Luxury Consumers Continue on a Spending Spree in 2005

STEVENS, Penn.--Jan. 15, 2006--In a speech at the National Retail Federation's Annual Convention Pam Danziger, president of Unity Marketing, announced the results of Unity's luxury consumer survey. "Luxury consumers ended 2005 on an up swing. The average amount spent by an affluent household on luxuries, including luxuries for the home, personal luxuries, automobiles and luxury experiences, rose 3.8 percent, to $52,588 in 2005, from $50,640 in 2004. But their spending continues to shift towards the experiential, while they are spending about the same or slightly less in traditional luxury goods categories."

The average luxury consumer household spent 4.6 percent less on home luxuries in 2005 as 2004, $19,990 as compared with $20,948 in 2004. Personal luxury spending, on things like luxury apparel, fashion accessories, jewelry and watches, wine and spirits, pet luxuries and pens and desk accessories, rose 5.6 percent to $10,007 in 2005.

Luxury consumers' spending on experiences nearly doubled in 2005

Spending on luxury experiences, including travel, dining, entertainment, spas and beauty services and home services, nearly doubled, from an average of $11,632 in 2004 to $22,746 in 2005 -- a 95.5 percent increase. The average amount spent on luxury automobiles, a low purchase incidence category as compared with the others, also rose in 2005, up 18.5 percent to $42,696. (Note: the category averages don't total $52,588 because not all households buy in all categories.)

For luxury goods marketers and retailers the challenges for the future are daunting in the face of this trend toward experiences -- Luxury consumers are spending more, in many cases lots more, on life-changing experiences, while their need for luxury goods is waning.

Now that the baby boom generation (which makes up 57 percent of all households with incomes of $100,000 or more) is turning 60, they have already acquired the material trappings of luxury. The trend for the future for the baby boomer luxury consumers is toward experiences and this will tip the entire luxury business experiential simply because of the generation's size.

Americans are growing wealthier and feel entitled to spend on luxury

Americans continue to grow wealthier with the average income of all households rising to $60,500 in 2004. There are 30.2 million households with incomes of $75,000 (which Unity defines as near-affluent and affluent) and the average income of that segment is $137,500. At the upper end, there are 1.7 million households with incomes of $250,000 and that segments' average income is $438,338 per year.

As luxury consumers' incomes rise, so too does their spending. Households with incomes over $150,000 tend to spend at least three times more in most categories of luxury than those with near-affluent incomes of $75,000-$99,999. But interestingly their purchase incidence of luxury, i.e. the percentage of households that purchase luxuries, is level across all income levels.

Danziger explains, "That means near-affluent households are buying luxuries at about the same rate as super-affluent households, only they are spending less. It's the difference between buying last season's Coach bag in the Coach outlet store, as compared with the latest Dolce & Gabbana number at Saks Fifth Avenue. Both are luxurious to the individual consumer."

"That is another key trend in the luxury market today -- The consumer is the final arbiter of what is luxury, not the manufacturer, the designer, or the retailer. Consumers at all income levels feel entitled to luxury, whether it is a 'big' luxury like a two-karat right-hand diamond ring from Cartier or a 'little' luxury like a similar-sized Moissanite ring from J.C. Penney's," Danziger concludes.

About Unity Marketing's Luxury Consumer Tracking Study

Every quarter Unity Marketing conducts a Luxury Consumer Tracking Study among 1,000+ luxury consumers. For the fourth quarter 2005, a total of 1,126 consumers were surveyed with an average income of $139.2k and average age 41.1 years. Year-end 2005 statistics are compiled from the four tracking studies during the year and will be published in Unity Marketing's Luxury Report 2006 -- Who Buys Luxury, What They Buy, Why They Buy (http://www.unitymarketingonline.com/reports2/luxury/luxury1.html)

This is a semi-custom research service with subscribers adding specific product categories and their brands and the brands of five key competitors to the survey. In addition, subscribers can add up to six exclusive questions to the survey through the year. Use this link for more information about subscribing to luxury tracking http://www.unitymarketingonline.com/reports2/luxury/luxurytracker_reg. html (Due to its length, this URL may need to be copied/pasted into your Internet browser's address field. Remove the extra space if one exists.), or call Pam Danziger at 717-336-1600.

About Pam Danziger and Unity Marketing

Pamela N. Danziger is a nationally recognized expert specializing in consumer insights for luxury marketers, whether they sell luxury to the masses or the 'classes.' She is president of Unity Marketing, a marketing consulting firm she founded in 1992.

Advising such clients as Lenox, Herend, Remy Amerique, Stearns & Foster, Prudential Fine Homes, Baccarat, The World Gold Council, The Conference Board and American Express, Danziger taps consumer psychology to help clients navigate and master the changing luxury marketplace. Her latest book, Let Them Eat Cake: Marketing Luxury to the Masses--as well as the Classes, (Dearborn Trade Publishing, $27, hardcover) is in book stores now. She is the author of the recent book, Why People Buy Things They Don't Need: Understanding and Predicting Consumer Behavior (Chicago: Dearborn Trade Publishing, 2004).

She is working on her next book, Shops That Pop! Predicting the Future of Shopping set for publication in Fall 2006.

She has appeared on CNN's In the Money, NBC's Today Show, CNBC, CNN International, CNNfn, CBS News Sunday Morning, Fox News' Your World with Neil Cavuto, ABC News Now, NPR's Marketplace and is frequently called upon by the Wall Street Journal, New York Times, American Demographics, Women's Wear Daily, Forbes, USA Today, Associated Press, Los Angeles Times, Chicago Tribune for commentary and insight.

For media, Unity Marketing can make tables, charts and graphs available about the luxury market upon request.