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Class Actions
Judy Martel
03/01/2008
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Consequently, says Michael Silverstein—a senior partner and the
managing director of the Boston Consulting Group, and a coauthor of
Trading Up: The New American
Luxury—consumers are continually seeking to
trade up to higher-priced products. He predicts that the market for luxury items
that are seen to define abundance and affluence will grow somewhere between 6
and 8 percent over the next five years.
TOP VIEW
Throughout the world,
traditional markers of social standing are giving way to a class system defined
primarily by the consumption and personal display of luxury goods. Though the
ultra-affluent continue to define the market for such items, the socially
aspirant middle class increasingly makes up the bulk of demand. This confluence
of class and consumption is not, of course, lost on marketers of luxury goods.
As wealth around the globe grows, so do their sales. |
Christmas for Marketers
The machinations of America’s class system are not lost on the
makers of high-end goods, who are primarily responsible for the current
redrawing of social boundaries. These vendors have captivated the market by
creating higher-priced goods in small quantities to keep the top rung secure,
while still producing masses of the lower-priced entrée items. This trend
started at least as far back as the 1920s, when clothing designers in Paris
began manufacturing perfume under their names and thereby attracting consumers
who could not afford a ball gown.
According to Pam Danziger, president of Unity Marketing, a
Pennsylvania firm that tracks luxury spending in the United States, the
individuals who comprise the market for luxury goods are small in number but
extremely influential. Manufacturers market their wares to these people first,
then shortly thereafter to the trading-up crowd—the middle- and
upper-middle-income consumers who often follow the more affluent in terms of
taste and style.
Luxury branding consultant Robert Burke says that these
acquisitive, "price-resistant" middle-class consumers will always step up to the
cash register to purchase a possible entrée to a social station above their own.
Four or five years ago, designer shoes were priced at $400 to $500 a pair, he
says, and now pairs from Manolo Blahnik, Jimmy Choo or Christian Louboutin can
cost $600 to $700—up to $3,000 for shoes crafted with exotic skins. And still
they buy.
Last year’s Neiman Marcus Christmas catalog offered a perfect
example of this strategy in action. The upscale retailer featured the usual
assortment of affordable luxury items available to the masses—those who might
indulge in cashmere gloves and premier chocolates. Yet it also offered more
unusual items to appeal to consumers aspiring to higher social stations: A cell
phone studded with pink and white diamonds, offered at $73,000, would
undoubtedly turn heads.
The catalog’s apex of opulence was a personal submarine, the
Triton 1000, which is designed to perch on its owner’s yacht, waiting to
submerge up to three passengers as far as 1,000 feet below the surface of the
ocean. Price tag: A steal at $1.5 million. One might guess that the market for
such an item would be confined to only a select few customers, yet Bruce Jones,
the president and founder of the Triton’s manufacturer, U.S. Submarines, says
the company is trying desperately to fill a backlog of orders for the 1000, its
most popular model, while postponing the construction of some of its other
personal submersibles.
What the People Want
Demand for this and other exclusive items is growing, and not
just from the ultra-affluent. The explosion of luxury goods marketed to all
levels of society, coupled with the growth of wealth in America, is making it
difficult for those with the highest net worth to set the lavish standards that
historically were theirs exclusively. Beyond the recent marketing buzz about the
shortages of yachts, cars, planes and the legendary waiting-list-only Hermès
Birkin bag lurks an apparently endless appetite for luxury. According to the Telsey Advisory Group, a market-research firm in New York, luxury sales
worldwide topped $150 billion in 2006, with 30 percent of that spending coming
from the United States.
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