As you've probably heard, Unity Marketing's latest Luxury Tracking Survey found luxury consumers' confidence rose at its fastest pace ever in the fourth quarter 2012. With renewed confidence, luxury consumers spent much more on luxury goods and services as well; total spending was up more than 25 percent from the previous quarter.
But while total luxury spending was up at the individual consumer level, not all segments in the luxury market rose in step. For example, luxury consumers spent less on luxury furniture, lamps/lighting and rugs/floor coverings last quarter, and spending on both luxury home and personal electronics was down as well.
So while the luxury consumer confidence 'tide' is rising, that doesn't mean that all 'boats' will necessarily rise along with it. Your company, your brand, your store must be properly positioned now in order to benefit from the improved consumer environment.
Take for example jewelry, the most luxurious of luxury goods categories included in our Luxury Tracking Survey. In the most recent study period, spending on luxury jewelry was down both from the previous quarter and from the same period last year. This cut in spending actually coincided with strong demand, as measured by the share of luxury consumers who made purchases in the category.
Strong demand for jewelry coupled with reduced spending by customers with plenty of cash on hand (the average income for those surveyed in the fourth quarter was $290,600) points to jewelry customers looking for discounts and bargains or trading down to less premium jewelry selections -- which is exactly what happened this time.
For example, fine gold jewelry, the category's typical top seller, was bumped from first place by strong spending on sterling silver; further instead of buying premium-priced platinum jewelry, this quarter's buyers opted instead for palladium and platinum/rhodium-plate jewelry. Luxury jewelry customers also economized on their gemstone selections, cutting back on diamonds while favoring less-expensive pearl, crystal and faux/manmade gem alternatives.
New patterns emerged in luxury jewelry buyers' choice of stores in which to shop. Spending at discount stores (think Costco, Kohl's and other discounters that sell fine jewelry) more than doubled this time. And while Tiffany still ranked as the number one luxury jewelry retailer, its share of jewelry buyers declined by nearly 10 percentage points, which signifies that Tiffany may be losing its edge with luxury jewelry shoppers.
What luxury marketers should take away from this analysis of the jewelry market is that not every brand, every company, every retailer is necessarily going to profit from luxury consumer's return to the market. Their needs may have changed and the criteria they are using to determine value may be different now. Marketers need to assess their current position and make sure that their brand, their offerings, their pricing, their services line up with today's, not yesterday's, luxury consumer.
With the economic environment starting to improve and luxury consumers willing to indulge again, businesses need a new road map that will help grow profits now and in the future. Too many companies are approaching the new consumer environment with the same old strategic marketing plan in place. But the luxury consumer market is very different today than it was two years, five years, ten years ago. Brands need a plan that is designed for today's environment and today's customer - one who younger and from a new generation than the Baby Boomers who have been the core customer for luxury brands for so long.