NEW YORK: Luxury brands have put a lot of effort into expanding into emerging markets in recent years, but a new report has advised them not to neglect the US, the largest and potentially most lucrative market for luxury goods.
The marketing and positioning of luxury brands should also reflect cultural differences between emerging and mature markets while recognising that American millionaires, in particular, tend not to be conspicuous or ostentatious consumers.
Published in association with the American Affluence Research Center, the report found US millionaires typically have incomes of between $100,000 and $249,900 per year, and only 4% have an income of more than $1m a year.
Most live in homes valued at less than $500,000, with only 15% living in a home worth $1m or more, 72% are employed, and most choose to save rather than spend.
As such, these HERNS – defined as "high earners rich now" – tend to have relatively modest household incomes and this is reflected in their shopping preferences.
Unity Marketing found that discount department stores are their second most popular shopping destination, after the internet, and that nearly half (47%) do not shop at luxury department stores.
With a sizeable proportion of American millionaires displaying such frugality, Danziger said it is important for luxury brands to develop strategies that differentiate between high spenders as opposed to those wealthy who want to protect their accumulated wealth.
"In their search for rapid growth, they have often neglected the biggest and best potential market for luxury, which is right here in the United States," she said.
"The fact is positioning and marketing luxury in emerging markets, with 'nouveau riche' consumers, in many ways is easier than positioning and marketing to more established wealthy consumers like you find here.
"Ultimately, the idea of developing a one-size, fits-all 'global' luxury brand concept may prove to be flawed, since luxury is very much culture bound."
Ron Kurtz, president of the American Affluence Research Center, agreed, adding that luxury brands should concentrate on "educating the affluent about the value and quality feature of luxury goods".
Data sourced from Luxury Daily, Unity Marketing; additional content by Warc staff