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Luxury: What They're Buying

-- Gifts and Dec, 1/1/2008 12:00:00 AM

In 2006, the typical luxury consumer's spending on luxury items rose 6.6 percent to reach $56,065, following an increase of 3.8 percent in spending in 2005. Of that, last year typical luxury consumers spent $21,700 on luxuries for their home (8.6 percent more than they averaged in 2005), according to Unity Marketing's Luxury Report 2007: The Ultimate Guide to the Luxury Consumer Market. “In our most recent survey, we found that roughly one-third of luxury consumers have plans to redecorate their homes, and about 15 percent plan on doing a major home remodel in the coming year,” said Unity.

Fine watch and jewelry sales are also up: fine watches rose 39 percent and fine jewelry, 10 percent. (By contrast, the fashion or costume jewelry segment declined by 8 percent, and costume watches were off by 20 percent.) Men's jewelry, in particular, is up — to 12 percent at the end of the third quarter, compared to only 5 percent in 2006.

Consumers are also buying a lot of Christmas presents. A study by Harrison Group market research firm, Waterbury, CT, found that households with over $75,000 in income were projected to spend 3.1 percent more in 2007 on the holidays, bringing their total to almost $82 billion, or nearly half of the $169.1 billion all Americans were projected to spend on gifts in the 2007 holiday season. (According to U.S. Census estimates, affluent families now comprise 17 percent of U.S. households, and are projected to reach 22 percent by 2010.)

Luxury Tracking Quarterly
Avg. Spend and Percentage Change

	Avg. Spend	% chg
Source: Unity Marketing
1Q04	10,596
2Q04	15,055	40.8%
3Q04	14,776	-1.9%
4Q04	10,213	-30.9%
1Q05	11,726	14.8%
2Q05	11,714	-0.1%
3Q05	14,534	24.1%
4Q05	14,614	0.6%
1Q06	14,800	1.3%
2Q06	14,851	0.3%
3Q06	13,432	-9.6%
4Q06	12,982	-3.4%
1Q07	14,024	8.0%
2Q07	15,283	9.0%
3Q07	12,142	-20.6%

Your Luxe May Vary

Consumers who can afford it don't always buy luxury. Three out of five higher income shoppers say luxury isn't part of their lifestyle, or that they scale back in some areas to afford luxury in others. Those for whom luxury is an everyday expectation comprise less than 10 percent of the luxury market, according to Unity Marketing's Pam Danziger. This fits with a study by research firm The Nielsen Company, Schaumburg, IL, which found that households with more than $100,000 in annual income still patronize stores such as Costco, Sam's Club and Target as well as niche formats, traditional and alternative retail channels.

The majority of luxury consumers say the greatest luxury is time, according to an international survey by the Consumer Research Center of The Conference Board. And despite appeals to envy and prestige in luxury advertising, the study found that the large majority of luxury consumers say what matters is personal experience, not what someone else thinks.

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