Getting to know the U.S. luxury consumer (I)

Ottawa

Carol Besler - Over the past year, a number of poll-takers have peered inside the psyche of the wealthy American shopper, revealing some interesting data about this fascinating species. Review of these data and there impact on the watch and jewellery industry in two parts. First one.

Over the past year, a number of poll-takers have peered inside the psyche of the wealthy American shopper, revealing some interesting data about this fascinating species. Review of these data and there impact on the watch and jewellery industry in two parts. First one.

Carol Besler

Ah, the American consumer. Where would the world be without those dedicated, demanding, capital-generating, free spending Yanks? Over the past year, a number of poll-takers, retail analysts and surveyors have peered inside the psyche of the wealthy American shopper, revealing some interesting data about this fascinating species, its habitat, spending habits, attitudes and preferences. Here is a review of some of that data and what it means to the watch and jewellery industry.

More people have more money

• The number of millionaires in North American grew 6.9% to 2.9-million in 2005, and their total wealth is about $10.2 trillion.

• American affluent consumers spent significant amounts of money in 2006, indulging in luxury goods and services. Spending by the typical luxury consumer rose 6.6% to reach $56,065, following an increase of 3.8% in spending in 2005, according to a recent study by Unity Marketing.

• Today, the luxury market is a two-tiered market. The wealthy, with incomes over $150,000, constitute the mass luxury market. The super-rich, with assets in the multiple millions, constitute the premium luxury market. Many brands are now catering to both, with two distinct product lines. With the democratization of luxury, many people can now afford a Ralph Lauren suit, a Dior handbag or a Cartier Tank Française. For the über-rich, products are custom-made and exclusive, often one-of-a-kind. The price points are largely inaccessible to what is now being defined as the “average” luxury consumer.

Mass luxury is the new middle class

• The mass luxury market segment is growing. According to the Luxury Institute, wealthy American households have increased in number by more than 51% in the past four years. A 2006 American Community Survey data, from the U.S. Census Bureau, confirms that the number of households with an annual income of $150,000 or more increased to 8-million in 2006 from approximately 5-million in 2002. This represents 7% of American households.

• Among $150,000 U.S. households, 6.5 million are white, 372,000 are Hispanic, 312,000 are African-American, and 527,000 are Asian. California is the wealthiest state, with 1.3 million wealthy households, followed by New York, with 668,000. Washington, D.C. has the highest percentage of citizens who are wealthy, followed by New Jersey and Connecticut. The New York Metro has the highest concentration of wealthy consumers, at 885,000, followed by Los Angeles at 450,000.

• Not surprisingly, a home-owning consumer is likely to spend twice as much on jewellery as a consumer who is renting, according to recent survey by Idex Online.

• According to an annual survey of affluence and wealth in America, by American Express Publishing Corp. and the Harrison Group, the new upscale consumer carries a “middle-class mentality” using diligence to save money and comparison shop.

• Early last year, the Luxury Institute surveyed 1,650 people with annual household income of at least $150,000, asking them to assess 19 upscale brands. Their favorites were among the most affordable even as a growing number of high-end marketers have introduced super-premium products.

• According to a Luxury Institute survey, a total of 96% of Americans with annual incomes of $150,000 or more buy products and services online; 55% do so frequently. Nearly all wealthy consumers (99%) use the Internet to research before they buy; two-thirds conduct online research frequently. Nearly three-fourths of the wealthy say finding companies through Internet search is an effective way to create a positive impression. Just 30%, however, found ads on a search engine site an effective marketing technique.

• Once wealthy consumers arrive at a Web site, privacy and security are of chief importance, followed closely by ease of navigation. Forty percent find easy-to-navigate Web sites very effective at creating a positive impression and leading them to purchase; 37% cite ease of navigation as somewhat effective. Wealthy women are significantly more likely than men (46% compared to 35%) to find easy navigation very effective.

• Useful content, and a liberal return policy, are highly important, as is the ability to track shipments. Companies should refrain from using pop-up or banner ads on-site as they are a turnoff for the wealthy, especially at the highest levels of income and net worth. What’s not important? Having a physical location, an attribute the wealthy rate 4.8 (1-10 scale). ■

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