Friday, April 2, 2010
With the new year comes a new state of luxury
By Jennifer BroughMarch 31, 2010
Is this what it means to be in recovery? Are we in the throes of a major paradigm shift that will affect the way we spend for the next decade? Or are we slyly awaiting a return to a perceived norm and, in essence, the “ok” to return to our bad behaviors?
This year would have the makings of a fascinating study in consumer behavior if we weren’t all playing a starring role in these more realistic times. Only a few years ago, we aspired to living well beyond our means and not really caring so much how our behavior affected our own lives, let alone the country’s outlook.
NEW WORLD ORDER
It didn’t take long, however, to wake up to the new world order. Living with dour statistics sobers a nation quickly: foreclosures, unemployment rates, lack of consumer confidence and credit card debt included. In comparison, what was defined as the luxury market had been somewhat insulated through 2008. But 2009 and beyond has been a different story, one of redefining how we view this targeted population.
Opportunity does exist with the true luxury consumer. It’s simply a matter of recognizing that the pool of luxury consumers has diminished—or, some might argue, was overinflated from the beginning. Generally, statistics suggest that 20 percent of U.S. households have incomes of at least $100,000. According to a January 2010 Forbes.com blog post, there are currently 225,000 Americans worth more than $10 million. If they represent the true luxury consumer, then we are looking at approximately 0.01 percent of the population.
A different mindset exists for each. First, the Earnest Affluents—or that 0.01 percent of the population—appreciate true luxury and can afford it, albeit more discriminately these days. For them, excess is out and stealthy spending is in. Carrying a brand-emblazoned shopping bag is no longer the epitome of status. Quality is. Yes, they will continue to spend money, but decisions are made with more consideration and they look to marketers and manufacturers to answer the question, “Why should I spend?”
The second group, the Offluents, are made up of that 20 percent of the population who exhausted themselves by trying to keep up with the authentic luxury lifestyle. Their new mindset involves the internal need-versus-desire debate. If the answer to the question, “Do I need it?” is “no,” likely the item will return to its shelf or remain on a wish list. As a result, frugality is in. Instead of consumers feeling self-conscious about their new shopping habits, bargaining, coupon clipping and consignment shopping have become bragging points. In addition, the values of the Greatest Generation, or those born prior to 1946, are now prized: discipline when it comes to finances and saving for retirement.
TALK THE TALK
The word “luxury” has been used to define many things. As we know, it’s been overextended. What’s in and out for brand-speak?
True luxury brands have remained above the fray, as their brand messaging and company legacy still hold appeal for the wealthiest percentage of the population. Those who have embraced the new vocabulary also find themselves in a good position as tenets like authenticity, quality and dependability are valued. In the future, luxury goods will be marketed to the Earnest Affluents exclusively, or those who can afford the investment.
SMALL, SMART & HANDSOME
Even design trends have followed suit, with smaller, smarter and handsome homes becoming more enticing for both the Earnest Affluents, as well as the Offluents. While less is needed to fill these more petite homes, the quality of goods has not been lowered. These well-appointed spaces equal singularly chic environments—meaning money saved on energy, for example, may be redistributed elsewhere in the home. Form, function and detail are paramount, along with thoughtful customization to utilize every inch smartly.
Finally, we ask ourselves if we did indeed learn our lesson. Industry experts encourage authentic luxury brands to step up and embrace what has made them special: substance over style and quality over consumption. The angst in consumers’ desire to find balance continues, however, as a new attitude toward the elusive business of being happy evolves. As a nation, we sometimes embrace change slowly, which is why some question whether our frugality is a short-term fix or a long-term attitude.
— Jennifer Brough is a trend tracker at White Good & Co.