The Lure of Luxury
April 26, 2013-- Furniture Today,
When it comes to the health of the luxury segment, a recent headline in the Wall Street Journal probably said it best: "What Recession? Americans Regain a Craving for Luxury."
Most analysts, including Jonas Hoffman, professor of luxury marketing at SKEMA Business School, would readily agree.
In one of his reports on the luxury consumer, Hoffman acknowledges that "the luxury industry is currently on a remarkable journey. Quarter after quarter, Hermes, Louis Vuitton, Gucci, et al announce record sales in a growing market with profits in double-digits."
Until very recently, China had held bragging rights for being the engine responsible for driving the luxury segment. Most studies, including a Bain & Co. report issued last year, found that Chinese consumers were spending more on luxury items than shoppers anywhere else in the world, including the United States, which was close behind.
Bain said affluent Chinese consumers spent close to $35 billion last year on iconic luxury brands, with Louis Vuitton, Gucci and Chanel at the top of the list.
The Bain report also concluded that China's well heeled consumers spent the majority of their money on luxury purchases to buy goods directly from Western sources, at a lower cost than they can obtain them from Chinese importers.
But here at home, an uptick in housing sales and prices, declining unemployment, and record and near-record highs at the stock market clearly have loosened up attitudes and spending for wealthy Americans. According to the Wall Street Journal, America may have regained the distinction of being the largest spenders in the luxury sector.
While Americans in general indicated they spent less last year, a report from the Harrison Group and American Express Publishing found that the nation's top 1% - based on wealth - said they planned to spend 20% more than in the previous year.
The gains made by luxury brands were also confirmed in findings from the recently released 2013 Harris Poll EquiTrend study. After evaluating more than 1,500 brands in more than 155 categories, the study concluded that dozens of luxury brands made significant gains in brand equity compared to the prior year.
The February edition of the Mendelsohn Affluent Barometer, a service that surveys households with annual income in excess of $100,000, found that 52% of those households not only perceived themselves as well off, but also believed that they would be doing even better next year.
And that can only bode well for furniture, according to an online survey conducted in December with 3,000 U.S. households by Furniture/Today and TNS, a Kanter Group company. The specifics of that study appear on the next page of this special report, but suffice it to say that affluent households continue to spend significantly more on home furnishings than middle-income households.
But even so, a number of retailers contacted by Furniture/Today acknowledged a spike in high-end sales from what they described as aspirational shoppers - middle to upper-middle income shoppers with an appetite for better goods.
There has also been a renewed interest in selling upper-end home furnishings from a number of Top 100 retailers, including Michigan's Art Van Furniture, which has renewed its focus on luxury goods in the form of a 13,000-square-foot addition to its Royal Oak, Mich., showroom for a flagship Scott Shuptrine Interiors design center.
Other retailers successfully targeting the high end include Clive Daniels Home, Robb & Stucky International, and La Maison Furniture.
Meanwhile high-end veterans such as Louis Shanks of Texas, Michigan's Gorman's Furniture and others continue to make inroads by taking the high road on the home furnishings highway.
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