In the U.S. retail market, the word luxury doesn’t have the same connotation that it once did. Or perhaps it’s just that the consumers who shop for luxury goods aren’t who they used to be. Either way you look at it, defining luxury today is no easy task—and neither is identifying how people view the term.
For many consumers, luxury is a way to signal that they’ve “made it,” but the ways they choose to showcase or express their status can be as varied as the consumers themselves. For example, some convey it subtly through the scarcity and heritage of the products they purchase. Others take a more forthright approach by purchasing eye-catching products they want to showcase for everyone to admire and covet.
Regardless of how consumers choose to bring luxury into their lives, the U.S. has the deepest pockets when it comes to luxury retail spending. In fact, management consulting firm Bain and Co. estimates that Americans spent $73.3 billion on luxury goods last year—more than consumers in Japan, Italy, France and China combined.
Despite the breadth of the U.S. luxury goods market, however, retailers have plenty of untapped potential to explore. In fact, a closer look at the luxury goods arena shows that the households that want to buy luxury goods outnumber those that already do by 8%.
In order to engage with luxury-buying and aspirational buyers, retailers need key insight into the specific differences among these consumers. While no two consumers are exactly alike, Nielsen has identified five distinct perspectives around the meaning and value of the term “luxury,” and has categorized them into specific consumer segments. Three of them value luxury and make luxury retail purchases. The other two value and aspire to buy luxury items, but are less likely to actually make the purchases.
The aspirational consumer market is vital for luxury brands looking to achieve volume and growth. Both younger and older aspirational consumers place value on luxury products, but they haven’t traditionally been luxury consumers themselves. Lower-priced offerings and partnerships with mass merchandisers give these consumers access to the brand and build loyalty.
A luxury purchase should feel like an indulgence and a reward for aspirational consumers. Aspirationals under the age of 55 tend to live in college towns like College Station, Texas, and Lafayette, Ind., and they often shop at retailers like Burlington Coat Factory, Express and Old Navy. Aspirationals over 55 tend to shop at retailers Stein Mart and Chico’s, and live in Florida locales like Homosassa Springs, Punta Gorda and Sebring.
While luxury brands seeking growth should make marketing and product decisions geared toward engaging consumers who haven’t traditionally shopped for luxury items, it’s critical that they don’t lose sight of their core buyers in the process. That’s why developing a focused consumer engagement strategy for each segment is crucial as the luxury retail market evolves. Continued growth of the luxury market requires diligence in understanding the evolving tastes of consumers entering the market and the distinct values these consumers place on the luxury items they purchase.
For more detail and insight, download Nielsen’s Luxury Retail Landscape Report.