We spoke with Unity Marketing president Pam Danziger, an expert on the affluent market, about her predictions of a luxury drought and how the industry should react.
JCK: Why are you seeing a luxury drought?
Danziger: There are two factors. The first is the aging of the population. Baby boom consumers are seven, eight years older than when we went into the recession. An older consumer is not as good and strong a customer. As people age, their desire to purchase luxury goods tends to decline. They already bought everything. They tend to change perspective and focus more on experiences.
On the other end, we won’t see the millennials reaching the affluent market for a while. This year, the leading edge turns 35. They have been a little bit delayed in terms of affluence because of the recession. We are not going to see them as part of the affluent market until 2026.
JCK: When you talk about a drought, that seems to contradict talk among forecasters who, due to income inequality, urge marketers to target higher-income consumers.
Danziger: I am not saying it’s going to fall off. A drought is a period of less rain. You will have to work harder to make the rain.
The rising tide in luxury that we saw just before the recession isn’t there anymore. The tide has turned; it’s a time of challenge. There are opportunities for companies that recognize it. If you think that your brand is the be-all, end-all and it’s all aspiration and that is all that matters, you are headed for a huge awakening.
JCK: Do millennials look at luxury differently?
Danziger: Younger consumers are bringing a new style and approach and are turning away from “luxury.” They think it’s just a marketers’ label. They are looking for functional brands. Today you don’t have to pay the premium for that prestige. You can get very good products at good prices, thanks to the Internet. The Internet has been a game changer. Consumers can peel back the curtain and see reality.
Younger consumers want good-quality things, but they don’t care about the prestige. [Facebook CEO] Mark Zuckerberg is a good representative of his generation. He has billions. What does he choose to wear? Sneakers and a hoodie. I say: Think about what kind of jewelry goes with tattoos. For many younger consumers, tattoos are their jewelry.