Affluent consumers tend to trade down

New research about the luxury consumers (household incomes $150,000 and above) finds that a majority of affluent consumers are trading down in most of the categories in which they shop.

“So much attention has been given to the ‘trading up’ phenomenon—where people with upper-middle incomes of $50,000 to $75,000 stretch to luxury—that the converse trend toward ‘trading down’ has been largely ignored,” says Pam Danziger, president of Unity Marketing, Stevens, Pa., which conducted the research. “Trading down is where the affluent consumer with means to buy just about any luxury they want at full-price, opts instead to select a less luxurious, but more affordable substitute for the real thing.”

The latest issue of Luxury Business: The Luxury Marketer’s Report reveals that even among shoppers in the top 5% of households based upon income, luxury consumers are cautious with their money and strongly motivated to get maximum value for the money they spend.

In Unity’s most recent study of more than 700 luxury consumers, they were asked to what extent they selected the more luxurious item or service, rather than the ordinary, everyday item or service when they shop. The results show that in all three categories of luxury—luxuries for the home; personal luxuries like fashion, jewelry, cosmetics and cars; and experiential luxuries, like travel, dining, and personal services—about half of the consumers say they only occasionally, rarely or never select the more luxurious offerings and opt instead for the ordinary, everyday brands.

Just over one-third of the luxury consumers often select luxury in the three major categories, while the remaining 15% or so are the highly indulgent consumers who always or almost always go first-class, the research reveals.

Within each of the major luxury categories, a higher percentage of luxury consumers go luxury for specific things. For example, more luxury consumers are likely to always or almost always select the more luxurious option in electronics (30%); automobiles (21%); fragrance and cosmetics (20%); jewelry (18%); watches (17%); and travel (21%).

“Luxury marketers realize they target a slim 5% segment of the total market, but even in their target market (i.e. consumers with household incomes of $150,000 and above) the real opportunity exists only among an even thinner slice of high-income consumers who have a propensity to buy luxury,” Danziger says.

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