It's not easy to define that luxury consumer
Jerry Epperson -- Furniture Today, January 15, 2006
My new car has satellite radio. I didn't expect to hear as much advertising as there is on many of the stations. Maybe this is a new opportunity to reach affluent consumers in a very segmented way — 150 channels!
On my drive in today, I heard a comedian explain the difference between "rich" and "wealthy." A successful pro ballplayer is probably "rich," but the person that owns the team is probably "wealthy." Another way to say this is that the rich have great income statements (big paychecks) but the wealthy have great balance sheets (bank accounts, real estate and investments). Lots of people make big money but they spend it, so they are not wealthy. Others have lots of assets, like real estate or art, and are wealthy, but their income is not that great.
This is one reason it is difficult to define the luxury market. Thanks to recent strong appreciation, some fixed-income consumers (primarily elderly) have seen their homes soar in value. But so have their real estate taxes. Thus, they have greater wealth but their disposable incomes actually may have decreased.
The luxury market is growing rapidly, largely because of maturing baby boomers whose assets have grown while debts and the number of dependents declined. We have never had more products and services targeting this group. But where are they shopping?
A study by Affluence Research showed that households with investable assets of $1.5 million or more, which had an average annual income of about $350,000, were more likely to have shopped at Home Depot, Target, Costco and Best Buy in the last 90 days than anywhere else.
Surely, that's no surprise. Isn't that where you shop?
As EPM's Ira Meyers said recently, "When it comes to commodities, upscale shoppers are perfectly content to roll their carts down the aisles of Costco and Target — and, no doubt, the local dollar store. But when it comes to defining their lifestyles through brands, they don't want to be mixed in with the hoi polloi."
Luxury varies greatly by locality. In the Richmond, Va., real estate market last month, the most expensive home sold for $1.6 million; in the greater Los Angeles area, it was in excess of $35 million. What is perceived as extreme luxury in one place is merely upper-middle in another.
Perhaps the lesson is not to prejudge either who has money or what they consider luxury. The consumer wearing clothes from Target might have the funds to buy Baker, while another carrying a Gucci bag and driving a Jaguar may shop for furniture at Goodwill.
Don't be impressed by the bling — or the lack of it.
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It's not easy to define that luxury consumer
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