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Scrimping to splurge
Driving much of the growth: statusconscious, middlemarket shoppers juggling their dollars for everyday needs to make room in their budgets to trade up to a taste of luxury.
"A consumer might buy grocery staples at WalMart and sports clothes at Target in order to afford other goods that cost 200% more than average ones but have real technical benefits that satisfy emotional needs," says Michael Silverstein, vice president at The Boston Consulting Group. Silverstein cited as examples everything from entrylevel BMW cars to esoteric teas, from Coach bags to spa vacations.
A hit in every class Spending on luxuries, prevalent in just about every retail category, totaled more than half a trillion dollars last year: $130 billion$100 billion
Homes and home renovations
$80 billion
Cars, SUVs and light trucks
$60 billion
Dining out
$50 billion
Home goods and electronics
$50 billion
Food, coffee, wine
$30 billion$25 billion
Spas,[url=http://www.sport.fr/business/louisvuitton.html]louis vuitton paris[/url], cosmetic surgery and dentistry
Source: The Boston Consulting Group
Luxury retailers' holiday sales grew 11% over 2003, says research firm The NPD Group, while overall holiday retail sales gained about half that: 5.7%. Neiman Marcus' were up 11% in December, driven by designer apparel, handbags and accessories while WalMart sales grew 3%.
The consulting group forecasts luxury sales becoming a $1 trillion retail sector by 2010.
While the wealthy customer is still a core customer, highend retailers are paying close attention to these aspiring middleclass customers and have been adding more highstyle items at notquitesohigh prices.
"Luxury is how we show off status," says David Wolfe, fashion forecaster at The Doneger Group.
Upscale handbag maker Coach, for example, has in its collection vintage wristlets in leather as well as its popular signature fabric for $78. Neiman Marcus offers delicate glass dinnerware in a tulip motif at $90 for four dinner plates. Tiffany's lesscostly sterling silver offerings include cuff links for $90.
Such catering to middleclass buyers will be crucial to upscale retailers' growth through 2010.
That year promises to be pivotal and will begin a transition era for marketers wanting to sell indulgence and status for a price.
That's because members of what has been a key demographic group for them baby boomers begin to retire that year. While they may not stop shopping, their tastes and needs, and even status markers, may shift from things to experiences such as lengthy vacations, golf resorts and spas. That will require luxury retailers to be ready to work harder to compete.
"We'll see changes in wants and needs occur more rapidly," Coach CEO Lew Frankfort said during a recent retail conference here. "The companies that are going to prosper are the companies that will continue to innovate and be relevant and mindful that every day they have to give a little extra value."

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