Captivating Connections.

is the 1% rewriting the rules of luxury?

According to Ipsos Mendelsohn's study of consumers considered to be affluent, "people making at least $100,000 are feeling better about the economy...but the super rich are really feeling better." Fair enough, as they've got reason to feel better: "the good news for the especially affluent is that the top fifth is doing better and better now, while recovery among the hoi-polloi is as flat as a leftover tarp in Zuccotti Park."

Womp womp.

But what does this mean for the notion of 'luxury' today? According to Stephen Kraus, chief research and insights officer at the firm, "Eighty-nine percent of respondents said luxury is in the eye of the beholder. Responses varied widely, but pampering was important. It might be a fish pedicure [don't ask], a two-hour massage, or a facial in a spa in Beaver Creek."

But how different is this than the notion for ANY consumer and the idea of 'value is in the eye of the beholder', where a 'splurge' could be anything from a Starbucks latte or a mani pedi?

even the affluents are cautious about luxury spending this holiday season.

If you look at forecasts from eMarketer and Unity Marketing, you'll get the sense that, while Affluents plan on spending this holiday season, when it comes to luxury purchases, how much they'll be buying is iffy. Why? Even among Affluents, "there are also signs that consumer confidence is waning in the face of the continuing down economy."

According to Unity's Luxury Consumption Index, "the share of affluent respondents who said they were currently spending less on luxury goods than a year ago was up to 27% in Q2 2011, from 25% in Q1 and 23% in Q4 2010. At the same time, 26% of respondents said they were spending more—down from 33% in Q1, and the smallest number since 2009.

Affluents were similarly cautious about their plans for future luxury spending. Most said they would be spending the same amount in the coming year as they have been for the past year. But in Q1 2011, they were more optimistic. Earlier this year, 30% planned to spend more, a response that dropped to 24% in Q2, while the proportion planning to spend less rose by 2 points."

even the rich(er) are bargain hunters.

According to Unity Marketing's recent research looking at ultra-affluent consumers (consumers making $250,000+ in annual income, also known as the wealthiest 2% of Americans), not only are they shopping online more often than other consumers, but also they're looking for deals. Apparently Amazon.com is the top shopping destination for the ultra-affluent, with 45% of the demographic logging on.

These savvy shoppers are also looking for online deals. "Fourteen percent of shoppers went to eBay, 10% used Groupon and 8% hit Craigslist.com. Wealthy shoppers are also heading to flash-sale sites such as Shopittome.com, Gilt.com, Hautelook.com and Amazon's entry into the category, MyHabit.com."

What's up with that? According to Unity Marketing's President Pam Danziger, ""They don't get wealthy by spending all their money. They [like to] compare prices and features," Danziger says. "We have to recognize conventional wisdom doesn't apply. They'll go to Craigslist for bargains."

Digitas and Ipsos Mendelsohn have done an awesome study looking at the link between affluence and digital, finding that "as a consumer's affluence increases, so do factors such as early adoption of new digital devices, consumption of digital content and usage of mobile devices."

What does that mean?

"Digitas pointed to a changing 'affluent landscape' in America. It found that what used to be called the 'mass affluent' market -- with annual household incomes between $100,000 and $199,000 -- 'has disappeared.' These households, Digitas said, have lost their leveraged spending power, been forced to live on income alone, and mostly consider themselves middle-class.

They've given way to two groups with spending power: the truly affluent and the up-and-coming affluent. The former, the 'class affluent,' earns between $200,000 and $1 million annually, with most considering themselves upper-middle class.

The latter is the 'emerging affluent.' Members of this group earn the same income as the mass affluent group did, but they are under 35 years of age. Plus, they have 'intensely digital media behavior.'

Emerging affluent consumers, Digitas said, work in careers that will eventually deliver affluence (i.e., financial services, legal services, engineering). They consider themselves opinion leaders, follow trends, love to travel, are passionate about food and dining, and purchase both stylish youth-oriented brands like Scion, Diesel, and Samsung and true luxury brands, such as H. Stern, Tiffany, St. Ives and D&G."

 

are affluents feeling weighted down by technology?

"As people of means acquire more technological devices to simplify their lives, their lives have actually become more complicated."

Yep, you read that right. According to Ipsos Mendelsohn, "technology, seemingly like everything else from the last decade, is viewed by the Affluents as something of a mixed blessing. When we asked how their lives had changed over the past decade, 'infused with technology' was the most widely cited answer. But equally telling are the phrases coming next on the list -- 'more complicated,' 'more stressful" and 'focused on finding ways to do more with less.' In contrast, fewer than half said their lives had become 'more fun' or 'easier.'

At least in the short-term, expect both trends to continue -- enthusiastic adoption of new technology, and the increasing complication of everyday life. A host of new tablets, e-readers and other platforms are poised for introduction, surely bringing lower prices, new capabilities, and increasingly complicated purchase decisions. For most, a tablet or e-reader doesn't replace an existing device, it becomes a supplement -- another device to carry, manage, troubleshoot and potentially pay monthly charges for. And it's another device to be accounted for in the complex calculus of choosing a media platform for a particular task or occasion (e.g., a smartphone for calls and texting, a tablet for app usage, a print magazine to read on the train, a laptop for document creation and internet use).

Expect another trend to continue: Life will continue to get more complicated for those of us in advertising and media. We must understand the growing adoption and use of new technology, as well as the evolving 'topography' of platforms and occasions. At each point in this topography, we must understand consumers' level of engagement, receptivity to advertising, preferences for apps vs. web-based content, unmet information needs and much more. And we must do it all in an environment in which consumers feel they are facing more complex and stressful decisions than ever before."

luxury sales to increase 8% this year.

According to Bain & Co., "worldwide spending on luxury goods is expected to increase 8% this year."

What's causing this?

"Fueled by strong spending in the U.S., Europe, Brazil, Russia, China and the Middle East, the report forecasts luxury spending of €185 billion euros, or about $275.4 billion -- up from €172 billion last year. And 2010 actually came on stronger than many expected, with a 14% jump in luxury goods in the fourth quarter pushing sales past their pre-recession levels. For 2010, sales totaled €172 billion -- busting past the prior peak of €170 billion in 2007.

From 2008 to 2009, the affluent cut back sharply, with luxury sales plunging 17%.

So far this year, sales are up smartly: In both February and March, Bain says both department store and direct-owned luxury chains saw double-digit growth from the prior year. And orders for the fall season are up sharply, particularly for accessories, leather goods and hard luxury categories such as jewelry and watches. The report was released by Fondazione Altagamma, the Italian luxury goods industry trade association.

In the Americas, it predicts spending for the year will reach €52 billion, or $77.3 billion, with the U.S. continuing to hold its position as the largest consumer of luxury goods."

the digital media connection between gen y & brands.

Shout out to Professor Galloway's L2 for this study. Full disclosure: I was a participant in this survey.

"Digital media is 'trouncing' traditional channels in the battle for affluent Gen Y consumers, according to a new study by L2, which examined the media consumption habits of well-heeled millennials, defined as anyone born between 1980-2000).

The L2 study was based on an international survey panel of 535 young adults who expect to be earning more than $80,000 per year in the near future. Of key interest to advertisers and marketers, it delved into the implications for luxury marketers looking to connect with prestige-oriented members of this rising generation.

Facebook is a dominant presence in the Gen Y media mix, with 81% of affluent millennial consumers using it every day; that's about twice the proportion who read newspaper content (45%) or watch TV shows (44%) every day.

Some 25% said they use mobile devices to access social media, while a solid majority gave social media an important role in their consumer decisions. Sixty-three percent use social media to engage with brands, and over half said their attitudes toward brands were shaped by Facebook, blogs and online video produced by brands.

Companies take note: 45% said they read blogs every day." Including this one! :)

today's luxury gift buyer.

It's not who you may think it is...

According to Accenture, "buyers of luxury gifts this year are younger and less solvent. The company says that buyers between the ages of 25 and 34 are more likely to purchase some form of luxury gift this year, but that the likelihood of that happening drops when the consumer is older than 34.

Accenture says over 25% of luxury buyers will shop for luxury gifts online, with younger customers showing the greatest desire to shop online. Mass retailers (16%) and discount stores (10%) were the next-most-popular shopping destinations, followed by specialty stores (4%), and luxury brand stores (3%) rounded out the bottom of the list.

The firm says 92% of consumers expect to spend the same or less on luxury gifts this holiday season than last year, and 36% plan to spend less than $250 on all of their holiday gift purchases, including luxury. Thirty-four percent plan to spend more than $500 total on gifts. Accenture says price has been the most important product attribute by far -- more than quality, brand or store experience -- among the reasons consumers choose a luxury gift item this holiday.

how are you reaching affluents online?

"Affluent consumers are the primary shoppers for many different online product categories and retailers, and their influence on ecommerce sales in general is heavy. Households with incomes of at least $100,000 made up about a third of all US retail ecommerce spending in Q2 2010, but they also accounted for two-thirds of ecommerce growth in that quarter, according tocomScore.

'Marketers who sell high-end goods must understand how the shopping behavior and attitudes of affluent consumers are evolving,' said Jeffrey Grau, eMarketer senior analyst and author of the new report 'Affluent Shoppers and Luxury Brand Retailers Online.'

what's really going on with luxury spending.

"A new report from American Express Business Insights says luxury sales are up, gaining 9% in the second quarter.

While spending in each of the four categories it analyzed increased, furniture and home furnishings showed the biggest improvement -- up 21% -- followed by sales at luxury department stores, which rose 15% in the quarter. (Women powered those department stores sales, making 69% of purchases. And 22% of all charges came from shoppers ages 36 to 45.)

While sales also rose in the apparel and accessories (up 9%) and jewelry sectors (up 12%), the report says growth slowed in each of those categories as the quarter progressed, indicating renewed fears about the fledgling recovery. Jewelry sales gained only 3% in June, for example, the smallest increase in the last eight months.

A new survey from Unity Marketing, which focuses on affluent consumers, reports that 73% believe the recession is still continuing, no matter what the economists say. Some 21% believe the economy is in recovery. Unity, which conducted the research in July among adults with an average annual income of $307,000, also found that 44% of this group plan to spend less and to save and invest more, in the 12 months ahead.

Specifically, they said they were planning to shop less, cut back on dining out, do more comparison shopping, and even clip more coupons."