While wealthy U.S. shoppers tend to cut back on spending when markets take the kind of hit that has characterized the last few months, luxury retailers have been exceeding sales estimates, and there are no signs of stopping.
Yesterday, both Saks (NYSE:SKS) and Nordstrom (NYSE:JWN) reported September sales that exceeded analysts’ estimates, while the luxury goods sector far outpaced all other segments except gasoline-selling wholesale clubs.
Affluent Americans between the ages of 24 and 49 are helping drive luxury sales, according to Unity Market, which conducts shopper surveys. According to Unity Market, a group referred to as the “X-Fluents” — for “extremely fluent” — are responsible for 23% of all luxury sales in the U.S. In 2007, the same group accounted for 18% of luxury sales.
“The U.S. marketplace is more concentrated among young people,” said Unity Market President Pam Danziger. “They are more predisposed to luxury indulgence and represent more promising targets to luxury brands.” So-called “Aspirers” — those who favor “flash, bling, and status” — are also spending more on luxury items, says Danziger, now accounting for 18% of luxury sales compared to 16% of sales in 2007.
In the past, luxury sales have been directly tied to the stock markets because their performance has affected perceptions of personal wealth. In 2009, luxury sales in the U.S. fell 9.1%. But this time, things are different. Though markets have been tumultuous and consumer confidence is waning, luxury sales are expected to outpace the overall industry this holiday season. Sales at luxury retailers open more than a year are expected to climb 7.4%, while other retail segments are expected to see slower or unchanged sales growth.
Unity Markets has been surveying luxury shoppers since 2002. Respondents are placed in one of five categories based on whether they agree or disagree with such statements as: “Luxury is defined by the brand of the product, so if it isn’t a luxury brand it isn’t a luxury.” Or: “Once you experience luxury in your life, you never want to go back to the ordinary.”
X-Fluents are the most highly indulgent of the five groups, spending more, buying more frequently, and dedicating more time and wealth to maintaining a “deluxe lifestyle”. The next group, Aspirers, like to buy and display brands for the status they bequeath.
“Butterflies” tend to be over 47 years of age, mostly female, and enjoy luxury experiences such as travel, while “Cocooners”, also predominately female and over 47, express their luxury identity by spending on their homes. “Temperate Pragmatists”, averaging 45 years of age, have a take-it-or-leave-it attitude toward luxury goods, and also have the lowest income of the five groups.
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X-Fluents average $410,152 in annual income, before taxes, and spent an average of $253,960 on fashion accessories, cards, home furnishings, travel, and dining last year. Aspirers have an average income of $303,057, with a minimum of $100,000 to qualify for the group, and are the most materialistic of the groups, as they have yet to achieve the level of luxury to which they aspire.