Luxury Spending Close to Home: the NZ Experience
Luxury Spending Close to Home: the New Zealand Experience
17 June 2005 –The affluent and rich in New Zealand would appear to be having a good year so far and are treating themselves to plenty of luxuries, according to American Express New Zealand Country Manager Rob Hennin.
Analysis of activity across a range of nearly 100 merchants in the luxury sector showed close to 4% growth in the first quarter of the year compared with the same period in 2004.
It also suggested that the wealthy were spending more on dressing up their homes than at the same time last year (up 31%), but a little less on dressing up themselves (down 7%).
“The first American Express Platinum Luxury Survey in the United States last year highlighted a trend over two decades since the launch of the Platinum Card from material to experiential luxuries and we have noticed the same trend, particularly within our rewards programme where treats on items such as spa packages are particularly popular,” Mr Hennin said.
“Travel is always something many New Zealanders enjoy, irrespective of wealth, but we have seen strong spend in the ‘5-star’ travel sector though the start of this year, indicating that the well-off are actively seeking quality travel experiences."
Mr Hennin said it was a misconception that the ‘rich and famous’ sat back and drank daiquiris at the beach all day. Instead it was apparent that affluent consumers are often working long hours, juggling personal and professional lives and are constantly pressed for time.
“They are looking to ease their hectic lives with experiences that make them feel special – that reward them for their success and sacrifices – whether it be a massage, a night out with fine dining and entertainment, or taking a luxurious vacation."
“Recognising these trends, and satisfying them, is something American Express prides itself in. One example is adding, within our Platinum rewards programme, options to meet these needs - such as a special travel package where Cardmembers are able to experience zero-gravity at a Russian space centre."
About American Express
The American Express Company is a diversified worldwide travel, financial and network services company founded in 1850. It is a leader in charge and credit cards, Travellers Cheques, travel, financial planning, investment products, insurance and international banking.
American Express Platinum Luxury Survey shows wealthy Gen X consumers are mighty in luxury buying power
17 June 2005 – The wealthy in America continue to spend lavishly on luxury goods and services according to the second annual American Express Platinum Luxury Survey, and the trend appears to be mirrored in New Zealand.
And among other information, it seems when they spend on luxuries, the wealthy tend to spend more on their pets than their children.
Households surveyed had an average annual income of US$235,900, (NZ$331,800) which represents the top 8% of the population in the U.S., and spend over 20% of their income on luxury goods and services.
The U.S. survey results show that wealthy members of the younger “Generation X” (born between 1965 and 1976), despite being the smallest total generational group in the U.S. (numbering 49 million) budget their luxury dollars quite differently than the wealthy older Baby Boomers (born between 1946 and 1964), whose generation has 78 million people. Gen Xers are far more invested in buying up the material trappings of wealth.
Members of Gen X
Mighty in Luxury Buying Power
Overall, the wealthy members of Gen X have an average income of US$213,000 (NZ$299,600) and spend 18% more than the Boomers on luxury goods annually: US$26,751 (NZ$37,610) compared with $22,631 (NZ$31,840). This difference is made more significant by the fact that the average income of wealthy Baby Boomers, US$222,900 (NZ$313,620), is similar to Gen X.
spending far exceeds the Baby Boomers in a number of luxury
goods categories including:
60% more than Baby Boomers on fragrance, cosmetics and beauty products ($3,235 (NZ$4,550) vs. $2,017 (NZ$2,838)
47% more on fashion accessories - $6,066 (NZ$8,536) vs. $4,116 (NZ$5,862)
37% more on men's and women's clothing - $23,027 (NZ$32,404) vs. $16,924 (NZ$23,814)
32% more on wines and liquors - $3,922 (NZ$5,493) vs. $2,966 (NZ$4,1554)
For luxury experiences, including dining, travel, and home services, both generations spend roughly the same: $17,554 (NZ$24,560) for Gen X compared with $17,651 (NZ$24,720) for Boomers.
However, in a number of luxury experience
categories Gen X spending exceeds the Baby Boomers:
33% more than Boomers for entertainment
17% more for personal/health services
11% more for sporting events
"Marketers tend to think of the Gen Xers as a cohort too small to even worry about, but this research shows that Gen X may be small in size but they are mighty in luxury buying power,” Pam Danziger, founder of Unity Marketing, a marketing consulting firm that specializes in marketing to the luxury market, and who conducted this year's Platinum Luxury Survey.
“They are in a more youthful life stage and are accumulating a lot of big, material goods. Their influence is destined to grow even more in the luxury market in the future now that the leading edge of this generation reaches 40 years of age this year."
Contrary to the Gen X population, many Baby Boomers are approaching a near plateau in terms of their career trajectory, as the leading edge of the generation turns 59 years old in 2005. Furthermore, their overall wealth may even decline after retirement. The Boomers are at a different life stage and thus have accumulated many of the “big purchases” the Gen X are currently making, or planning to make.
The Boomers are more likely to own original art (31% as compared with 24% among Gen X), a fine jewelry collection (29% to 25%), a vacation/second home (26% to 18%) and an antique or other collection (24% to 18%).
Members of Gen X, by comparison, are more likely to place a greater emphasis on active or experiential ‘toys' such as sports cars, (owned by 28% of Gen X compared with 24% of Boomers) and boats and yachts (21% to 17%).
Dramatic Spending Differences Among Rich vs.
The survey also looked at the difference in spending patterns and attitudes between the rich and the affluent. In this survey, the rich sample earn an average of US$390,400 per year (NZ$546,755) with approximately $10 million (NZ$14m) in investible assets and represent the top 2% of American households. The affluent sample earn an average of US$152,500 per year (NZ$213,576) with approximately $1 million (NZ$1.4m) in investible assets.
In comparing the rich with the affluent, the rich spend three times more than the affluent in both the luxury goods and luxury experiences categories – an astounding US$81,172 (NZ$113,681) total per year. And in several categories the rich spend nearly four times as much as the affluent. For instance, the rich spend US$17,185 (NZ$239,744) on luxury jewelry and watches vs. US$5,163 (NZ$7,231) by the affluent; US$12,831 (NZ$17,970) on luxury pet products vs. US$1,316 (NZ$1,843); US$11,679 (NZ$16,356) on luxury children's goods vs. US$3,577 (NZ$5,010); US$9,931 (NZ$13,908) on luxury fashion accessories vs. US$2,898 (NZ$4,059); and US$7,703 (NZ$9,906) on luxury wines and liquors vs. US$1,880 (NZ$2,633).
Interestingly, the rich spend about as much on luxury products for their pets as they do on luxuries for the children.
The rich also indulge more in luxury experiences than the affluent, spending three times more in almost every category: US$6,281 (NZ$8,796) on personal and health services vs. US$1,851 (NZ$2,592) by the affluent; US$6,363 (NZ$8,911) on entertainment vs. US$1,791 (NZ$2,508); US$9,313 (NZ$13,043) on sporting events vs. US$2,891 (NZ$4,048); US$7,611 (NZ$10,658) on dining vs. US$2,632 (NZ$3,686); and US$17,051 (NZ$23,877) on luxury travel vs. US$7,815 (NZ$10,943).
Value Conscious But Willing to Pay More For
Personal Service and High Quality
While the luxury consumers surveyed buy luxury in a variety of categories, they also enjoy shopping wisely and searching for the best value and price.
80% of luxury consumers surveyed agree
with the statement, “Getting a discount or finding a really
good sale price on a luxury item makes me feel like a smart
63% agreed that “The price of most luxury goods is too high, and I rarely pay full price for a luxury brand.”
58% said their last luxury purchase was bought on sale and 83% said a sale or discount was very or somewhat important to their purchase decision.
“The luxury shopper is value conscious and passionate about getting the best price. However, despite their propensity to watch their wallets, they are willing to pay more for superior service and greater convenience,” said Peggy Maher, senior vice president and general manger, Consumer Charge Card, American Express Company.
“Most of the wealthy consumers surveyed come from middle-class backgrounds and are thus more value-conscious. As we know from our Platinum Cardmembers, they are willing to pay for goods and services as long as they see the value."
About two-thirds (64%) of wealthy consumers surveyed are willing to pay more for special services when they travel or shop at a more exclusive boutique. The overwhelming majority of survey respondents said luxury had to do with quality and service, not a price tag or label.
Nearly 80% of the luxury consumers surveyed
agreed with the statement, “An important part of my
enjoyment of a luxury experience is how well the service
personnel treat me and the extra service they provide.”
Sometimes buying luxury is based on pure convenience with 43% of wealthy consumers agreeing, “I often trade off spending more money for convenience, because I know I could find it cheaper but it is just too much of a hassle.”
About The American Express Platinum Luxury Survey
The American Express Platinum Luxury Survey was a quantitative survey conducted in March 2005 among a random cross-section of 770 wealthy consumers in the U.S. including:
270 consumers with a household income over US$200,000 (NZ$280,100) of any age group
250 Baby Boomers with a household income of US$125,000 (NZ$175,062) to US$199,999 (NZ$280,099) - average age of 50 years
250 Gen Xers with a household income of US$125,000 (NZ$175,062) to US$199,999 (NZ$280,099) - average age of 34 years)
Those surveyed had to possess an income of at least US$125,000 (NZ$175,062) to be considered and were not required to be American Express Cardmembers to participate.
All of the participants purchased a luxury good or experience in the past 12 months to qualify. The average income of the respondents was US$235,900 (NZ$330,378). Unity Marketing conducted the survey on behalf of American Express.
The Platinum Card from American Express was the first of its kind in the market, offering Cardmembers access to exceptional travel benefits and services. Since the time of it's introduction, the company has been employing many methods to understand what motivates and engages this consumer set. The Second Annual American Express Platinum Luxury Survey is the company's most recent study.
When American Express launched the Platinum Card in 1984, the company's reputation for providing outstanding service to frequent travelers and Card members was already well established. Since the 1950s, American Express has been offering Card members high-quality products and services, including the Green and Gold Charge Cards and travel assistance and office facilities to travelers. Today the Platinum Card continues to evolve with the changing luxury marketplace, making it one of the most desired cards in the market.
American Express is a diversified worldwide travel, financial and network services company founded in 1850. It is world leader in charge and credit cards, Travellers Cheques, travel, financial planning, business services, insurance and international banking. For more information, visit www.americanexpress.com.