Luxury marketers need to provide experiences to draw this consumer segment.
The number of wealthy Americans continues to grow, making it more critical than ever for luxury marketers to meet and exceed the expectations of their clientele, according to a new report from Luxury Institute, New York.
The number of millionaire households in the United States jumped 33 percent in the past year, to a total of 8.2 million before the fourth quarter. The Luxury Institute credits the rise to the end of the bear market, which hit the affluent sector hard in 2002 and 2003. Another sharp market rise at the end of last year should push that number even higher, even when the early market decline of early 2005 is factored in, according to Luxury Institute CEO Milton Pedraza.
As luxury marketers look to attract the affluent, Pedraza urges them to concentrate on the experiences they can provide for wealthy shoppers. For example, Mattel’s American Girl dolls retail for $80 and up, five times the price of a Barbie and selling much faster. The appeal of the American Girl dolls is personalization, including hair and beauty appointments that cost parents about $40 per visit.
“From the standpoint of luxury marketers, the growth in the population of wealthy people comes with a bonus,” Pedraza says. He points to yacht builders’ reports of rising order backlogs amid surging demand as evidence.
A large percentage of new purchases are centered around the home, according to the report. Spending on home improvements and home theaters are soaring. Similarly, luxury travel continues to perform at high levels, and luxury automobiles are selling briskly, while broader auto sales remain sluggish. Boat docks and landscaping ranked highly among planned future purchases, but nowhere near as popular as home theaters, according to the report.
This spending includes everything from major home improvements to buying second or third homes. Nearly one third of respondents say they already have a second property, and an additional 15 percent plan to buy a second home in the next year or so. Within the next 24 to 36 months, more than 35 percent of million-dollar homeowners plan to remodel or add on to their property.
Far and away the biggest major domestic purchase planned by the wealthy is a home theater system. While 46 percent of million dollar homeowners already have a home theater, 39 percent plan to buy one.
“The wealthy as a demographic group seem more inclined to part with their money,” Pedraza says, “reporting more optimism about increasing their spending during the coming year than do consumers of more modest levels of income and net worth.”