September, 2011 – This article from The Centurion (E-Newsletter & Info Hub for Prestuge Jewelers) features AARC research about the differences between the affluent market and the luxury market—and who jewelers actually are serving (http://news.centurionjewelry.com/articles/view/who-are-americas-highest-ticket-jewelry-stores).

By Hedda Schupak

New study finds the average ticket among top 15 most expensive luxury jewelry stores is $5,559. But typical guild jewelers’ average receipt is only $1,100. Why is there such a difference?

New York—What jeweler is writing the highest tickets in America?

Not surprisingly, it’s Harry Winston (left). According to a report released Tuesday by bundle.com, the tony jeweler averages $8,388 per ticket sale. Trabert & Hoeffer in Chicago is second, with an average sale of $6,627. By contrast, the typical guild jewelry store’s average ticket is around $1,100, says industry analyst Ken Gassman. (This figure is adjusted and does not include watch batteries, repairs, or bead sales, he told The Centurion.)

Bundle.com’s report is based on data provided by Citi for average receipt amounts based on millions of transactions in jewelry stores across the United States from July 2010 to June 2011. The study includes only Mastercard and Visa transactions; it does not include cash transactions or those made with American Express, Diners Club, Discover, or private store accounts, says Mike Dang, the article’s author.

“We were surprised at how many stores that made the list were names that most consumers [outside the retailer’s trading area] probably never heard of,” Dang told The Centurion. “We also were surprised to see that three stores on our list are in Dallas. It’s the first time that Texas made it on a list,” he said, referring to a number of lists the site tracks. William Noble Rare Jewelry with an average ticket of $5,839 took the number-four spot, Sue Gragg Precious Jewels came in fifth with an average receipt of $5,605, and Eiseman Jewels is in 11th place with an average of $5,028.

The three Dallas stores and Trabert & Hoeffer were among nine independent stores on the list of 15 jewelers. The others were Betteridge’s Vail, CO store (average ticket, $5,391, number nine on the list), Fourtane in Carmel, CA ($5,937, number three), Hyde Park Jewelers, Las Vegas, NV ($5,423, number seven), Belluso, a watch store also in Las Vegas, ($4,753, number 13), and Westime, a watch store in Los Angeles, CA ($4,591, number 15).

Also on the list were De Beers, New York City ($4,625, number 14), the Rolex boutique in South Coast Plaza, Costa Mesa, CA ($4,861, number 12), Chopard, New York City ($5,305, number 10), Wynn & Co. Jewelry, Las Vegas ($5,412, number eight), and Van Cleef & Arpels’ store at South Coast Plaza ($5,599, number six.)

Read bundle.com’s entire jewelry article here.

The consumer finance website also recently released its list of the top 25 most expensive apparel stores. According to its research from Citi, the top store is Oscar De La Renta. The designer’s eponymous dress shop on Madison Avenue in New York City had an average sale of $3,217. The lowest of the bundle.com apparel list is Prada, with an average ticket of $1,429—still higher than the $1,100 average guild-level fine jewelry store ticket.

The average ticket for chain jewelers is, not surprisingly, even lower than for guild stores. It’s about $400 at Zale, $350 at Kay, and $800 at Sterling’s higher-end Jared division, according to Gassman’s research. Tiffany, incidentally, did not make Bundle.com’s list of priciest jewelers either, presumably because its wide selection of affordable sterling silver jewelry brings down the calculation of the average ticket.

“I bought a sterling silver necklace for my girlfriend, so I’m probably one of those people who brings their average down,” laughed Bundle.com’s Mike Dang.

But why is the sales figure for a typical guild store tracking below even the apparel leaders?

Part of the reason could be that the jewelry industry is highly fragmented, with few brands big enough to spend with the kind of dollar clout that global luxury brands have, says Huw Daniel, president of Platinum Guild International. Now that De Beers has shifted marketing to its own Forevermark brand and away from generic diamond advertising, there’s no entity pushing jewelry into consumers’ lives with the same impact as luxury brands.

“The global luxury brands have made themselves relevant for today’s woman’s lifestyle, and their objects—bags, shoes—are a highly telegraphic marker of one’s status and personal style,” says Daniel. “That being said, however, adornment will always be a human need, so jewelry has a big role to play and the brands that can seize this can make a very nice profit.”

“Jewelers spend 4-6% of sales on advertising, while true luxury retailers or brands spend up to 20% or more of sales on advertising,” says Gassman. Plus, he says, don’t discount the fact that Mother’s Day and Valentine’s Day—even at guild stores—tend to be fairly low ticket sales, which brings the overall average down.

But that doesn’t explain why some jewelers are hitting the mid $4,000’s and $5,000’s for an average ticket.

What might, however, is identifying the differences between the affluent market and the luxury market—and who those jewelers actually are serving.

According to the American Affluence Research Center, those differences are both distinct and important. The AARC defines the affluent market as the wealthiest 10% of U.S. households as determined by the Federal Reserve Board, based on net worth. But only 10% of the affluent market—or 1% of U.S. consumers, approximately 1.1 million—have the means to acquire and are familiar with the brands and price points of products or services generally considered to be true luxury, says Ron Kurtz, AARC president.

AARC identifies true luxury consumers, who are the most likely to be viewed as conspicuous consumers, with the following profile:

• Average annual income of $982,000
• Minimum net worth of $6 million; average net worth is $15.3 million, or 33% of total net worth of all U.S. households.
• They earn about 14% of the total income earned by all American households.

The affluent market, by contrast, has this profile:

• Average annual income of $256,000
• Average net worth of $3.1 million; and comprise 70% of the total net worth of all U.S. households.
• They earn 36% of the total income earned by all American households and account for almost half of all consumer spending. This represents about a third of total GDP (gross domestic product).
• Additionally, these 11.4 million households hold 89% of the value of all publicly traded stock and stock mutual funds in the United States.
• Only a small segment of this demographic are conspicuous consumers; most are careful spenders and aggressive savers.

According to Forbes.com, the most affluent towns in the United States are Westlake, TX—a suburb of Dallas—and the Village of Kenilworth, IL, a suburb of Chicago. No surprise, then, that four of the 15 stores on the Bundle.com list are nearby. Several more of Forbes’ most affluent towns are New York City suburbs, while Orange County, CA, where South Coast Plaza is located (Rolex and Van Cleef & Arpels’ boutiques from the list) also has a number of very tony zip codes. Cities like Vail and Las Vegas, meanwhile, may not make the list for permanent residents, but they’re favorite affluent vacation spots.

The definition of “luxury” is ambiguous, not quantifiable, says the AARC. In fall of 2008, the organization polled well-heeled consumers asking, “what’s the most you could imagine spending” for 37 different categories of products and brands.

“The numbers were much lower than we expected,” Kurtz told The Centurion. Consumers offered up a very wide spread of price points they considered luxury—but the medians (the point at which half of the responses were above and half below) were surprisingly low.

Kurtz shared the jewelry and watch results—three of the 37 categories—with The Centurion. When asked “what’s the most you could imagine spending for a watch for a dressy occasion,” the median value among respondents was $1,000. 36% of men and 26% of women responding indicated they would spend $2,000 or more. Among the top 1% of respondents—those with net worth over $6 million—the median figure rose to $3,000, and the top value cited was $30,000. Not surprisingly, the most popular brand named was Rolex.

For an everyday watch, the median was a shockingly low $130. 29% of men and 27% of women said they’d spend $500 or more on an everyday watch, and the top value cited for this category was over $20,000. Only about half of the respondents naming a maximum price for this question named a brand; however, among those, the brand most often cited (22%) was Timex.

For diamond stud earrings, only women were polled. The median response was $1,000, with a point spread ranging from less than $100 to more than $10,000. 20% of women said they could imagine spending $2,000 or more for a pair of diamond studs. Only about 15% of women naming a maximum price also named a brand, says Kurtz, and the brand cited most often was Tiffany.

In recent years, says AARC, much of the growth of the luxury market has come from people who have the income ($100,000 to $250,000) to purchase some luxurious products, but not the wealth (or credit) to sustain such purchases, especially if portfolio values dip or the breadwinner loses a bonus or job.

That said, however, AARC’s conclusion from its research is that in the long run, marketers of luxury goods and services will find it far more productive, accurate, and practical to focus on the larger affluent market than the very ambiguous and often elusive luxury market.

Posted in Affluence Research, Fine Jewelry & Watches, Luxury Defined, Luxury Market & Goods | No Comments »

This article on Wall Street Journal Digita Network features AARC research about aspirational consumers (http://www.smartmoney.com/spend/deal-of-the-day/how-to-buy-luxury-goods-at-a-discount-1313705085759/?link=SM_hp_middle_optStory).

by Kelli Grant

August 2011

While the market upheaval and economic uncertainty has encouraged many people to tighten their budgets, shoppers lusting after that “it” bag, a first-class airline seat or a pricey car may now find those luxuries are more affordable than before.

Companies that make or sell high-end goods are increasingly aiming for what they call aspiration buyers — middle-class shoppers who can afford to occasionally splurge. The tactics are vast, including pitching less-expensive product lines, selling overstock online and allowing consumers to buy luxury perks in lieu of earning them. Audi, for example, is rewarding brand loyalty by offering $1,000 to $3,000 cash-back to households that already own an Audi and want another one. In September, eBay (EBAY: 30.49, 1.03, 3.50%) will team up with Nieman Marcus and other luxury e-tailers to sell goods at discounts of up to 65%. And new credit cards from American Airlines (AMR: 3.54, 0.28, 8.59%) and United (UAL: 18.59, 0.67, 3.74%) offer a cheaper buy-in for perks previously available only to elite road warriors and big spenders. “Luxury has become more democratized these days, and everyone wants access,” says Milton Pedraza, the president of Luxury Institute LLC, a marketing firm.

The luxury-for-everyone pitch may seem at odds with brands that owe some of their success to their elite images. But going down-market has become a survival tactic during tough economic times. Luxury goods sales fell 5% during 2008 and 2009, the biggest drop since 1995, according to Bain & Co., and experts say most of those lost sales were from these so-called aspiration buyers. (Shoppers with a net worth of $800,000 or more scaled back somewhat during the recession, but have largely kept spending, according to the American Affluence Research Center.) Recent market volatility could make middle-class shoppers even more important. Less than the very wealthy, aspiration buyers tend to have less of their net worth tied up in the stock market, and so the occasional downdraft may not stop them from spending, says AARC president Ron Kurtz.

The best deals on luxury goods may not come via coupon — or Groupon. Instead, luxury brands often use subtler tactics, like private sale events and invitation-only deals, Pedraza says: “You don’t want to scream ‘discount’ when you’re a luxury brand.” Getting in on these offers isn’t so hard, though. Consumers can give their contact information to the high-end stores and brands they like, says Fred Thompson, a partner at LoyaltyOne Consulting. Invited guests often gossip on sites like SheFinds.com or Mizhattan.com, where, in June, notices about Chanel’s two-day private sale with deals of 40% off made the rounds a week beforehand. Auto pricing site Edmunds.com tracks unadvertised auto incentives, including loyalty rebates.

Shoppers on the hunt for luxury goods are also finding success with so-called flash-sale sites such as Gilt Groupe, which offer discounts of 50% or better for a short time on clothing, home goods and other products. eBay launched its version, Fashion Vault, last fall and Amazon (AMZN: 206.53, 7.26, 3.64%) debuted MyHabit in May. But shoppers may find the same problem that outlet-mall shoppers often do: Some items on sale aren’t a part of the brands’ usual collections, they’ve been produced specifically for the sites. Which ones? The sites don’t usually say. Amazon and Gilt spokeswomen said there’s no need, because the items are legitimately from that brand or designer and have quality consistent with their price. “We make sure not to give the [buyer] lesser quality,” says a spokeswoman for Gilt.

Even non-luxury brands — think American Airlines, for example — are offering new opportunities to pay for a higher-end experience, says Thomas Jacobson, a senior executive in consulting firm Accenture’s pricing division. For example, airline credit cards have grown in popularity over the past year with the introduction of bigger benefits and waived fees for the first year, while the airlines have also started offering more a la carte purchase options to cut the line for boarding or pick a cushier seat. Cable companies, amusement parks and other companies are also offering pay-in options for a shorter wait. Here, consumers need to evaluate what they’re getting for the extra cash, Jacobson says. Your luxury experience might be little more than a convenience fee.

Posted in Affluence Research, Apparel, Luxury Defined, Luxury Market & Goods | No Comments »

March 2011

This is a post from The Cruise Industry News

Defining Luxury

While rating ships on an intricate point system, luxury is ultimately in the eye of the beholder, according to Douglas Ward, author of Berlitz Complete Guide to Cruises and Cruise Ships 2011. Not so fast, according to Ron Kurtz, president of the American Affluence Research Center, who defines true luxury products by per diems, which should be $500 and higher.     Only a few brands command per diems of $500 or more, Kurtz said, with some of the proclaimed luxury brands merely aspiring to that price level. In addition, exclusive accommodations on some of the premium lines also command very high per diems, he noted.

Five Stars

Ward said that to be considered luxury, ships have to earn a five-star rating in his book – but even so, there is a range. Not all five-star ships are the same, he said, and not all the ships thought of as luxury ships are rated five stars.  Ward’s top rated ship continues to be Hapag-Lloyd’s Europa, which he attributed largely to a superior service level, including the smaller details, such as making tea from loose tea leafs and not bags. “If you are a coffee drinker, you do not expect your coffee from a bag (instant coffee),” he added. “When they serve butter, they ask if you want salted or unsalted butter. And the first time you sit down for dinner, they ask if you are right- or left-handed.” Such attention to details is the difference that distinguishes the top rated ship, Ward said. In all fairness, some of the cruise lines that did not earn top grades from Ward also disagreed strongly with his ratings.  Ward commented that in some cases the service level was friendly and enthusiastic, but it was not refined enough to compare to the top brands, which he attributed to “sloppy middle management.”Some of the older ships are also starting to look a bit date and “tired,” according to Ward, and do not compare well to new ships.Bigger ships are also straddling into the luxury segment, and Ward noted MSC Cruises’ Yacht Club, where “you find good examples of fine European service.”This year’s Berlitz guide is the 26th edition, going back to 1985. Distributed worldwide, the 720-page book rates all cruise ships and has its biggest markets in the U.S., the UK and Australia.

Bi-Annual Surveys

Kurtz said that since nobody has a quantifiable definition of luxury as a concept, per diem is the only reasonable definition. The American Affluence Research Center does affluent tracking surveys twice a year – in spring and fall, and will do its 19th bi-annual survey shortly. In a 2008 survey, respondents put the price points for cruises in this market segment much lower than they actually were, Kurtz said, and few expressed any brand knowledge, except for the top 1 percent of the market.  The surveys target the top 10 percent of the wealthiest U.S. households, and only the top 1 percent expressed much knowledge about luxury products, according to Kurtz. He said that experienced travelers and cruisers have good awareness of the different brands, but demonstrate less understanding of why they should pay so much for a luxury cruise.  “The problem the luxury lines have is to convey the value of their products to the market,” said Kurtz. “To get the value message across, they need better presentation, personal presentation and better websites. They need to justify their rates and that is hard to do in advertising only.”  Another issue is that some of the brands are limited in their market appeal as some guests today want to travel with children, especially during the holiday periods, and many of these ships are not geared to children. It would be wise to dedicate a few sailings to family cruises, he said. In the recent 2010 fall survey, 12 percent said they would like to take a cruise in the next 12 months, compared to 15 percent in the previous spring survey, and 22 percent in the fall of 2007.  Most likely to take a cruise are the oldest and wealthiest.  Eighteen percent of those over 60 said they would like to take a cruise in the next 12 months; 10 percent of those between 50 and 60; and only 7 percent of those under 50.  Twenty-five percent in the highest income group said they would like to take a cruise; 15 percent in the middle income range; and only 8 percent in the bottom half.  The top 10 percent includes 11.4 million households with an average net worth of $3.1 million and an average annual household income of $290,000.

Struggles?

When Carnival Corporation announced that the Yachts of Seabourn will merge its operations with Holland America Line and move to Seattle, it was clear that the luxury brand was not meeting its financial objectives.  The move from Miami to Seattle will take place over several months, according to Carnival, and once the transition has been completed and the synergies are fully realized, the company said it expects annual savings starting in 2012 in the $20 to $25 million range.  Rick Meadows has been named president of Seabourn, taking over from Pam Conover, who assumed the job after Larry Pimentel. Conover has chosen not to move to Seattle at this time, according to Carnival. Meadows has been executive vice president of marketing, sales and guest programs for Holland America.  In addition, at press time, John Delaney has been named senior vice president of marketing and sales; he has been vice president of revenue management for Holland America.  But Seabourn may not be the only luxury brand facing challenges. Silversea Cruises also introduced a new and bigger ship, adding another 20,000 berths to the passenger capacity in the luxury segment, in addition to its luxury expedition ship.  Also, Silversea has had more executive changes at the top any of the other luxury brands.  At Crystal, Greg Michel, who joined as financial officer at the very beginning, has been at the helm since Art Rodney left to help launch Disney Cruise Line, and Mark Conroy has been at the helm of Regent Seven Seas virtually since the start of that line – since 1993.

New Ship

While the North American luxury market is reorganizing, Hapag-Lloyd will add a ship in 2013 “to complement its Europa.”
The German brand operates the 1999-built, 28,600-ton, 408-passenger Europa in the luxury segment, and the expedition ships, the 188-passenger Hanseatic, the 164-passenger Bremen and 420-passenger Columbus in the premium segment.  The new ship, to be named Europa 2, will be 39,500 tons and have a passenger capacity of 516.  Hapag-Lloyd said the ship will be built by a “third party owner” at STX in France, and it will operate the ship on a 12-year charter agreement.  In addition, the line is chartering the 684-passenger Insignia from Oceania Cruises for two years, starting April 2012. Crystal and Regent have not appeared to move any further on their new ship plans. Meanwhile, marketing and sales for the luxury brands continue to be very price-driven, offering discounts up to 60 percent off brochure prices and added values, including free or subsidized air fare, to attract customers, plus bonus commissions to travel agents.

Posted in Affluence Research, Cruises, Luxury Defined, Travel | Comments Off

According to various retail consultants quoted in recent media publications, the current recession has average American consumers entering into a “new normal” that will be characterized by less household debt, higher personal savings, and less consumption. This behavior is being projected for the affluent market also, thus suggesting an extended decline in sales in the luxury category. Interestingly enough, the concepts of saving more and spending less are nothing new to the affluent market.

The affluent market has always leaned towards careful spending and aggressive saving, as clearly demonstrated in the 20 plus years of research by Thomas Stanley, author of the best seller “The Millionaire Next Door.”.  The affluent typically live within their means and generally do not overextend themselves financially.

In a recent survey of the wealthiest 10% of US households, 80% of the affluent reported they plan to return to pre-recession spending levels. Most plan to return to these spending levels when they see clear and certain recovery of the economy and the recent losses in their net worth. As a factor for returning to pre-recession spending, certainty of job security and compensation are more important to the younger and lower net worth affluent groups than others.

Given the short memories and proclivity to shop among Americans, the numbers returning to pre-recession spending could be much higher than 80% . It makes sense that this group of careful spenders would return to previous spending patterns since those habits were not inflated in the first place.  Apparently the “new normal” may not be that new for the true affluent.

The national survey included 684 affluent men and women with an average of $300,000 household income, $3.1 million average household net worth, and $1.2 million average value of their primary home.

Tags: affluent market, luxury, recession, Spending
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In November 2008, Newsweek published an article stating that the American affluent population was “experiencing an unfamiliar emotion:  luxury shame”.  The article, as well as several others that have appeared in various media since then, explained that across America, the affluent population was straying from conspicuous consumption, and engaging in “stealth wealth” because conspicuous consumption just didn’t feel right in these difficult economic times even though the affluent could still afford the finer things in life.

According to a recent tracking study of the wealthiest 10% of US households, the American Affluence Research Center found that in fact a mere 7% of survey respondents indicated any signs of luxury shame or stealth wealth.  For those who did reduce spending because of their self-consciousness, they did so an average of only 4.5 times during the year.  Vacations, new cars, and dining out were the three biggest categories where this small share of the affluent consumer market reduced its spending due to luxury shame.

Despite the fact that 41% of survey respondents acknowledged feeling self-conscious about being in a better financial situation than those around them, we see that not many felt badly enough to change their spending habits because of appearances.  Rather, respondents were more likely to have indicated a change in spending habits due to uncertainty when the economy will recover, decline in value of investments/savings, and a desire to spend less and save more.

It seems the media has it wrong.  Although luxury retailers have seen declines of 10-25% during this recession, those declines are most attributable to “aspirational” consumers who were living beyond their means but can no longer afford to do so.  The change in spending habits of aspirational consumers has given the biggest blow to luxury retailers.  The true affluent have reduced only some spending due to declining net worth, but the truth for the affluent market seems to be that old habits die hard.  Especially spending habits.

The national survey included 684 affluent men and women with an average of $300,000 household income, $3.1 million average household net worth, and $1.2 million average value of their primary home.

Tags: Affluence Research, affluence surveys, affluent market, luxury, luxury research, luxury travel, survey of the affluent, survey of the wealthy
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Contrary to popular perception, affluent Americans do not spend lavishly on luxury hotel suites on Park Avenue.

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 hotel room for one vacation night in New York City.

For both men and women across various high net worth levels, the overall median amount survey respondents could imagine spending for one night of leisure in a NYC hotel is $300. Marriott and Hilton were the top two brands named by those responding with a brand preference.

Surprised that the wealthiest Americans aren’t staying at the Peninsula or the Four Seasons when vacationing in the Big Apple?  Ron Kurtz, President of the American Affluence Research Center, is not.

According to Kurtz, the people most likely to be savoring the finer things in 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, indicated a median of $400 when imagining the most they would pay for a night in The City that Never Sleeps.

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 stay at The Plaza or The Pierre, even though they have the funds for suites in these luxury destinations.  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.”

Someone please tell The Donald he needs to sell his friends on the value of style, service and exclusivity if he wants to fill those suites at The Trump International.

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, Big Apple, Fifth Avenue, high net worth, Hilton, luxury, Luxury hotels, luxury market, luxury research, luxury suites, Main Street, Marriott, millionaires, multi-millionaire, New York City, Peninsula Hotel, Serenity Bed, splurge, The Donald, The Pierre, The Plaza, Trump
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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
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Contrary to assertions by some luxury market and retail consultants that the current economic problems are creating longer term changes in their lifestyles and reductions in spending on luxury and conspicuous consumption by America’s luxury consumers, Ron Kurtz, President of The American Affluence Research Center (AARC) believes that “most of the affluent are behaving like their normal, rational, and frugal selves. Their careful spending is not a new trend”.

While the concepts of “stealth wealth” and “luxury shame” are now being advanced by the retail and luxury consultants and futurists through anecdotal research about cut backs in the spending on ostentatious luxury, Kurtz feels “the sale of luxury goods and services, as defined by the majority of America’s affluent, is not subject to much change in 2009, just as it has not shown much change over the past 30 years”.

Kurtz bases his opinions on AARC’s ground breaking research on the definition of luxury among the affluent. The respondents to the AARC survey of the wealthiest 10% of US households were asked to specify the most they could imagine spending for 37 different products and services. They were also asked to name the brand they would most likely purchase for each of the items.

The profile of the 552 affluent men and women in the national survey sample is: $304,000 average household income, $3.1 million average household net worth, and $1.2 million average value of their primary home. The average age is 55 while 86% are married and 60% are males.

Kurtz emphasized that he “doesn’t see any evidence that the majority of the affluent are showing major long term trend changes in their spending patterns and attitudes. They have never been ostentatious or conspicuous consumers. They have always been careful shoppers and savers who look for quality and value in their purchases, the brands they buy, and the stores where they shop”.

The affluent market in the US is cutting back and deferring expenditures, according to AARC research in  2008 and 2009, due to current economic conditions, especially given the reduced values of their homes and stock portfolios. However, these expenditure changes should not materially affect the sales of the high end products and brands normally associated with ostentatious “luxury” because most of the people in this market have not represented a substantial source of the sales of such products. “They will not suddenly be switching from Manolo Blahnik to Stuart Weitzman shoes, from Prada to Coach purses, or from Four Seasons hotels to Marriott,” according to Kurtz, “because they were not supporting those brands previously”.

The sales of the high end “luxury” products appear to be derived primarily from international “new rich” consumers and by the small segment of the wealthiest 1% in the US, as indicated by the AARC research.  A portion of the sales have apparently also been derived from those stretching their resources (especially their credit) to achieve a taste of luxury.

Kurtz believes “a segment of the small niche market of conspicuous American consumers will have to change their spending and saving behavior. The Wall Street investment bankers, attorneys, and others in related activities are experiencing large reductions in income and net worth. Many of the younger people in this group don’t have substantial net worth to fall back on, as they were spending what they were making and perhaps even more”. Kurtz observed that changes in the spending of these people, as well as among the wealthy “new rich” citizens of the BRIC (Brazil, Russia, India, and China) and other countries now experiencing recessions and declines in oil and commodity prices, will contribute to the decline in sales of the ostentatious “luxury” brands.

Concepts such as “discreet luxury”, in Kurtz’s view, are creations of some retail and luxury consultants who invent terms such as “mass affluent”, which he considers to be an oxymoron, to promote new consulting work. In his opinion, “some of these consultants are prone to invent such terms to describe changes in behavior among a small group of people as major trends. These trend projections are often based only on anecdotal or “managed” research”.

For a more detailed summary of the findings of this research and its implications, visit our blog post at AffluenceResearch.org entitled “Popular View of Luxury Spending Debunked in Survey of the Wealthy.”

Tags: Affluence Research, affluent market, conspicuous consumption, consumption habits, discreet luxury, high net worth, luxury, luxury consumers, luxury market, luxury research, luxury shame, millionares, stealth wealth
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“Luxury is a very ambiguous word that is used very loosely”, according to Ron Kurtz, President of The American Affluence Research Center (AARC), which has conducted a survey that provides a new view of the luxury market and how luxury consumers define luxury. In this survey, the affluent defined luxury by price point and brand for 37 products and services.

Affluent Report the Most They Could Imagine Spending for 37 Products

In AARC’s ground breaking research on the definition of luxury among the affluent, the respondents to the survey of the wealthiest 10% of US households were asked to specify the most they could imagine spending for 37 different products and services. They were also asked to name the brand they would most likely purchase for each of the items.

The profile of the 552 affluent men and women in the national survey sample is: $304,000 average household income, $3.1 million average household net worth, and $1.2 million average value of their primary home. The average age is 55 while 86% are married and 60% are males.

Conspicuous Consumers Only 10% of Affluent Market; Most Affluent Not Familiar with Luxury Brands

“The research results support two important observations about the affluent market and their spending on luxury items”, according to Kurtz.

First, the affluent market is composed primarily of people with middle class backgrounds who continue to pursue a somewhat middle class lifestyle with middle class values. Kurtz emphasized that “about 90% of the affluent, or 10 million households, are not conspicuous or ostentatious consumers. They spend conservatively and save carefully. America’s current credit and economic problems might have been avoided if these affluent people, with their conservative spending and saving habits, had been recognized as role models. They have demonstrated the importance and value of living within your means.”

Second, only about 10% of the wealthy, or the 1 million households that account for less than 1% of US households, might be considered conspicuous consumers. With the exception of this relatively small niche segment, the affluent market does not appear to be very knowledgeable about the pricing and brands of products that are generally recognized by marketers as being in the higher price points associated with the luxury category. This seems to create an opportunity to substantially increase the market for high end luxury products if the affluent market can be educated about why they should consider buying them and the brands that offer them.

The popular perception of the luxury market and luxury consumers has resulted from anecdotal “research” “provided to the media by retail and luxury consultants that used examples such as a young Wall Street attorney spending $50,000 of a year end bonus for a new watch or a secretary spending $1,000 for a new hand bag”, according to  Kurtz.

Kurtz observed that “other examples of conspicuous consumption among the wealthiest 1% of US households have created the impression that there were many hundreds of thousands of people making a million dollars a year or more among the ranks of the entertainers, professional athletes, Wall Street bankers and attorneys, Fortune 500 executives, real estate developers, and entrepreneurs who have taken their company public. In fact the latest Internal Revenue Service data shows less than 400,000 US households in this income bracket”,

The results of this survey, together with earlier research by Dr. Thomas Stanley, challenge the conventional wisdom that the US has witnessed increasingly conspicuous and ostentatious consumption by an increasingly affluent market for a period of about 30 years, which has been interrupted by brief interludes of retrenchment during the occasional recession and the 9-11 tragedy.

With only about 10% of the US affluent engaged in conspicuous consumption, together with the purchases of luxury goods by international visitors leveraging the weak value of the dollar, Kurtz believes “a distorted view of the size and nature of the true luxury market in the US has been created”.

The actual size and spending patterns of the affluent market are well documented by the data from the Internal Revenue Service and The Federal Reserve Board and the research of the affluent by former Georgia State University Professor Thomas J. Stanley that began in the 1970s and led to “The Millionaire Next Door” and a series of related books beginning in 1996. Dr. Stanley’s research produced similar conclusions regarding the lifestyle, values, spending, and savings profile of the affluent as that suggested by the AARC research. In fact, since AARC’s inception in 2002, the results of its research have been consistent with Dr. Stanley’s research.

For a more detailed summary of the findings of this research and its implications, visit our blog post at AffluenceResearch.org entitled “Popular View of Luxury Spending Debunked in Survey of the Wealthy.”

Tags: Affluence Research, affluent market, conspicuous consumption, consumption habits, discreet luxury, high net worth, luxury, luxury consumers, luxury market, luxury research, luxury shame, millionares, stealth wealth
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For several years, luxury retail and marketing consultants have fed the media with anecdotal research about the luxury market as though the purchases of $700 Manolo Blahnik shoes, $1,000 Prada hand bags, and $250 True Religion jeans are common place among luxury consumers.

But the affluent women in a survey of the wealthiest 10% of US households by The American Affluence Research Center (AARC) report they are more likely to spend less than $120 for nice shoes, less than $100 for a purse for every day, and less than $75 for a pair of women’s jeans.

“Luxury is a very ambiguous word that is used very loosely”, according to Ron Kurtz, President of AARC, who observed that “the definition of luxury varies considerably by individual and by product, as clearly demonstrated by our survey. In this survey, the affluent defined luxury by price point and brand for 37 products and services”.

Affluent Report the Most They Could Imagine Spending for 37 Products

In AARC’s ground breaking research on the definition of luxury among the wealthy, the survey respondents were asked to specify the most they could imagine spending for 37 different products and services. They were also asked to name the brand they would most likely purchase for each of the items.

The profile of the 552 affluent men and women in the national survey sample is: $304,000 average household income, $3.1 million average household net worth, and $1.2 million average value of their primary home. The average age is 55 while 86% are married and 60% are males.

Both men and women  were asked to provide a price (the median value of the price reported by men/women is shown in parenthesis)  and a brand for a new auto ($40,000/$35,000) for personal use, a room in the winter in a Caribbean resort ($300/$250 per night), a European cruise ($300/$300 per person per night), a hotel room in New York City ($300/$300 per night) for a vacation, a refrigerator ($1,500/$1,500), an original painting $3,000/$3,000), a washer/dryer set ($1,500/$1,500), a king size mattress ($1,000/$1,500), a set of linens for a king size bed ($200/$150), wall to wall carpet ($20/$20 per square foot), a watch for dressy occasions ($1,000/$500), a watch for every day ($130/$150), a bottle of wine ($40/$30) for a special dinner at home, frames for sun glasses ($125/$150), and a large 24” wheeled garment bag ($200/$150).

Women were asked to provide a price (median value shown in parenthesis) and a brand for a dressy suit ($250), shoes ($120) to go with the dressy suit, a cocktail dress ($200), shoes ($100) to go with the cocktail dress, a pair of jeans ($75), a pair of diamond stud earrings ($1,000), a purse ($100) for every day, skin rejuvenation cream ($50 for 1.7 ounces), liquid make-up/foundation ($25 for one ounce), a bottle of perfume ($60 for 1.7 ounces), and lipstick or gloss ($15).

Men were asked to provide a price (median value shown in parenthesis) and a brand for a business suit ($500), shoes ($200)  to go with the business suit, dress shirt ($75) to go with the business suit, a tie ($50) to go with the suit, a tuxedo ($500), shoes ($125) to go with the tuxedo, shirt ($75) to go with the tuxedo, a sport coat ($250), slacks ($100) to go with the sport coat, a dressy long sleeve sport shirt ($75), and dressy short sleeve sport shirt ($50).

For a more detailed summary of the findings of this research and its implications, visit our blog post at AffluenceResearch.org entitled “Popular View of Luxury Spending Debunked in Survey of the Wealthy.”

Tags: Affluence Research, affluent market, conspicuous consumption, consumption habits, discreet luxury, high net worth, luxury, luxury consumers, luxury market, luxury research, luxury shame, millionares, stealth wealth
Posted in Affluence Research, Luxury Defined, Luxury Market & Goods | No Comments »