcast presentation on May 21 or for future webcasts are free.
Danziger to webcast "The Coming Luxury Drought"
On May 21 at 9:00 a.m. eastern Pam Danziger will present a webcast for luxury marketers entitled "The Coming Luxury Drought: What Luxury Marketers Need to Know and What They Can Do About It." The webcast will examine the cultural factors that are causing affluent consumers to cut back on their luxury spending. It will present ways that luxury marketers can tap the shifts in consumer psychology to overcome a newly resistant affluent consumer and create a loyal relationship with them.
For Media: Charts, tables and graphs available on request.
Pam Danziger's webcast "The Coming Luxury Drought" May 21 9:00-10:00 a.m. (other webcasts tbd)
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