SOURCE: Unity Marketing

May 09, 2008 12:29 ET

Unity Marketing's New Report on the State of the Luxury Market Is Released

Luxury Marketers Face New Challenges as the Economy Falters and Luxury Consumers Hold Back on Lavish Spending

STEVENS, PA--(Marketwire - May 9, 2008) - The market for luxury boomed in 2006, with the 22 leading global luxury companies reporting an industry-wide revenue increase of 10.2 percent over combined industry revenues in 2005. Topping the list of the fastest-growing luxury companies in 2006 were Giorgio Armani and IT Holding/Ittierre, both with revenues up over 30 percent; and Coach, LVMH and Swatch, posting revenue gains over 20 percent. This according to the latest report on the state of the luxury market published by Unity Marketing entitled Luxury Report 2008: The Ultimate Guide to the Luxury Consumer Market. (http://www.unitymarketingonline.com/cms_luxury/luxury/Luxury_Report_2008.php)

Yet when these luxury companies tally up their 2007 revenues and earnings, the results will be much more modest based upon a 4.4 percent drop in average luxury consumer spending in 2007. "Affluent Americans backed off markedly in their pursuit of the luxury lifestyle, most notably in the second half of 2007. Going into 2008 their spending continues weak. This will place tremendous competitive pressure on luxury companies and retailers, as they face a newly resistant affluent consumer with a mindset to hold onto their cash, rather than spend it," says Pam Danziger, president of Unity Marketing and author of "Shopping: Why We Love It and How Retailers Can Create the Ultimate Customer Experience."

Luxury Report 2008 details the state of the United States luxury market

Unity Marketing's Luxury Report 2008 is the definitive study of the U.S. market for luxury goods and experiences. The total market for luxury contributed some $321.9 billion in consumer spending in 2007. The Luxury Report examines consumers' buying behavior and spending details on 22 luxury product and services, including where products were purchased and details of the types of products and services bought.

This report provides vital market size, growth and demographics for any company that is in the business of luxury, including product marketers, advertisers, retailers, and service providers. It reports the results of a three-year longitudinal research survey of the luxury market conducted every three months. The results of the four 2007 surveys are combined with those from 2005 and 2006 to provide vital trend analysis. In 2007 a total of 4,284 luxury consumers were surveyed, with an average income of $155,100; average age of 45.2 years and including 64 percent female and 36 percent male respondents.

Key findings reported in the latest Luxury Report 2008

Among the key findings from the latest state of the luxury market report from Unity Marketing:

-- Luxury spending down except in experiential luxuries -- The typical
   luxury consumer cut their spending on personal luxuries by 12 percent in
   2007, the category in which the heaviest budget cuts were made.  But
   while they spent less on luxury goods in 2007, they increased spending
   on experiences by 5.2 percent.  "Since experiences give affluent
   consumers their greatest source of happiness and satisfaction, they are
   more cautious in splurging on luxury goods which don't provide the same
   level of personal gratification," Danziger explains.

-- All affluent income segments cut their spending in 2007 -- Spending was
   down across all income segments in 2007, including among near-affluents
   ($75k-$99.9k); affluents ($100k-$149.9k); and super-affluents ($150k and
   above).  "In this downturn luxury marketers can't depend upon their most
   affluent customers to see them through.  No matter how much cash one
   has, people feel less flush and that means they are going to hold tight
   and resist temptation.  In marketing, perception IS reality and the
   affluent feel less well-off now," Danziger says.

-- Bright spots amidst the gloom -- Luxury consumers were willing to spend
   more on certain luxury categories in 2007.  For example, luxury
   consumers spent more on art and antiques and kitchen appliances, bath
   and building products last year, both categories that have potential
   investment value.  In personal luxuries consumers spent more on
   cosmetics, fragrance and beauty products, fashion accessories,
   especially shoes, but not handbags this year; and watches.

-- Luxury consumers bought fewer luxury brands in clothing and fashion
   accessories -- Overall the trend in buying specific clothing and fashion
   accessories designer labels in 2007 tended to be off, with most of the
   more than 35 designer labels included in the surveys showing a decline
   from purchase levels in 2006.  Danziger says, "This may indicate
   consumers have reached a saturation point when it comes to the
   high-priced luxury brands.  Today there have never been such good
   quality competitive offerings at premium, even mass-market levels. So
   instead of spending $1,500 on a luxury handbag, affluent consumers can
   confidently trade down to a $350 premium brand that can carry the same
   amount of stuff and without a significant loss in quality."

-- Conservative trend in jewelry -- Luxury consumers turned away way from
   gold and precious stones, toward sterling silver and semi-precious.
   Jewelry shoppers too trended away from specialty jewelry stores and more
   towards Internet and other direct-to-consumer channels where prices are
   more competitive.  Luxury consumers on average spent 10.8 percent less
   on jewelry in 2007.

-- A change in luxury consumer mindset away from luxury indulgence and
   toward a more conservative, less materialistic and ostentatious
   lifestyle -- Most significantly for luxury marketers in the future is a
   marked shift in people's propensity to indulge in an ostentatious luxury
   lifestyle.  Rather a 'less is more' approach is emerging among the
   affluent consumers.  Rampant materialism is on the decline as measured
   in this attitude statement, "While luxury experiences are nice, they are
   fleeting, so I prefer to buy luxury items I can keep and cherish."  Back
   in 2003 nearly two-thirds of luxury consumers agreed with that
   statement.  In 2007 only 41 percent of luxury consumers agreed, a drop
   of 22 percentage points.

The Luxury Report 2008: The Ultimate Guide to the Luxury Consumer Market (225+ pages) is available by subscription through Unity Marketing. Click this link to learn more about the report, review the table of contents and details of the charts, tables and graphs included, and the study's methodology. http://www.unitymarketingonline.com/cms_luxury/luxury/Luxury_Report_2008.php

For subscribers to the Luxury Report 2008, attendance at "The Coming Luxury Drought" webcast presentation on May 21 or for future webcasts are free.

Danziger to webcast "The Coming Luxury Drought"

On May 21 at 9:00 a.m. eastern Pam Danziger will present a webcast for luxury marketers entitled "The Coming Luxury Drought: What Luxury Marketers Need to Know and What They Can Do About It." The webcast will examine the cultural factors that are causing affluent consumers to cut back on their luxury spending. It will present ways that luxury marketers can tap the shifts in consumer psychology to overcome a newly resistant affluent consumer and create a loyal relationship with them. To register for this webcast, click here http://www.unitymarketingonline.com/unity_shop/shopping_cart_add.php?product_id=244&quantity=1 Subscription fee is $495 and FREE for subscribers to the Luxury Report 2008.

Coming Soon:

--  Pam Danziger's webcast "The Coming Luxury Drought" May 21 9:00-10:00
    a.m. (other webcasts tbd)
--  How the Affluent Will Vote in the Upcoming Presidential Election --
    The Gender Factor
--  Green Marketing and the Luxury Consumer
--  Release of Luxury Report 2008 with special report on a newly emerged
    luxury consumer personality -- the Temperate Pragmatist
--  Latest trends and directions in the giftware and home decorative
    accents market
    

About Pam Danziger and Unity Marketing

Pamela N. Danziger is an internationally recognized expert specializing in consumer insights, especially for marketers and retailers that sell luxury goods and experiences to the masses or the 'classes.' She is president of Unity Marketing, a marketing consulting firm she founded in 1992.

Advising such clients as PPR, Diageo, Stearns & Foster, Waterford/Wedgwood, Lenox, Prudential Fine Homes, Marie Claire magazine, Orient-Express Hotels, The World Gold Council, Italian Trade Commission and The Conference Board, Danziger taps consumer psychology to help clients navigate and master the changing luxury consumer marketplace.

In recognition of her ground-breaking work in the luxury consumer market, Pam received the Global Luxury Award presented by Harper's Bazaar for top luxury industry achievers in 2007.

Her latest book is "Shopping: Why We Love It and How Retailers Can Create the Ultimate Customer Experience," published by Kaplan Publishing in October 2006. Her other books include "Let Them Eat Cake: Marketing Luxury to the Masses--as well as the Classes," (Dearborn Trade Publishing, $27, hardcover) and "Why People Buy Things They Don't Need: Understanding and Predicting Consumer Behavior" (Chicago: Dearborn Trade Publishing, 2004).

Contact Information

  • Contact:
    Pam Danziger
    717-336-1600