October, 2011 – This article from The Fiscal Times features data about the growth for the wider luxury industry (http://www.thefiscaltimes.com/Articles/2011/10/07/9-Must-Have-Status-Symbols-that-Say-Im-Rich.aspx#page1).

By Drew Gannon

Take walk down Fifth Avenue, Michigan Avenue or Rodeo Drive, and you might think Louis Vuitton had finally had a sale. Block by block, the signature brown bags fill the streets. Never mind that the bags in the Spring 2011 collection start at $2,930 for a small clutch, and go up to a whopping $35,500.

With sales up 23 percent from last year to $23.4 billion, Louis Vuitton is setting the tone of growth for the wider luxury industry. In 2011, spending on premium items and services is expected to rise 8 percent over last year to $359 billion, according to an annual survey by American Express Publishing and Harrison Group.

But the big players are not just the barons of Wall Street, sports, and entertainment.

“America’s top one percent – a little over one million households with a net worth of six million plus – are spending on luxuries,” says Ron Kurtz, president of the American Affluence Research Center. “But the bigger growth has come from the BRIC markets – Brazil, Russia, India and particularly China.”

China, the deus ex machina of the luxury market, is expected to account for 20 percent (roughly $27 billion) of global luxury sales by 2015, according to research by McKinsey, as the Chinese shift their consumption preferences from generic goods and materials to the status of internationally well-known brands. China’s unprecedented wealth has bolstered consumer confidence throughout the country; the fifth annual China Luxury Summit in December 2010 was aptly titled “China Luxury Market: An Oasis of Hope and Possibility.”

In the U.S., despite the belt-tightening across most of the country, wealthy Americans are starting to enjoy the good life once again, buying high-status items and services they had cut out of their 2009 and 2010 budgets. Indeed, rich Americans’ expenditures on luxury are set to rise $26.6 billion this year.

Whether such optimism will trickle down to the middle class is to be seen. Overall spending is still at a standstill, with consumer confidence declining sharply in August. Online shopping and social media may be the key to bringing up luxury sales in the United States as well as abroad. A recent study by Italian luxury foundation Altagamma found online sales (now only 2.6 percent of the market) growing at a rate of 20 percent a year as luxury brands multiply their friends on Facebook and activity on other social media sites.
Here are nine popular purchases helping wealthy consumers live high. Some people just can’t live without their Louboutins.

1. Swanky Strollers
Think a stroller is just a way to transport your kids? Think again. The mommy wars are being played out on the playground, with parents sizing up each others’ wheels. High-end strollers like those by the Bugaboo brand are flying off the shelves, and run anywhere from $500 to $2,000. One Bugaboo model that converts from a single stroller into a side-by-side double has a $1,659 price tag, and a waiting list to buy one. Another stroller by Kid Kustoms has a vinyl leather seat and optional iPod speakers, for a mere $3,500. Celebrities like Naomi Watts and Gwen Stefani have been spotted pushing around expensive Bugaboo prams, and their popularity has spread to suburban streets across the country.

2.Specialty Bikes
Biking became more popular in the last year, with bike sales rising 15 percent between 2009 and 2010, according to the Bicycle Manufacturing Association. But the bikes that are gaining the most popularity? Pricy, custom-built bikes. Specialty bike retailers command only 14 percent of the market, but 44 percent of the dollars, according to the National Bicycle Dealers Association. For example, custom bicycle company KGS Bikes does an elaborate three-hour fitting session, and has sold bikes for as much as $32,000. “I’ve seen growing demand,” says KGS Bikes’ owner Kevin Saunders. “My customers want a bike that is perfect for them.”

3. Designer Fashion
Last year, Carolina Herrera reported that, to her pleasant surprise, her $7,990 gray sequined ball gowns were “selling like hotcakes.” Other top designers have also reported stellar earnings, including Louis Vuitton (up 23 percent from 2010 to $24.3 billion), Hermes (up 41 percent to $11.9 billion), and Chanel (up 23 percent to $6.8 billion). The king of American style, Ralph Lauren, has seen his $13 billion-valued company’s stock grow 150 percent in the two years since June 2009. Sales for Ralph Lauren’s heritage Rugby brand jumped 34 percent last year after an online-only fashion show where online shoppers could purchase items in real time. High-end department stores and online designer sale sites have snagged some of the profits as well. Saks reported quarterly earnings up 50 percent and sales up nine percent ($726.7 million) in May this year, thanks in part to a boost in full-price sales.

4. Fine Wines
Forget two-buck chuck. Nielson Co. reporting a 4.1 percent rise in total U.S. wine sales to $9.32 billion this year, but wine priced $20 plus saw an even larger increase in sales (11 percent), demonstrating that pricier wines are becoming more popular. In its 22nd Annual Restaurant poll, Wine & Spirits magazine found the average price for the most popular wines in restaurants was $62. One of the magazines’ most popular restaurant brands, Duckhorn Vineyards, boasts an array of reds, including a 2007 estate-grown Rector Creek Vineyard Cabernet Sauvignon, which goes for $95 per bottle.

5. The Fur Effect
Fur is in, according to America’s top fashion magazines. Many September issues– including long-time fashion bible Vogue – featured fur and faux fur as the next big thing for the coming cold. According to them, fur goes with and on anything, from apparel like vests and coats, to accessories like purses and even shoes. Global retail sales for fur were up 5.4 percent to $14 billion in 2010, according to the International Fur Trade Federation. Alexander Wang’s fur sandals sell for $895 a pop. And while just this month West Hollywood becomes the first U.S. city to ban all fur sales, fur’s popularity continues to rise as the temperature falls.

6. …to Furry Friends
American pets are living the good life – sometimes even better than their owners. In 2010, Americans spent a record $55 billion on their pets, according to research firm Packaged Facts, more than the gross domestic product of many countries. Gourmet pet food tasty enough for humans to eat (think duck and quinoa) and premier pet care facilities like the Barkley Hotel and Day Spa, are popping up everywhere. Packaged Facts estimates that pet insurance sales, which rose 27 percent from 2008 to 2009 to $303 million, will reach $881 million by 2014. By the end of 2010, one in five Fortune 500 companies offered pet insurance by Veterinary Pet Insurance (VPI), the industry’s largest provider. Expensive designer dogs, like “teacup” dogs as well as hybrids between two breeds are growing more and more popular, and can cost thousands of dollars. Celebrities buying into the designer dog trend include Mischa Barton with her Shih Pom (cross between a Shih Tzu and Pomeranian) and Jessica Simpson with her Maltipoo (cross between a Maltese and Toy Poodle). But pure breeds have also kept their place on the upper crust. An 11-month old red Tibetan mastiff named Big Splash became the world’s most expensive dog after being sold to a Chinese millionaire for 10 million yuan, or $1.5 million.

7. Fast Cars
Despite the doom and gloom in Detroit, the luxury car sector is revving its engine. In July, Mercedes-Benz reported its highest monthly sales growth (16.7 percent) since 2006, with 21,065 cars sold. Still, BMW outsold its competitor that same month by over 5,000 vehicles, an 11.7 percent increase from sales on year prior. BMW’s SAV, a midsize SUV starting at $37,000, led the pack, with sales up 56 percent in 2011. And the high-end Z4 Roadster was BMW’s third highest selling vehicle, up 92.4 percent in July from the previous month. U.S. News & World report named the Z4 one of the best luxury cars of 2011, describing it as a car suited for drivers more interested in luxury than performance. The Z4 sells for between $47,450 and $62,500.

8. Cruising Through Life
An estimated 73.7 million Americans will travel outside the United States in 2011, estimates Business Monitor International in last month’s United States Tourism report. And while air travel sales remains on a perpetual roller coaster of ebbs and flows, cruises have grown more popular for wealthier Americans this year. Business Monitor International reports that in 2011, 9.6 million will have traveled outside of the United States by cruise. The Cruise Line International Association plans to welcome 22 new ships to its 25 lines, including the 3,690-passenger Carnival Cruise Lines’ Carnival Magic, launched in May 2011. A 12-night stay in the Mediterranean on luxury cruise liner Celebrity Solstice costs $9,299 per person.

9. The Bling
Rolex, recovering from a 14 percent decline in brand value last year, is making a comeback. Sales are up 11 percent to $5.3 billion this year, making it the sixth most powerful luxury brand according to consulting firm Millward Brown. The Rolex Presidential Day-Date watch has long been considered a quintessential luxury item, worn by celebrities and several U.S. Presidents from Roosevelt to Reagan, and costing upwards of $35,000 depending on its materials and dealer. Rolex’s signature men’s watch has now opened its doors to women, with InStyle featuring Jennifer Aniston and Courtney Cox among others wearing the brand. Other jewelers have also seen strides in the last year. Milward Brown ranks French jeweler and watchmaker Cartier fifth on its luxury list, up 34 percent to $5.3 billion net worth. Tiffany & Co.’s American sales rose 22 percent in the first half of 2011.

Posted in Affluence Research, Apparel, Automobiles, Cruises, Entertainment & Recreation, Fine Jewelry & Watches, Luxury Market & Goods, Travel, Vacations | No Comments »

Contrary to popular media hype, wealthy Americans do not spend wildly on luxury cars, opulent hotel rooms, or 4000 thread count sheets.

In ground breaking research on the definition of luxury and the spending habits of the wealthiest 10% of US households, respondents to a survey by the American Affluence Research Center were asked to specify the most they could imagine spending for 37 various products, including a new car.

Over 75% of those surveyed said the most they would spend is $50,000 for a new automobile. Toyota ranked #2 as the most popular brand to buy, ranking just behind Lexus and ahead of BMW and Mercedes Benz.

Surprised that the wealthiest Americans only want to spend less than $50,000 on a new car?  Thought they were driving Ferraris and Maseratis?  Clearly this isn’t Lifestyles of the Rich and Famous.

According to Ron Kurtz, President of the American Affluence Research Center, the people most likely to be living the really good life are the ones with a net worth of $6 million or more and an income of $500,000 or more.  These are the “conspicuous consumers” who, according to Kurtz’s study, are most likely to spend more than $50,000 for a luxury automobile; the kind of car that you wouldn’t find in the Toyota showroom.

So what does all of this mean?  According to Kurtz,” about 90% of the affluent are not conspicuous or ostentatious consumers. They spend conservatively and save carefully.”  They choose not to spend more than $50,000 on a car, even though they have the funds.  Kurtz believes it is these affluent consumers that represent “an opportunity to substantially increase the market for high end luxury products if the affluent can be educated about why they should consider buying them and the brands that offer them.”

Luxury brands take note.  There’s market share to win if you can convince the average multi-millionaire that your product, brand, make, or model is worth the splurge.

The national survey included 552 affluent men and women with an average of $304,000 household income, $3.1 million average household net worth, and $1.2 million average value of their primary home.

Tags: Affluence Research, affluent market, BMW, Ferrari, high net worth, Lexus, Lifestyles of the Rich and Famous, luxury, luxury automobiles, luxury cars, luxury market, luxury motor vehicles, luxury research, Maserati, Mercedes, millionares, multi-millionaire, splurge, Toyota
Posted in Affluence Research, Automobiles, Entertainment & Recreation, Luxury Defined, Luxury Market & Goods | No Comments »

A record low level of new motor vehicle acquisitions by affluent consumers is suggested by the most recent survey in a series of studies that began in Spring 2002.

Negative attitudes about the current economy and the economic outlook for the next 12 months are contributing to plans for deferring the purchase or lease of new motor vehicles by affluent consumers during the next year, according to the Spring 2009 Affluent Market Tracking Study, the fifteenth in a series of twice yearly surveys of the affluent market.

In the Spring 2009 survey of the wealthiest 10% of all U.S. households, only 14% of the affluent consumers reported plans to acquire a new car during the next 12 months. Equal to potential purchases of 1.6 million cars (almost 20% of the current annual sales pace in the U.S. for the auto industry), this is a 30% decline from the Fall 2008 survey and a record low. The record high for intentions to purchase or lease a new motor vehicle was 37% in the Fall 2003 survey.

As in earlier surveys of affluent consumers, the likelihood of purchasing or leasing a new car increases with wealth (both income and net worth). In the most recent survey, 15% of the households with incomes above $200,000 and 21% of those with a net worth above $6 million plan to acquire a new auto during the next 12 months.

The survey respondents indicated a negative 12 month outlook for business conditions and personal household income. They also reported declines in their net worth, as a result of substantial declines in the value of their home and their investments/savings during the past two years. Together, these factors have contributed to a general attitude toward reducing or deferring expenditures in all areas.

The intentions to reduce or defer new auto purchases are consistent with the overall mood of the affluent market. Over 80% of the survey respondents reported that they had made a general effort to reduce or defer expenditures during the past 12 months, would make a conscious effort to do so during the next 12 months, or had both done so in the past and would continue to do so in the future.

The survey is representative of the population of the most affluent 11.2 million households in the U.S. that account for almost 40% of total personal income and two-thirds of the personal wealth of all Americans.

The 640 men and women included in the national survey have an average annual household income of $290,000, an average primary residence value of $1.2 million, an average net worth of $3.1 million, and average investable assets of $1.4 million. This survey of the affluent market has a maximum margin of error of five percentage points.

* * *

Ron Kurtz is President of the American Affluence Research Center, which provides marketing research and mailing lists of affluent consumers to prominent companies targeting the affluent market.

AARC is an independent, private research organization dedicated to providing reliable marketing information about the values, lifestyles, attitudes, investments, and purchasing behavior of the most affluent segments of the U.S. population through both custom and multi-client surveys.

Ron’s experience includes over 20 years in senior management positions in the airline, hotel, and tour business. As the founding President of Sea Goddess Cruises, he created the product category of small deluxe ships for the very affluent. He also served as the chief marketing officer of four cruise lines, including Norwegian Cruise Line and Windstar Cruises.

Ron has been a key contributor to 6 start ups and 11 turnarounds of substantial businesses. He earned his MBA at Harvard Business School.

The American Affluence Research Center CONTACT: Ron Kurtz at 770-740-2200 or info@affluenceresearch.org. Website: http://www.affluenceresearch.org

Tags: Affluence Research, affluence surveys, affluent market, auto spending, automobile spending, car purchases, destination clubs, luxury market
Posted in Affluence Research, Automobiles | No Comments »