Room At The Top
By Wanda Jankowski, Editor-in-Chief
Startling statistics were revealed by Jean-Marc Bellaiche, senior partner and managing director in the N.Y. office of The Boston Consulting Group, during a recent meeting of the Luxury Marketing Council. Twenty-nine percent of the world’s millionaires live in the U.S. Almost 40 percent of the world’s richest (30 million or more in assets) reside in the U.S.
Yet the spending of those groups on luxury goods falls at lower percentages than might be expected. While U.S. afflluent consumers purchase 37 percent of the world’s luxury cars, they only claim 24 percent of experiential luxury goods (which include home goods), and 19 percent of personal luxury goods.
This is good news for makers and sellers of luxury products: there is room for growth in the U.S. luxury market. To help you craft a strategy in addressing this market, here are more details shared by Bellaiche in his presentation on who these affluent consumers are and how they shop :
- The U.S. luxury market is driven by millionaires, more of whom are women (37 percent) than in any other country.
- Sixty-one percent of the U.S. wealthy live in major cities, but the remaining 39 percent, which total 1.2 million, live in smaller cities. The key to selling luxury goods in second-tier cities is to customize the assortment and pricing to the local community.
- While Europeans have no problem paying full price, U.S. luxury consumers, in spite of their wealth, want to make a deal, look for sales and go to factory outlets. Factory outlets have proved to be a rousing success for some luxury brands. (Seventy percent of Ralph Lauren’s stores are factory outlets.) For those brands, a main driver of business is the special collections developed for the factory outlets. Higher-end department stores also are moving heavily into factory outlets.
- Include non-U.S. customers in your target market. In the U.S., there are increasing numbers of tourists from Brazil, Russia, India and China. Also, Hispanic and Asian U.S. consumers are outgrowing other ethnic groups and they have a high willingness to spend on luxury goods.
- There is strong technology adoption among the affluent and younger U.S. populations. The U.S. and Korean consumers are the most digitally advanced in the world. Luxury brands are doing more online, using social media and creating apps that may offer exclusive products or blog content to enhance the shopping experience. Department stores are trying to reinvent themselves to compete and survive, offering more exclusive and private label products. They also are focusing on online business, adding features to make shopping easier on their websites that luxury brand websites don’t have, such as enhanced graphic presentation of products, cross-merchandising elements and customer reviews. The challenge for both brands and department stores is to integrate efficiently the online and offline experiences.