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In cooperation with the Swiss watchmaker IWC Schaffhausen, Mercedes-AMG has developed an exclusive model known as the CLS55 AMG "IWC Ingenieur." Only 55 units of the unique four-door coupe will be produced for the United States. (PRNewsFoto)
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Wealthy Gen X Consumers Are Mighty in Luxury Buying Power
NEW YORK, (PRNewswire) June 7, 2005 - The wealthy are spending lavishly on luxury goods and services, according to the results of the Second Annual American Express Platinum Luxury Survey.
The survey results show that wealthy members of the younger Gen X, despite being the smallest total generational group in the U.S. (numbering 49 million) budget their luxury dollars quite differently than the wealthy older Baby Boomers, whose generation has 78 million people. Gen Xers are far more invested in buying up the material trappings of wealth.
The survey investigated the differing attitudes, expectations and motivations among the wealthy with a close look at the rich (incomes $200,000 and above) and the affluent (incomes $125,000 to $199,999), as well as the wealthy Gen Xers, born between 1965 and 1976, and their Baby Boomer counterparts, born between 1946 and 1964.
Members of Gen X Mighty in Luxury Buying Power
Overall, the wealthy members of Gen X have an average income of $213,000 and spend 18 % more than the Boomers on luxury goods annually, $26,751 compared with $22,631. This difference is made more significant by the fact that the average income of wealthy Baby Boomers, $222,900, is similar to Gen X.
Gen X spending far exceeds the Baby Boomers in a number of luxury goods categories including:
- 60% more than Baby Boomers on fragrance, cosmetics and beauty products
($3,235 vs. $2,017),
- 47% more on fashion accessories ($6,066 vs. $4,116),
- 37% more on men's and women's clothing ($23,027 vs. $16,924),
- 32% more on wines and liquors ($3,922 vs. $2,966).
For luxury experiences, including dining, travel, and home services, both generations spend roughly the same: $17,554 for Gen X compared with $17,651 for Boomers.
However, in a number of luxury experience categories Gen X spending exceeds the Baby Boomers:
- 33% more than Boomers for entertainment ($3,629 vs. $2,722),
- 17% more for personal/health services ($3,324 vs. $2,838),
- 11% more for sporting events ($4,176 vs. $3,769).
"Marketers tend to think of the Gen Xers as a cohort too small to even worry about, but this research shows that Gen X may be small in size but they are mighty in luxury buying power," Pam Danziger, founder of Unity Marketing, a marketing consulting firm that specializes in marketing to the luxury market, and who conducted this year's Platinum Luxury Survey. "They are in a more youthful life stage and are accumulating a lot of big, material goods. Their influence is destined to grow even more in the luxury market in the future now that the leading edge of this generation reaches 40 years of age this year."
Contrary to the Gen X population, many Baby Boomers are approaching a near plateau in terms of their career trajectory, as the leading edge of the generation turns 59 years old in 2005. Furthermore, their overall wealth may even decline after retirement. The Boomers are at a different life stage and thus have accumulated many of the "big purchases" the Gen X are currently making, or planning to make. The Boomers are more likely to own original art (31% as compared with 24% among Gen X), a fine jewelry collection (29% to 25%), a vacation/second home (26% to 18%) and an antique or other collection (24% to 18%). Members of Gen X, by comparison, are more likely to place a greater emphasis on active or experiential 'toys' such as sports cars, (owned by 28% of Gen X compared with 24% of Boomers) and boats and yachts (21% to 17%.)
Dramatic Spending Differences Among Rich vs. Affluent
The survey also looked at the difference in spending patterns and attitudes between the rich and the affluent. In this survey, the "rich" sample earn an average of $390,400 per year with approximately $10 million in investible assets and represent the top 2% of American households. The "affluent" sample earn an average of $152,500 per year with approximately $1 million in investible assets.
In comparing the rich with the affluent, the rich spend three times more than the affluent in both the luxury goods and luxury experiences categories -- an astounding $81,172 total per year. And in several categories the rich spend nearly four times as much as the affluent. For instance, the rich spend $17,185 on luxury jewelry and watches vs. $5,163 by the affluent; $12,831 on luxury pet products vs. $1,316; $11,679 on luxury children's goods vs. $3,577; $9,931 on luxury fashion accessories vs. $2,898; and $7,703 on luxury wines and liquors vs. $1,880.
Interestingly, the rich spend about as much on luxury products for their pets as they do on luxuries for the children.
The rich also indulge more in luxury experiences than the affluent, spending three times more in almost every category: $6,281 on personal and health services vs. $1,851 by the affluent; $6,363 on entertainment vs. $1,791; $9,313 on sporting events vs. $2,891; $7,611 on dining vs. $2,632; and $17,051 on luxury travel vs. $7,815.
Value Conscious But Willing to Pay More For Personal Service and High
Quality
While the luxury consumers surveyed buy luxury in a variety of categories, they also enjoy shopping wisely and searching for the best value and price.
- 80% of luxury consumers surveyed agree with the statement, "Getting a
discount or finding a really good sale price on a luxury item makes me
feel like a smart shopper."
- 63% agreed that "The price of most luxury goods is too high, and I
rarely pay full price for a luxury brand."
- 58% said their last luxury purchase was bought on sale and 83% said a
sale or discount was very or somewhat important to their purchase
decision.
"The luxury shopper is value conscious and passionate about getting the best price. However, despite their propensity to watch their wallets, they are willing to pay more for superior service and greater convenience," said Peggy Maher, senior vice president and general manager, Consumer Charge Card, American Express Company. "Most of the wealthy consumers surveyed come from middle-class backgrounds and are thus more value-conscious. As we know from our Platinum Cardmembers, they are willing to pay for goods and services as long as they see the value."
About two-thirds (64%) of wealthy consumers surveyed are willing to pay more for special services when they travel or shop at a more exclusive boutique. The overwhelming majority of survey respondents said luxury had to do with quality and service, not a price tag or label.
- Nearly 80% of the luxury consumers surveyed agreed with the statement,
"An important part of my enjoyment of a luxury experience is how well
the service personnel treat me and the extra service they provide."
- Sometimes buying luxury is based on pure convenience with 43% of
wealthy consumers agreeing, "I often trade off spending more money for
convenience, because I know I could find it cheaper but it is just too
much of a hassle."
Those surveyed had to possess an income of at least $125,000 to be considered and were not required to be American Express Cardmembers to participate.
All of the participants purchased a luxury good or experience in the past 12 months to qualify. The average income of the respondents was $235,900.
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