14
Dec
2004
In 1899, the economist Thorstein Veblen coined the term "conspicuous consumption," describing the way the rich flaunted their wealth by buying expensive goods and services that people with less money couldn't afford.
In recent years, though, economists have noticed that conspicuous consumption is no longer the purview of only the rich. People of all income levels are indulging in luxury, from cars and clothes to bottled water.
"The access to these objects used to be for the rich," said James B. Twitchell, professor of English and advertising at the University of Florida and the author of the 2002 book Living It Up: Our Love Affair with Luxury. "Now the rest of us are having a go at it. All you have to do is look at bottled water. This is down at the Ben & Jerry's level." In other words, luxury items now run the cost gamut from private jets to grocery-store staples, making some level of indulgence available to just about everyone.
Hard numbers are difficult to come by, but luxury spending is increasing at roughly four times the rate of other types of spending, Twitchell said in an interview on Monday.
The middle class has always yearned for the luxuries of the rich, Twitchell said. What's changed is that providers of high-end consumer goods and services are now making luxuries more affordable. Luxury is now "holdable by people who could have never held it before," he said. Middle-class people can now have a Bahamas time share, lease a Lexus, or use frequent-flyer miles to travel first-class, he said.
In those cases, companies aren't necessarily changing their products but offering different ways to experience them that are more accessible to people with modest incomes.
But the luxury boom is also a function of new products. That trend was described in the 2003 book Trading Up: The New American Luxury, by Michael Silverstein and Neil Fiske. The book claims that middle-class Americans - 47 million households making more than $50,000 a year - are now buying "New Luxury" items.
Trading Up describes three types of New Luxury products: "accessible superpremium" things that are affordable because they are "relatively low-ticket items" such as vodka; "old luxury brand extensions" that are lower-cost products put out by prestige companies (such as Mercedes); and "masstige [a combination of 'mass' and 'prestige'] goods" positioned between common brands and superpremium ones (such as Bath & Body Works lotion).
Silverstein estimated in an e-mail response to questions that the luxury market will generate $500 billion in 2004. "There's been a tremendous growth in real disposable income in the last 30 years," he said. "Consumers have seen a doubling of real per-capita income. This has been the fuel that has permitted them to translate their wishes into product they can own."
The authors of Trading Up make a distinction between "conspicuous consumption" - whose primary benefit is the prestige bestowed by luxury items upon their owner - and this New Luxury market. Silverstein and Fiske say that to fall under "trading up" a product must deliver "emotional engagement" and performance and features that distinguish it from competitors.
"Consumers are not buying New Luxury product for status," Silverstein said. "They seek care, quest, and style."
Twitchell is skeptical that products' quality is driving this trend toward luxury items. He views it mostly as a triumph of marketing.
Producers and advertisers have gained "an awareness that sensation is what people want," he said. "You can generate this sensation on any number of things." Marketers create sensation by branding their products and telling a story. And branding happens because many products are seen by consumers as interchangeable, he said.
Silverstein disagreed. "The consumer is smart and discerning," he said. "They demand goods that have better ingredients and materials. ... If you fail to deliver your promise, they nail you and fast. They not only stop consuming your product, but they tell their friends."
Twitchell acknowledged that some luxury products provide only private experiences. "Cashmere-sock luxury," for instance, provides a sensation to the wearer that nobody else can see.
But that's the exception, he argued. Many luxury goods confer prestige on the person who buys and uses them. And that's made status more democratic, Twitchell argued. It used to be that ancestry, ethnicity, religion, and membership determined a person's lot in life - the "lucky-sperm culture," he said. Now one can buy status through luxury goods. "It's very wasteful. It's very shallow," Twitchell said. "But in some ways it's very fair. ... You sure weren't going to change your social place in the world I grew up in."
And the middle class recognizes that buying luxury items, whether for cachet or improved quality, means cutting back on something else, the authors of Trading Up claim. One key concept of the book is that consumers are being frugal - or "trading down" - in other areas of their lives so that they can afford luxuries.
A consumer-purchasing survey released this month by The Boston Consulting Group (of which Silverstein is a senior vice president) found that many respondents with household incomes of $50,000 or more "spend the bare minimum" or "try to save a little money" on certain items to afford luxuries. Half of the 2,100 people surveyed said they trade down in canned goods. Other areas that respondents cut spending included dry goods (47 percent), snack foods (46 percent), household cleaners (46 percent), paper products (46 percent), and fast-service restaurants (46 percent).
Ted Woodruff, a professor of economics at St. Ambrose University, doesn't buy it. He notes that consumers are "getting less responsible," with high numbers of personal bankruptcies and a saving rate that's as low as it has ever been.
Twitchell agreed, but said the value people see in luxury items is greater than the cost. "When people get near consumption, they become hyper-rational," he said, but they still go into debt for luxuries. "These people understand the penalty they're setting on themselves."
One byproduct of the infiltration of luxury outside of the wealthy is that there's the potential for these luxury items to lose their prestige, Twitchell said. All classes of people are buying luxury now, and as a result, "you can't tell the rich from the poor except by who's giving money away."
For more information about Trading Up, visit (http://www.bcg.com/publications/trading_up/introduction.jsp).
In recent years, though, economists have noticed that conspicuous consumption is no longer the purview of only the rich. People of all income levels are indulging in luxury, from cars and clothes to bottled water.
"The access to these objects used to be for the rich," said James B. Twitchell, professor of English and advertising at the University of Florida and the author of the 2002 book Living It Up: Our Love Affair with Luxury. "Now the rest of us are having a go at it. All you have to do is look at bottled water. This is down at the Ben & Jerry's level." In other words, luxury items now run the cost gamut from private jets to grocery-store staples, making some level of indulgence available to just about everyone.
Hard numbers are difficult to come by, but luxury spending is increasing at roughly four times the rate of other types of spending, Twitchell said in an interview on Monday.
The middle class has always yearned for the luxuries of the rich, Twitchell said. What's changed is that providers of high-end consumer goods and services are now making luxuries more affordable. Luxury is now "holdable by people who could have never held it before," he said. Middle-class people can now have a Bahamas time share, lease a Lexus, or use frequent-flyer miles to travel first-class, he said.
In those cases, companies aren't necessarily changing their products but offering different ways to experience them that are more accessible to people with modest incomes.
But the luxury boom is also a function of new products. That trend was described in the 2003 book Trading Up: The New American Luxury, by Michael Silverstein and Neil Fiske. The book claims that middle-class Americans - 47 million households making more than $50,000 a year - are now buying "New Luxury" items.
Trading Up describes three types of New Luxury products: "accessible superpremium" things that are affordable because they are "relatively low-ticket items" such as vodka; "old luxury brand extensions" that are lower-cost products put out by prestige companies (such as Mercedes); and "masstige [a combination of 'mass' and 'prestige'] goods" positioned between common brands and superpremium ones (such as Bath & Body Works lotion).
Silverstein estimated in an e-mail response to questions that the luxury market will generate $500 billion in 2004. "There's been a tremendous growth in real disposable income in the last 30 years," he said. "Consumers have seen a doubling of real per-capita income. This has been the fuel that has permitted them to translate their wishes into product they can own."
The authors of Trading Up make a distinction between "conspicuous consumption" - whose primary benefit is the prestige bestowed by luxury items upon their owner - and this New Luxury market. Silverstein and Fiske say that to fall under "trading up" a product must deliver "emotional engagement" and performance and features that distinguish it from competitors.
"Consumers are not buying New Luxury product for status," Silverstein said. "They seek care, quest, and style."
Twitchell is skeptical that products' quality is driving this trend toward luxury items. He views it mostly as a triumph of marketing.
Producers and advertisers have gained "an awareness that sensation is what people want," he said. "You can generate this sensation on any number of things." Marketers create sensation by branding their products and telling a story. And branding happens because many products are seen by consumers as interchangeable, he said.
Silverstein disagreed. "The consumer is smart and discerning," he said. "They demand goods that have better ingredients and materials. ... If you fail to deliver your promise, they nail you and fast. They not only stop consuming your product, but they tell their friends."
Twitchell acknowledged that some luxury products provide only private experiences. "Cashmere-sock luxury," for instance, provides a sensation to the wearer that nobody else can see.
But that's the exception, he argued. Many luxury goods confer prestige on the person who buys and uses them. And that's made status more democratic, Twitchell argued. It used to be that ancestry, ethnicity, religion, and membership determined a person's lot in life - the "lucky-sperm culture," he said. Now one can buy status through luxury goods. "It's very wasteful. It's very shallow," Twitchell said. "But in some ways it's very fair. ... You sure weren't going to change your social place in the world I grew up in."
And the middle class recognizes that buying luxury items, whether for cachet or improved quality, means cutting back on something else, the authors of Trading Up claim. One key concept of the book is that consumers are being frugal - or "trading down" - in other areas of their lives so that they can afford luxuries.
A consumer-purchasing survey released this month by The Boston Consulting Group (of which Silverstein is a senior vice president) found that many respondents with household incomes of $50,000 or more "spend the bare minimum" or "try to save a little money" on certain items to afford luxuries. Half of the 2,100 people surveyed said they trade down in canned goods. Other areas that respondents cut spending included dry goods (47 percent), snack foods (46 percent), household cleaners (46 percent), paper products (46 percent), and fast-service restaurants (46 percent).
Ted Woodruff, a professor of economics at St. Ambrose University, doesn't buy it. He notes that consumers are "getting less responsible," with high numbers of personal bankruptcies and a saving rate that's as low as it has ever been.
Twitchell agreed, but said the value people see in luxury items is greater than the cost. "When people get near consumption, they become hyper-rational," he said, but they still go into debt for luxuries. "These people understand the penalty they're setting on themselves."
One byproduct of the infiltration of luxury outside of the wealthy is that there's the potential for these luxury items to lose their prestige, Twitchell said. All classes of people are buying luxury now, and as a result, "you can't tell the rich from the poor except by who's giving money away."
For more information about Trading Up, visit (http://www.bcg.com/publications/trading_up/introduction.jsp).
