The Frugal Luxury Shopper (Luxury Tracking Report 3Q2004)
Unity Marketing, November 2004, Pages: 100
In today's hyper-competitive environment, market research is not an option; it is a necessity. Luxury marketers that want to win must stay vigilant in tracking the shifts, turns, and changing preferences in their affluent consumer market. They need up-to-the-minute data, as well as a historical perspective, to anticipate the next major luxury business opportunity or branding challenge. The Luxury Consumer Tracking Service is designed for luxury marketers who need to know all there is to know about their consumer market.
Beginning in January 2004, and every three months thereafter, we have measured the pulse of the affluent consumers in a longitudinal survey of 600-to-750 affluent consumer households. Every quarter we have tracked what luxuries they bought during the past quarter, how much they spent, where they bought, the luxury brands they became aware of and used, and how they felt about their current and prospective financial status.
Luxury consumers' confidence in the economy took a hit in the third quarter. After rising to 102.7 in the second quarter, the Luxury Consumption Index declined to 96.0, down 6.7 points, according to our latest tracking study of the luxury market.
The Luxury Consumption Index measures the luxury consumers' feelings and attitudes about their financial well-being. The majority of luxury consumers (53 percent) felt their financial position was the same and no better than during the previous three months. Further, nearly 40 percent said the country as a whole was less well off in the third quarter.
Luxury Spending Drops in 3Q2004 and Predicted to Bounce Back in 4Q2004
In the third quarter only 19 percent of luxury consumers said they spent more on luxuries, as compared to 35 percent who spent more freely in the second quarter. The link between consumer confidence and spending among affluents was marked by a 35 percent drop in average spending.
This benchmark index of luxury buyers is calculated form a sample of over 700 upper-income households throughout the United States. This panel, with household incomes over $75,000 (one-third $150,000 or more) represents one of the largest longitudinal studies of high-end luxury consumption of goods and services. Panelists reported purchasing behavior of luxury goods and services over the past three months, as well as attitudinal and expectation data about luxury brands and categories, their households and the health of the economy in general.
Specifics included in the Luxury Tracking Study are purchase incidence and spending, where purchases were made and expectations of future purchases on:
- Home Luxuries, such as electronics and photography equipment; linens and bedding; kitchenware, cookware and housewares; furniture, lamps and lighting and floor coverings and rugs; outdoor, lawn, patio and garden; kitchen appliances, bath and building products; home decorating fabrics, window and wall coverings; tabletop, dinnerware, flatware, servingware, figurines and decorative accents; and art and antiques.
- Personal Luxuries, such as clothes and apparel; fragrances, cosmetics and beauty products; fashion accessories; automobiles and jewelry and watches.
- Experiential Luxuries, such as fine dining; luxury travel; entertainment; and spa, beauty treatments and cosmetic surgery.
Also included in the third quarter tracking study is a special investigation to luxury consumers' propensity to buy luxuries on sale or at a discount.
Chapter 1: The Frugal Luxury Shopper and the Implications for Pricing Luxuries
Introduction.
Buying Luxury on Sale Predominates
- Figure: Last Luxury Purchased on Sale/Discount
Greatest Level of Discounting Is from 11-to-25 Percent Off List
- Figure: Level of Discount on Last Luxury Purchase
Discount Price Was Important in Influencing Last Luxury Purchase
- Figure: Price's Influence on Last Luxury Purchase
Luxury Consumers Love to Shop for Bargains
- Figure: Financial Status: Which best describes your financial situation?
Lower Income Luxury Consumers Search Out Bargains, While More Affluent Are
Opportunitistic to Buy When They See a Good Deal
- Figure: Attitude Statements About Price and Discounting of Luxury Goods by Income
Segment
Luxury Consumers Want to Preserve Their Luxury Lifestyles
Getting a Bargain Is How Luxury Consumers Measure their Winnings in the Shopping
Game
The Luxury Pricing Equation: How Much Does a Feeling Cost
Luxury Pricing Challenge: Triple the Value, but only Double the Price
How Reidel Crystal Delivers an Enhanced Luxury Experience and Maximizes the
Price/Value Equation
The Price Communicates on Many Different Levels
- Figure: Luxury Pricing Paradigm
Chapter 2: Luxury Tracking Study Topline Findings: Luxury Consumer Confidence Drops in 3Q04
Luxury Consumption Index Drops 6.7 Points to 96.0
Luxury Spending Drops in 3Q2004 But Is Predicted to Bounce Back in 4Q2004
- Figure: Luxury Consumption Index
Luxury Consumers Are Back to First Quarter in Financial Feeling
- Figure: Financial Well-Being
Luxury Spending Drops in 3Q2004
- Figure: Luxury Spending Trends
About Half Expect to Spend Same on Luxuries in Coming Twelve Months
- Figure: Expected Luxury Spending Next Twelve Months
Everybody Buys Home Luxuries in Third Quarter, but Fewer Buy Experiential
Luxuries
- Figure: Luxury Purchase Incidence, 2003 & 1Q04-3Q04 & Next Quarter Expect to
Buy
Total Spending on Luxuries Declined 35 Percent in Study Period.
- Figure: Total Luxury Spending, 2003 & 1Q04-3Q04, % Chg Q2-Q3
Super-Affluents Spend Twice as Much on Luxury as Affluents and 2.4 Time More than
Near-Affluents
- Figure: Luxury Spending by Income Segments; Near-Affluents, Affluents and Super-
Affluents
Where Luxury Consumers Shop for Luxury Goods.
- Figure: Where Luxury Consumers Shop for Luxury Goods, by product category
Brand Awareness in Luxury Department Stores
- Figure: Luxury Department Store Brand Awareness; Nordstroms, Neiman Marcus,
Saks Fifth Ave, Marshall Fields
Chapter 3: Home Luxury Purchases: Detail Finding on Home Luxury Purchases
All Luxury Consumers Bought for the Home — Major Increase in Purchase Incidence
- Figure: Home Luxuries Purchase Incidence & Expected Purchases, 1Q04-3Q04 & projected 4Q04
Did Decline in Consumer Confidence Result in More Home-Focused Luxury Consumers in 3Q2004?
More Modest Purchase of Home Luxuries Expected in 4Q2004
- Figure: Variation in 2Q Planned Home Purchase vs. Actual 3Q Purchases
Average Home Luxury Spending Was About Same — Net/Net: Home Luxury Market
Grew 3Q2004
- Figure: Total Home Spending 1Q-3Q and Q2-Q3 Percentage Change
Super-Affluents Spent 61 Percent More than Average on Home Luxuries
- Figure: 3Q2004 Home Luxury Spending by Income Segment
Where People Buy Home Luxuries
- Figure: Where Luxury Consumers Shop for Home Luxuries
Majority of All Home Purchases in 3Q2004 Were Bought on Sale
- Figure: Percentage of Home Purchases Made on Sale or at a Discount; Art and
Antiques; Electronics; Furniture, Lamps and Floor Coverings; Garden; Home
Decorating Fabrics, Wall and Window Coverings; Kitchen Appliances; Kitchenware,
Cookware, Housewares; Linens and Bedding; Tabletop
Art & Antiques—Purchase Details
Where People Shop for Luxury Art & Antiques
- Figure: Art & Antiques Shopping Choices
Art & Antiques Brand Awareness & Brand Usage
- Figure: Art & Antiques Brand Awareness & Usage: EBay, Sotheby's, Christies
Electronics & Photography Equipment—Purchase Details
Where People Shop for Electronics & Photography Equipment
- Figure: Electronics & Photography Equipment Shopping Choices
Electronics Brand Awareness & Brand Usage
- Figure: Electronics & Photography Equipment Brand Awareness & Usage: Best Buy;
Circuit City; Sony; Bose; Gateway; Panasonic; Samsung
Home Decorating Fabrics, Window & Wall Coverings —Purchase Details
Where People Shop for Home Decorating Fabrics, Window and Wall Coverings
- Figure: Home Fabrics, Windows & Wall Covering Shopping Choices
Furniture, Lamps & Floor Coverings—Purchase Details
Where People Shop for Furniture, Lamps & Floor Coverings
- Figure: Furniture, Lamps & Floor Coverings Shopping Choices
Garden, Outdoor, Lawn & Patio Products—Purchase Details
Where People Shop for Garden, Outdoor, Lawn & Patio
- Figure: Garden, Patio, Outdoor Shopping Choices
Kitchenware, Cookware & Housewares—Purchase Details
Where People Shop for Kitchenware, Cookware
- Figure: Kitchenware, Cookware, Housewares Shopping Choices
Kitchen Appliances, Bath & Building Products—Purchase Details
Where People Shop for Kitchen Appliances, Bath & Building Products
- Figure: Kitchen Appliance, Bath & Building Products Shopping Choice
Linens & Bedding Products—Purchase Details
Where People Shop for Linens & Bedding Products
- Figure: Linens & Bedding Shopping Choices
Tabletop, Dinnerware, Flatware, Servingware—Purchase Details
What Types of Tabletop Were Purchased.
- Figure: Type of Tabletop Products Purchased, 1Q04-3Q04: Any Glassware or
Crystal; Any Dinnerware; Any Silverware
Where People Shop for Tabletop Products
- Figure: Tabletop Shopping Choices
Why People Buy Luxury Tabletop, Dinnerware, Crystal, Flatware
- Figure: Motivators to Buy Luxury Tabletop
Tabletop Brand Awareness & Brand Usage
- Figure Tabletop Brand Awareness & Brand Usage: Lenox, Waterford, Swarovski,
Wedgwood, Baccarat, Lladro, Lalique, Haviland, Christofle, Reidel, Anna Weatherly,
Moser, Herend, Bernardaud, Daum
Chapter 4: Personal Luxury Purchases
Nearly 70 Percent of Luxury Consumers Made Personal Luxury Purchases
- Figure: Personal Luxuries Purchase Incidence and Expected Purchases: 1Q04-3Q04
& Proj. 4Q04
Personal Luxuries Spending Declined by One-Third in Third Quarter
- Figure: Personal Luxuries Spending Super-Affluents Spent 50 Percent More on Average on Personal Luxuries
- Figure: 3Q04 Personal Luxuries Spending by Income Segments
Where People Buy Personal Luxuries
- Figure: Where Luxury Consumers Shop for Personal Luxuries
Majority of Personal Luxuries, with exception of Beauty Products, Were Bought on
Sale
- Figure: Last Personal Luxuries Bought on Sale/Discount
Automobiles & Recreational Vehicles—Purchase Details
Clothing & Apparel—Purchase Details
Where People Shop for Luxury Clothing & Apparel
- Figure: Clothing & Apparel Shopping Choices
Fashion Accessories—Purchase Details
Where People Shop for Fashion Accessories
- Figure: Fashion Accessories Shopping Choices
Fragrance, Cosmetics, and/or Beauty Products—Purchase Details
Where People Shop for Luxury Fragrances, Beauty Products, Cosmetics
- Figure: Fragrance, Cosmetics, Beauty Products Shopping Choices
Jewelry and Watches —Purchase Details
Where People Shop for Jewelry and Watches
- Figure: Jewelry and Watches Shopping Choices
What Types of Jewelry Were Purchased
- Figure: Type of Jewelry Bought
Material of Composition
- Figure: Material of Composition
Jewelry Brand Awareness & Brand Usage
- Figure: Jewelry Brand Awareness & Brand Usage: Tiffany, Cartier, Bulgari, Bailey,
Banks and Biddle, Harry Winston, David Yurman, Scott Kay, Roberto Coin, Yvel,
Robert Lee Morris, Fope
Chapter 5: Experiential Luxury Purchases
Consumer Confidence Declined and so Did Purchases of Experiential Luxuries
- Figure: Experiential Luxuries Purchase Incidence & Expected Purchases: 1Q04-
3Q04 and proj. 4Q04
Luxury Consumers Spent 47 Percent Less on Average on Experiential Luxuries
- Figure: Experiential Luxuries Spending: 1Q04-3Q04 & Pct. Chg. 2Q-3Q
Super-Affluents Spent More than Average on Experiential Luxuries
- Figure: 3Q04 Experiential Luxury Spending by Income Segments
Only Travel Is Widely Discounted Experiential Luxury
- Figure: Experiential Luxuries Bought on Sale 3Q04
Luxury Dining—Purchase Details
Luxury Entertainment—Purchase Details
Luxury Spa, Beauty, Cosmetic Surgery—Purchase Details
Luxury Travel—Purchase Details
Foreign Travel Down While Domestic Travel Remains Vigorous
- Figure: Type of Luxury Travel
Internet Is Favorite Way to Book Luxury Travel
- Figure: How Booked Last Trip
Luxury Travel Brand Awareness & Brand Usage
- Figure: Luxury Travel Brand Awareness & Brand Usage: Disney World/Cruises,
Ritz-Carlton, Four Seasons, Radisson Seven Seas, W Hotels, Crystal Cruises,
Silverseas Cruises
Appendix A: Luxury Tracking Survey Methodology
Quarterly Tracking of Luxury Consumer Purchasing
Discount Purchases Researched in More Depth
Sample Demographics
Income Demographics
- Figure: Income Demographics
Gender Demographics Skews Female
Age Distribution.
- Figure: Age & Generational Variables
Other Demographic Variables
Luxury Tracking Survey Methodology
Quarterly Tracking of Luxury Consumer Purchasing
This report summarizes the third wave of the Luxury Tracking Survey, field during October 2004, recording luxury purchases from July-September 2004. The results of this survey are compared with the second quarter (March-June 2004 fielded in July) and the first wave of Luxury Tracking Study, fielded March 2004 and covering the January-February period. The next luxury tracking survey will be fielded right after the New Year in January 2005, covering luxury purchases from October, November and December. The overall objective of the survey is to help luxury brand marketers and retailers better understand the shopping and buying habits of their customers and anticipate how they will be spending their luxury budgets in the coming months.
To enable luxury marketers to understand variations within the affluent market, perspectives of three different segments of the luxury market are gathered, based on household income: $75,000-$99,999 (near-affluents or 27 percent of 3Q sample); $100,000-$150,000 (affluents or 45 percent of 3Q sample); $150,000+ (super-affluents or 27 percent of 3Q sample). A total of 717 luxury consumers were surveyed in the third quarter, down from 1,047 luxury consumers who were surveyed in the second quarter. The affluent sample to be surveyed will typically range around 500 consumers, though the luxury survey sample was larger than anticipated due to unexpectedly high survey response rates.
This survey gives luxury marketers early warning of changes and shifts in their marketplace. It will help them monitor brand awareness and purchase so that they can measure the success of new marketing communications programs. It provides a view ‘over the horizon’ of what trends are coming and how they will affect the luxury consumer. Through this service, luxury marketers will keep their finger on the pulse of their affluent customers.
Luxury product categories included in the quarterly survey:
- Home Luxuries: Art & Antiques; Electronics & Photography; Fabrics, Wall & Window Coverings; Furniture, Lamps & Floor Coverings; Garden & Garden Products; Kitchenware, Cookware & Housewares; Kitchen Appliances, Bath & Building Products; Linens & Bedding; Tabletop.
- Personal Luxuries: Automobiles; Clothing & Apparel; Cosmetics, Beauty & Fragrance Products; Fashion Accessories; Jewelry; Watches.
- Experiential Luxuries: Luxury Dining; Entertainment; Travel; Spa, Massage & Beauty Services.
Discount Purchases Researched in More Depth
As each wave of tracking studies are fielded, it is planned that special topics of interest to luxury marketers will be researched in more depth. During the third wave luxury tracking study, the role of price and value and finding discounts and bargains when luxury consumers shop was explored more fully. Detail questions about purchases on sale or at a discount within each luxury category was included, as was a battery of attitude questions seeking to find out more about the bargain-shopping, value-motivated luxury shopper. The topic for special study in the fourth wave luxury tracking will be the selection of luxury as gifts.
Sample Demographics
A total of 717 affluent consumers with household incomes of $75,000 or more and who purchased at least one luxury in the third quarter of 2004 (July-September) were included in the survey. This compares to the 1047 affluent consumers who were surveyed in the second quarter and 976 affluent consumers who were surveyed in the first quarter.
Income Demographics
The median income of the survey sample included in the third wave of luxury tracking was $125,000, comparable to the $124,500 median in the second quarter and the $125,000 median in the first quarter. Some 45 percent of the survey sample had a household income in the range of $100,000 to $149,999, which is defined as the ‘affluent’ segment. Some 27 percent had income in the range of $75,000 to $99,999, the near-affluent segment and the same percentage, or 27 percent, had income of $150,000
and above, the super-affluent segment.
Gender
The second wave of the luxury tracking study skewed toward a more female sample. Some 60 percent of the sample surveyed was female (compared with 67 percent in the second quarter and 62 percent in the first quarter) and 40 percent were male (compared with 33 percent in the second quarter and 38 percent in the previous period).
Age Distribution
In terms of age ranges, the sample surveyed in the third quarter luxury tracking study skewed slightly younger than in previous surveys. More luxury consumers aged 24-34 years were included in the survey, or 36 percent, while the participation rate among 45-to-54 year olds declined somewhat (18 percent). Distributions among the other age groups were about equal to previous tracking. Average age of this sample was 40.4 years, as compared with 42.6 years in the second quarter. From a generational perspective the sample is skewed toward baby boomers, now in the age range of 40 to 58 years old, who represent 44 percent of the total sample and generation Xers, ages 27 to 39 years old, who make up 41 percent of the total sample.
Other Demographic Variables
The survey sample skews strongly toward married households, with 74 percent of the total made up of married people. Singles comprise 14 percent of the sample and couples living together represent 8 percent of the total. Separated (less than 1 percent), divorced (4 percent) and widowed (less than 1 percent) make up the rest of the sample.
The affluent consumers sampled are highly educated. About one third (34 percent) have completed a four-year college degree and 20 percent have masters degrees. Some 20 percent have some college experience and 5 percent of the sample have either a doctorate degree or are a medical doctor. In total, about 70 percent have completed a four-year college degree or more educational attainment. Nearly 90 percent of this affluent sample is white Caucasian (87 percent). Some 9 percent are Asian or Pacific islanders and about 6 percent are Spanish/Hispanic/Latino. Some 3 percent are black/African-American and 2 percent is American Indian, Eskimo or Aleut.
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