New luxury consumer trends: Trading up to new products- sweet spot between mass and class
Middle-market consumers, in the United States and around the world, are trading up to New Luxury products and services that deliver higher levels of quality, taste, and aspiration than conventional items. Because New Luxury goods sell for 20 to 200 percent more than standard midprice goods, they deliver higher profits. They also can sell in much higher volumes than superpremium products, and thus have greater potential for growth.
In 23 categories of consumer products and services worth $1.8 trillion in annual sales in the United States, New Luxury goods account for about 22 percent of the total, or $400 billion per year. The total is growing at 10-15 percent annually and will reach a trillion dollars by the end of this decade. The New Luxury market is about the same size in Europe as it is in the United States.
96% of North American consumers say they often pay a premium for New Luxury goods. Most of these consumers are members of the “mass affluent” with household incomes of $50,000 +. But, because many of these items have low ticket prices, even households with lower incomes can participate.
Three Forms of New Luxury
New Luxury goods and services take three forms, covering an extremely wide range of price points in dozens of categories. They are not always the most expensive items in the category, nor are they always the top of the line for the brand. They always sell at a premium to conventional goods, but are always affordable by the middle-market consumer.
- Superpremium- These products are priced near the top of their category. They are at a substantial premium to conventional offerings. However, they may still be affordable to the middle class consumer because they are relatively low ticket items.
- Luxury extensions- These products are extensions of premium brands that have a following among high income consumers. Brands like Mercedes and Land Rover have introduced middle market products to appeal to a new emerging segment.
- Mass prestige- This is the new growth segment that will drive growth in the future. As consumers aspire to new products, they are looking for bargains in luxury categories. These new smart consumers value luxury brands but are looking for value defined by relatively lower prices. This mid segment will dominate top lne growth in low ticket products over the next ten years.
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