'Tis the Season ... to Live It Up
Luxury Goods Attracting More Consumers
NEW YORK, DEC. 6, 2003 (Zenit.org).- The usual concern over excessive
consumerism at Christmas has a new twist this year: the growing
popularity of luxury brands. A recent book, "Trading Up: The New
American Luxury," observed that people are increasingly disposed to
pay higher prices for what they see as premium products.
Coining a new phrase, authors Michael Silverstein and Neil Fiske
examine how "New Luxury" goods and services are attracting middle-
market consumers. "America is trading up, and it's good for both
business and society," write Silverstein and Fiske, a senior vice
president and ex-partner, respectively, of the Boston Consulting
Consumers of these New Luxury goods fall in the income bracket of
$50,000 to $200,000 a year. Some 47 million U.S. households have an
annual income of $50,000 or more, and this adds up to nearly 122
million consumers "with the means and the desire to trade up," the
book says. In 23 categories of consumer products and services, worth
$1.8 trillion in annual sales, New Luxury products account for 19% of
the total, with annual growth of 10% to 15%.
The luxury goods include even otherwise mundane household needs. A
prestige trademark washer-dryer, for example, sells for more than
$2,000, compared with conventional brands that retail for around
$600. To their surprise, the authors came across numerous consumers
from various backgrounds who assured them that possessing the higher-
cost brand made them feel happier and a better person.
"In our fifty combined years of listening to consumers, we have never
heard more heartfelt expressions of emotion about a product that even
industry insiders think of as mundane and unworthy of much
attention," marvel Silverstein and Fiske.
Other examples involve what are more commonly seen as luxury
products. A premium set of golf clubs has seen one company soar to
the No. 1 position in its field, when previously it was not even in
the top 10. One consumer said that he had paid $3,000 for his premium
clubs, as opposed to under $1,000 for a more conventional set,
because "they make me feel rich."
The authors divide the New Luxury products into three major types.
The first type is the accessible super-premium products. These are
priced at or near the top of their category. But, being low-ticket
items, they are still affordable to middle-market consumers. Example:
a $28 bottle of premium vodka, as opposed to $16 for more ordinary
The second type is the old luxury-brand extensions: lower-priced
versions of products for the rich. Popular items here include cheaper
models of top-range cars.
Third is the "masstige" goods, a term the authors use to refer to
mass prestige goods that occupy a spot between mass and class and
command a premium price. For example, toiletry products that carry a
fancy brand name can mean a price difference of over 200%.
Fulfilling emotional needs
What is the appeal of New Luxury goods? The authors observe that they
are typically based on the emotions and that consumers have a much
stronger emotional engagement with them that with other goods. This
compares to the very expensive old-style luxury goods that are based
primarily on status, class and exclusivity. As well as the emotional
factor, a New Luxury good must also have differences in design or
Once consumers become convinced of the superiority of a product and
form an emotional attachment to it, they are prepared to spend a
disproportionate amount of income on it. This is done by scrimping on
other expenditures. These consumers thus avoid middle-range products,
trading down in some areas to save money, and in others going for a
Behind the New Luxury trend lie demographic and cultural causes. In
terms of income, the earnings of the top quintile, households over
$82,000, have risen nearly 70% in real terms over the last 30 years.
As a result, now 21 million affluent households account for nearly
60% of discretionary spending power in the United States.
Another factor is the increased economic power of working women that
has seen the number of two-income households rise dramatically. There
are also more affluent singles with money to burn, as people delay
entering marriage, or find themselves divorced and single once more.
And the globalization of trade has made it easier to supply exotic
In terms of cultural factors, the authors note the increased number
of consumers with university degrees and the growing numbers who have
traveled overseas and discovered new tastes. Added to this is an
increasing weight given to emotional self-satisfaction: "[W]e all
receive countless messages every day -- especially from media
influencers and celebrity endorsers -- urging us to reach for our
dreams, fulfill our emotional needs ..."
The New Luxury phenomenon is not restricted to the United States. The
National Post newspaper in Canada on Oct. 18 described the growing
popularity of luxury products for babies. Stroller prices can reach
$500 or $600 Canadian (US $383 to $460), or even up to $6,000 for
some models. Designer-name diaper bags can retail at $1,000 (US $771)
or more, while rattles can fetch $160 to $320 (US $122 to $245).
Italy too is seeing a boom in luxury items -- even amid a stagnant
economy. The daily Corriere della Sera on Nov. 24 noted how a growing
number of people in the 40,000-euro-and-up income bracket ($48,300)
are prepared to splurge on expensive items such as second or third
cars. Favorite purchases include Jacuzzis (17,000 sold last year);
plasma televisions, at 8,000 euros ($9,569) each; and home cinemas
that cost up to 25,000 euros ($29,900).
Being and having
John Paul II's first encyclical "Redemptor Hominis" echoed the Second
Vatican Council's insistence on the importance of "being"
over "having." The encyclical, in section No. 15, warned that modern
progress demands "a proportional development of morals and ethics,"
which he observed seems "unfortunately to be always left behind."
The Pope asked if this progress really makes human life "more human"
and more "worthy." In some areas it does, he replied. But he
questioned whether, in the most essential facets of human life, we
are becoming truly better, more mature spiritually, more aware of the
dignity of our humanity, more responsible, and more open to others,
especially the neediest.
John Paul II also asked if, amid material progress, there is a growth
of social love, of respect for the rights of others -- or if there is
an increase in selfishness. This materialism, he warned, can lead us
to becoming slaves of our own products.
"Where your treasure is, there will your heart be also," warns Jesus
in Matthew 6:21. Timely advice for brand-conscious consumers.