Mass Market

It’s been called so many things: “luxury for the masses,” “trading up,” “the new luxury,” “the mainstreaming of affluence,” “the democratization of luxury.” The bottom line is, we’re a rich country and getting richer, and more of us are indulging in the finer things—even those who could hardly be described as “wealthy.”

The Luxury Institute, a New York–based market research firm, reported that the number of Americans boasting assets of more than $1 million last year soared 14 percent to 2.27 million. That rapidly expanding affluence, spurred by rock-bottom interest rates, surging home prices and other economic factors, is transforming America from a land of plain folk to one where Jaguars, Viking ranges and Hermès ties are attainable for growing legions, not just fantasies in magazines.

The Boston Consulting Group, an authority in the area of affluence, valued the market for luxury goods and services last year at $400 billion, or 12 percent of all retail sales. The group also said the luxury sector is growing at a clip of 15 percent a year, heading toward $1 trillion by decade’s end. Sky-high gasoline prices, creeping interest rates, weak job growth and terrorism fears seem to have done little to curb our cravings. Dallas-based retailer Neiman Marcus last month reported that its July same-store sales jumped 16.6 percent versus last year. Swiss watchmaker Swatch said increased demand for its prestige brands Omega and Tissot helped boost its profits 17 percent in the first half of this year. Ralph Lauren, in announcing last month that his company’s operating profit in the fiscal first quarter jumped 273 percent (no, that’s not a typo), credited “the phenomenal response to our luxury designs.”

As the ranks of the well-heeled have swelled, luxury marketers including Mercedes-Benz, Lincoln Mercury and Tiffany continue to introduce more affordable lines, introducing the up-and-coming upper classes to their wares and making the luxe life as accessible to the proletariat as it is to P. Diddy. The word “luxury”—from the Latin luxus, or “excess”—once conjured images of Rodeo Drive, private jets and polo matches. Now, luxury is on sale at Target, where couturier Isaac Mizrahi is hawking his line of affordable fashions with the pitch line “Luxury for Every Woman Everywhere.” Bottled waters and Starbucks routinely are included in conversations about the luxury sector, even as the demand for shares in private planes and yachts soars.

Meantime, House & Garden dubbed its September offering “The Luxury Issue” and drew ads from Tiffany, Lexus, Christofle—and Target. In his recent memoir, Vogue’s Andre Leon Talley associated luxury not with his mentor and high-fashion icon Diana Vreeland, as one might expect, but with his grandmother, for her freshly pressed, pure-cotton sheets. “My earliest experiences of luxury…were not experiences of surfeit and sumptuousness, but of the beauty of ordinary tasks done well and in a good frame of mind; of simple things suited to their purpose and well cared for,” Talley mused.

George Fertitta, president of New York–based ad agency Margeotes Fertitta + Partners, whose clients include JP Morgan Chase and Godiva Chocolatier, seconds that: “Luxury today is defined much more broadly. In its broadest sense, it’s what makes you feel good or special or secure. Clearly, it varies by the person and their experiences, economics and demographics, but often the end benefit is the same whether it’s a $100,000 car or a $10 manicure.”

Hence, it’s not only the rich who are driving the luxury market to such unprecedented heights. In a white paper released in concert with its 2004 Luxury Summit in Miami in April, American Express Publishing, whose titles include Travel+Leisure and Food & Wine, defined the “new affluent market” as encompassing 47 million U.S. households with an average annual income of a mere $50,000-plus. (Another observer of the sector, Stevens, Pa.–based Unity Marketing, defines the luxury market as the top 20 percent of households with incomes of $75,000 and up.) “It used to be that [luxury marketers] went after the 50-year-old male living in a certain community who went to a certain college and was in a certain profession—these days you can’t target a luxury consumer like that,” says Cara David, vp/corporate sales and marketing at Amex Publishing. “Luxury consumers are very diverse and are coming in from all different points of entry.”

That increasing accessibility is a double-edged sword for luxury marketers, as a growing army of marketing experts believe that these companies risk tarnishing their brands by pushing lower-end fare. “A brand can lose a great deal of its cachet” by catering to the masses, warns Milton F. Pedraza, CEO of The Luxury Institute.

“The challenge for a luxury company, for the very high-end, is to continue to try to market products as being very exclusive. It’s harder and harder,” adds Amex’s David, though she also contends that most brands that have broadened their product lines—Mercedes-Benz among them—have succeeded in maintaining their integrity.

“That blue Tiffany box is not as exclusive as it used to be,” counters J. Walker Smith, president of Chapel Hill, N.C.–based research and consulting company Yankelovich Partners. “If you want to drive a Mercedes, just about anybody can figure out how to do that now—you just lease one for a couple of years. The problem is, the expectation of luxury has now become a mass phenomenon. So, to sell luxury items to the super rich, to the top 1 percent, you can’t do the things you’ve done in the past, because those offerings have become part of the consumer marketplace in general. There’s nothing that makes those things special anymore, nothing that makes them exclusive.”

the growth of the “near-luxury” market, higher-end marketers offering a range of price points is not new. Polo Ralph Lauren offers not only its premium Purple Label line of men’s clothing but also the long-established, lower-end Chaps and Polo Jeans Co. labels. The name Rolex is synonymous with luxury, but along with watches in the $40,000 range, it offers the Oyster Air-King for around $3,000, points out marketing director John Flaherty. “We have always had a wide variety of models and price points to choose from,” he says. “We have always had a watch out there for a lot of different people.”

Then, there’s Martha Stewart’s long association with Kmart—a relationship that has survived both companies’ colossal hardships. Explains Smith: “Martha is not a luxury brand per se, but it’s a brand name people associate with fine living. Martha made a career of giving ordinary people access to the highest-quality experience at home. For Martha Stewart–branded items to be available in Kmart is an indication of the expanding reach of luxury brand names.”

Luxury today, it appears, is in the eye of the beholder. Martha Stewart throw pillows are one woman’s trash, another’s treasure. And the lines are getting blurrier. Fine California chardonnay can be found among the 50-count packages of toilet tissue and tubs of ketchup at Costco, while is peddling $90,000 necklaces. “A lot of the icons of American culture”—entertainment and sports figures, for example—”who 20 years ago would never have been thought of as symbols of success and achievement, and even elegance, now go hand in hand with luxury,” says MFP’s Fertitta. “America is absolutely in love with success. As Teresa Heinz Kerry said recently when asked about her husband’s wealth, ‘Since when was being successful in America something to be ashamed of?'”

Luxury is also increasingly being associated with services. As Pedraza explains: “When people speak about luxury, they usually refer to things like jewelry, watches, apparel. But the luxury services industry is becoming much larger. People don’t look at financial services as a luxury, but the luxury of the knowledge you get when you’re getting the best advice is often overlooked.”

Luxury-level service is the biggest selling point of the new Visa Signature Card, aimed at $125,000-plus households and meant to steal some of American Express’ thunder. The card offers perks like concierge services, hotel upgrades and reserved tables in top restaurants. The Signature ad campaign, created by BBDO/New York, featuring “signature” icons including Frank Sinatra and the Eiffel Tower and encompassing network TV, radio and magazines, launched last month on NBC during its coverage of the Summer Olympics’ opening ceremony. “When you think of brands that historically have been prestige-oriented, you think of the Rolls-Royces of the world,” says Visa’s Al Banisch, senior vp/consumer credit products at Visa USA. “Our view of the affluent is that the imagery is changing and the needs and desires of the new affluent are different. They’re rooted in practical values rather than badges.”

about luxury and today’s luxury consumer, it’s no wonder that researchers and media outlets are working overtime to help marketers better understand that customer and sell more efficiently to the target. Margeotes, Fertitta + Partners, for example, recently studied the buying and lifestyle habits of individuals making more than $100,000. Surprisingly, it found that the most affluent consumers had relatively little brand loyalty when it came to a range of products from automobiles and liquor to contraceptives and baby food. (They were more loyal to electronics brands.) “Trying to reach people in luxury goods, where those who are making decisions expect high quality, cannot just be made by surface emotions,” says Fertitta. “You cannot just leave out who that person really is. We’ve found some other interesting things about their lives that can help us to sell better.”

In addition to its annual Luxury Summit, Amex Publishing last November announced a joint sales initiative with Time Inc., dubbed The Luxury Portfolio, to help marketers reach luxury consumers via group ad buys across Amex’s T+L and F&W and Time Inc.’s In Style, Fortune and Real Simple. (In its most recent Affluent Survey, New York–based Mendelsohn Media Research pointed out that magazine readership remains particularly strong among individuals making six figures, while television and radio usage decline as income increases.)

With its largely female readership, Meredith shelter title Traditional Home, in its recent survey of affluent consumers, focused on the buying habits of women aged 35 to 50 with a median household income of $150,000. It found that well-off women were likely to spend more to get top quality and were particularly fond of high-end electronics such as flat-screen TVs and digital cameras.

“For 40-year-old female homeowners, luxury is synonymous with necessity,” says TH publisher Brenda Saget Darling. “These women with affluence have a certain expectation of which brands will deliver to them, and they’ll pay more for the premium brand. [They are saying], ‘don’t tell me it’s status, don’t tell me it’s a label, tell me how it’s better.'”

The masses may have discovered luxury, but fear not. Good old-fashioned obscene, decadent, full-blown luxury hasn’t gone the way of Dynasty. The oversized glossy Elite Traveler (which carries the tag line “The Essence of Luxury”), distributed on private planes and yachts, boasts a median household income of $910,000 and offers reviews of exotic destinations such as the Four Seasons Resort in Maui, home to the 5,000-sq.-ft., $8,700-per-night Maile Suite. And ET’s business is booming, with advertisers such as Aston Martin, Krug champagne and the Hong Kong Tourist Board helping the title achieve projected 128 percent growth in current-year ad pages (to 484, compared with 212 last year), according to president and editor in chief Douglas D. Gollan.

As for the magazine’s own consumer survey, only those with a net worth of at least $10 million were scrutinized. “Everyone likes to use the word luxury,” says Gollan. “But we’ve really created a way for luxury marketers to get directly to the high-spending consumer without the waste.” For the record, 83.5 percent of those surveyed planned to travel to Europe over this past summer, while the super rich aimed to spend $22,000 on wine and spirits, $55,000 on jewelry or watches, and $114,000 on redecorating a home during this season.

Stand back, Isaac Mizrahi—Ivana Trump is alive and well and looking to spend.

Tony Case is a contributing editor to Mediaweek.