In 2019, we live in an extremely visual world. Facebook and twitter no longer rule our screen time because they have had to make way for Instagram, Pinterest and other image-focused social media apps. Perhaps as a result, our attitudes towards luxury markets and our spending habits are changing and elite brands are trying to keep up to target a new ‘luxury consumer’. 81% of consumers believe that the definition of luxury is changing. Our guide is looking at who spends the most on luxury items and what it could mean for your finances.
What Is The Luxury Market?
Technically, a luxury item is something that is not considered essential for living but rather extremely desirable. There is no set price range for luxury goods, but they are normally high ticket items and can be material goods as well as deluxe or opulent services. Although luxury items are not necessarily required to be a high-quality, they are usually a premium item to be sold at the top end of the market, as the item will need to be ‘worth it’ to a consumer. Typically, clever marketing materials are what determine what is and what isn’t a luxury item, and thus our justification for committing to a high-priced item. Markets that have a prominent luxury trade include:
- Clothing and fashion industry
- Accessories, including luggage
- Food and drinks
- Jewellery and watches
We understand that what one person considers a luxury is quite relative, wherein it could be an everyday item for others. Many people, even subconsciously, use luxury items as a positional marker, to indicate to their peers their status in the world. This is because the ability to purchase a luxury item will depend on one’s financial standing, but the exclusivity of luxury goods also suggests social standing or affluence. Luxury items are considered to have an “income elasticity of demand”. This means that the demand for these goods is subject to a person, community or demographic’s income or disposable income. This is just one of the aspects of the luxury market that could be changing. Driven by image-focused advertising and personalised experiences of a product, some people might be buying luxury items despite their income not really allowing for such a high-priced purchase. This could affect their financial security and leave them short of money or a comfortable financial cushion and leave them reaching for a payday loan or other similar loan products to handle unexpected bills.
The New Luxury Consumer Profile
The Global Web Index completed a consumer profile survey to gain a better understanding of who spent the most on luxury goods. The results highlight that younger demographics (those under the age of 45) are the biggest spenders at the top end of the market. More than a third (34%) of those in the 25– 34 age brackets said they ‘regularly’ spend on luxury items or services. 33% of 35 – 45-year-olds also said they regularly indulge. Interestingly, the same percentage of 16 – 24 year olds said they buy luxury items as gifts. This could support the new turn the luxury item has made towards extreme personalisation, which could be considered to make thoughtful presents. Alternatively, as 25% of this demographic also said they are ‘occasional treaters’ and purchasers of luxury items, they might wait for an incentive or special occasion to buy at this end of the market, perhaps because they are just entering the workforce and have less disposable income.
This information could indicate that the luxury market could take an upturn, as those within the age brackets 16 – 22 and the Generation Z population begin their careers and money-earning years without any dependents, and thus have more disposable income to ‘regularly treat’ themselves to high end goods and services, whereas the 27 – 28 % of the aging population (45 – 64 year olds) ‘never’ purchase deluxe items. Moreover, there is a link between those who are willing to, and perhaps already do, spend on luxury goods and those who use visual social media platforms. In fact 90% of Instagram users are younger than 35 years old.
Furthermore, the same survey from The Global Web Index highlighted that 67% of those within the 23 – 36 age range that said they regularly buy premium goods were male. Whereas females were less likely to spend on luxury goods across all ages. Again, this coordinates with statistics that tell us that “the biggest demographic [of Instagram users] are males between 18 – 24 years old”.
What Are They Spending On?
Experiences are also considered a way to demonstrate status, especially now as they can be boasted about on so many platforms, as well as in person. Millennials are the driving force behind the move to experience markets. In conjunction with the demographics who are spending on luxury items, it does seem that the luxury experience market could be on the rise, as 1 in 3 people who are considered ‘the average luxury buyer’ have purchased an experience in the last 12 months. The platforms for how we display our status have changed from that of 10 years ago, never mind 50 years ago when you could only show off your opulent car or hand bag in person. This means that the focus of the luxury brands has also shifted, as 50% of US millennials prefer to spend on experience over ‘stuff’, fuelled by new money, technology and less interest in ownership. Interestingly, the trend seems to be that those who answered the poll as ‘occasional treaters’ seemed to be the ones who buy luxury material goods, such as handbags (26%), electronics (53%) or food ingredients (34%).
Secondary luxury spending by those who responded as ‘regular treaters’ said they are most likely to buy high-end household and furniture items (36%) and cars or automotive (26%). On one hand, this does suggest that this demographic is spending on investment pieces or items that are designed to last a long time. Alternatively, this could be viewed as the biggest-ticket items and thus could lead to the biggest financial commitments, which might be concerning if the buyers do not realistically have the means to purchase them.
Here at Wizzcash, we support purchases that are realistic and financially responsible. We also believe that short term loans should only be used in a financial emergency and in one-off situations. As part of our checks, we ensure all our applicants will be able to meet the repayment terms. For more information about our loans or what they can be used for, browse our website.