It’s tough enough competing for customers and market share when you sell something that’s a necessity. But even Eva Jeanbart-Lorenzotti (below), cofounder/CEO of luxury goods merchant Vivre, admits that the American consumer can survive without a rose-shape brooch made of black Kevlar ($175), a paisley stole trimmed with fox ($1,895), or the other items proffered by her company. “No one truly needs these items,” says Jeanbart-Lorenzotti. “They desire them.”
Fortunately for Vivre and its competitors, many consumers do think that they need the items they desire. And they are determined to fill this need. This is the era of what Michael Silverstein, senior partner for Boston-based global management firm Boston Consulting Group and co-author of Trading Up: Why Consumers Want New Luxury Goods — and How Companies Create Them, calls “new luxury.” Middle-income consumers, he says, escape the stresses of modern life in part by treating themselves to select high-quality, high-ticket luxuries. “The products satisfy the emotional needs of the consumer,” Silverstein says.
Boston Consulting says that “new luxury” represented approximately $525 billion in sales in the U.S. last year, up from $450 billion in 2003, and will near $1 trillion by 2010.
Clearly Park Avenue socialites and denizens of the 90210 zip code aren’t the only consumers snapping up limited-edition handbags and designer ensembles. That the increase in the luxury market corresponds with the increasing popularity of discounters such as Wal-Mart and Target is no coincidence: Middle-income consumers are scrimping on necessities so that they can afford luxuries.
As Jeanbart-Lorenzotti says, “Buying a new handbag is something women do every season.” Now more of them are buying the latest “it” bag from Louis Vuitton or Christian Dior or Lulu Guinness rather than what’s on sale at the nearby strip mall.