The Life of Luxury
Monday, May 20, 2019 from Floor Covering Weekly
“There’s no question Baby Boomers and Gen X have more money,” said Milton Pedraza, chief executive officer of the Luxury Institute. He added that while younger consumers may have more debt and are less affluent, it’s a matter of time before they catch up as Boomers transfer wealth in inheritances.
Pamela Danziger, founder of Unity Marketing, pointed out that households with income more than $100,000 are the only segments that are growing. “You have more people with more wealth.”
Unity Marketing’s 2019 State of Luxury pointed to a report by consulting firm Capgemini which showed that global, high-net-worth individual wealth rose 10.6 percent in 2017, following six consecutive years of wealth gains. Capgemini predicted that high-net-worth individual wealth may top $100 trillion by 2025.
Experts agreed that even with an abundance of wealth, the traditional definition of luxury is shifting. “It’s a very complicated marketplace,” Danziger added. “It’s changing and shifting and people haven’t really delved into it properly to understand it.” For example, she noted that the assumption that the very wealthy only shop for traditional luxury brands is false. “The idea that affluent people only shop at high-end stores is a myth. There’s a tremendous amount of competition from mass to luxury to what I call premium brands. People are looking for value — which is not necessarily a price definition — even at the luxury level.”
Luxury consumers don’t just look for high-end products. They look for service, unique experiences and other “intangibles” that make whatever they’re buying special to them.
“If you look at the evolution of luxury, we used to say there are three parts: scarcity, art-infused and experience,” said Chris Ramey, president of Home Trust International and FCW columnist. “But today, experience and personalization are even more heavily weighted in luxury. Everything is more personal. Another factor is surprise and delight — how can you surprise someone in a way they can’t get anywhere else?”
The Luxury Institute’s 2019 State of the Luxury Industry report polled global luxury consumers and indeed, while the majority said “superior quality” is the number one descriptor for what a luxury product is, “superior customer service” was the second descriptor for luxury. Other factors include craftsmanship, exclusivity and polite salespeople — pointing to luxury consumers’ quest for special experiences from shopping to purchasing to owning.
The experts all noted that consumers’ perceptions of both the economy and luxury are critical to how well the sector is doing. And in today’s robust economy, consumers are feeling extremely positive and upbeat.
Unity Marketing’s 2019 State of Luxury report noted that 56 percent of “luxury insiders” believe business conditions are better now than they were a year ago, and 52 percent believe conditions will continue to improve. “The respondents’ optimism is palpable, including both executives who manage the companies that provide luxury goods and service experiences to luxury consumers and the businesses that provide support services to the luxury industry,” Danziger wrote in the report.
Luxury Institute’s 2019 report noted that luxury customers need an emotional connection to their favorite brands. “A majority of affluent consumers feel emotional connections to their favorite brands as well as a predisposition to purchase and pay more for brands they have an emotional connection to,” the report stated.
Regardless of the product they’re shopping for, today’s luxury customer is looking for quality and value, traits easily found in Anderson Tuftex’s hardwood offering.
One factor that has permanently altered the luxury industry is the internet.
“There’s no question the internet has affected the luxury market,” Pedraza said, noting luxury consumers’ affinity for Instagram and Pinterest. “Events are very important and they love posting them on social media.” Social media platforms are also key for companies’ advertisements.
Added Danziger, “When we talk about the way people shop, the internet is really changing.” In particular, she said, consumers are doing more researching and pre-shopping, which saves them time. “Time is the ultimate luxury.”
Agreed Ramey, “The internet is having a tremendous impact. It has impacted buying behaviors for everyone. It is now the ultimate flagship store.”
Luxury experts cautioned that geopolitical worries can impact the sector.
“I think a lot of people are expecting a recession after a 10-year boom,” Pedraza said. “There’s a lot of employment right now but not exactly what we call high level. The world is dynamic, but most economists expect a recession. So, people are more guarded. It doesn’t apply to the uber-wealthy, but definitely to the upper and middle classes.”
Danziger noted that the rising concern about income inequality is driving conspicuous consumption — or rather a move to more inconspicuous consumption. “The truly wealthy want to keep luxury undercover.” She pointed to worldwide protests over wages as one example. “It’s truly one world and one world economy. What’s going on in China or Paris impacts us here.” She noted that 80 percent of luxury consumers have a college education and are involved in business. “So, they are very involved in what’s going on and will get the first word if the economy starts to turn. In the last recession, they pulled back spending six months in advance.”
Ramey said that while there is chatter about politics and even recessions, at the end of the day, the stock market drives the luxury consumer. “The stock market is good. When the stock market is good, people have money and spend it.”