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February 22, 2005

Luxury Goods and the Shift to Generation X

Buyers of luxury goods are already living luxurious lifestyles. They have new homes and new cars.  They have closets stuffed with clothes and they already own high-end furniture for every room. The only thing they don’t have is a real need for anything. So when they shop, they do it based on emotions and perceptions of wealth.

Reasons people spend money are changing, and the purchasing power is being passed on to the next generation.  For manufacturers of luxury furniture, this shift is becoming a real problem, says Pam Danziger, President of Unity Marketing and author of "Let Them Eat Cake: Marketing Luxury to the Masses—as well as the Classes." She explains in terms of two phases or stages in life: the cocooning stage and the connecting stage.

Take the Baby Boomers. They are leaving the cocooning stage––when they bought homes, had families and spent their money on furniture and decorating. But Boomers, who number 76 million, are leaving that stage. In the connecting stage they’re now entering, they’ve stopped spending money on those types of things.  Now, their money is spent on experiential purchases like exotic vacations and evenings at the theater.

In one of the focus groups Unity Marketing uses for research, Danziger met a 60ish woman whom she says embodies the shift from cocooning to connecting. The woman explained that she and her husband just moved to a small home in a golf course community. During his career he had risen through corporate ranks and they had moved several times, each time buying new furniture and decorating accessories. Now, she’s tired of doing that. Furnishing a home is more like a job and she would rather spend her time and money on memorable experiences.

So with the Baby Boomers leaving cocooning and its buying habits for connecting and its much different buying habits, who will pick up the purchasing slack? Danzinger says it’s in the hands of Generation X. They’re just approaching the cocooning stage and have an interest in luxury goods. There’s just one problem, numbers. Compared to the 76 million Boomers, Gen X only has about 42 million members.

Furniture manufacturers are going to have work hard at getting these people to buy their products and it will be more than difficult without strategic marketing. Danziger explains that while people don’t defer to brand when buying high-end furniture, they do use brand as an excuse or justification for paying  high prices.

The bottom line: consumers buy it ‘cause they like it, they pay more because of the brand name. With less people buying furniture, manufacturers better focus on branding to make up the lost dollars.

And by the way, this generation shops online. They may not purchase furniture online, because of shipping costs, but they do look for bargains in stores they're willing to drive to. Luxury consumer or not, nobody’s going to pay more if they don’t have to. And when it comes to high-end items and their high cost price tags, finding a place that saves even 10%, can mean a bundle. 

Manufacturers need to get into a shift of their own and play to the yen of these computer savvy consumers who will pay more––if they believe in the brand.

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