By Bruce Horovitz, USA TODAY
Steve Hundley dumped his Jaguar convertible. He stopped taking Baltic cruises. And he stopped buying his wife pricey jewelry.
But last year, just as the recession raised its head, the San Diego resident paid $6,500 for an outdoor artisan pizza oven.
“We don’t need the Jaguar or cruises to the Baltic,” says Hundley, who at 56, is semiretired following a heart attack two years ago. “But cooking healthy food is a big priority.”
Americans are dipping their toes back into the luxury pool — but with a mindset that’s been smacked down and radically reshaped by the recession, the lure of new technologies and emerging lifestyle twists that are often as much personal as cultural.
“The luxury brands are all trying to reinvent themselves and deliver a better experience,” says Milton Pedraza, CEO of the Luxury Institute, a research firm that consults for designer brands. “Apple is making all these companies rethink their business models.”
It wasn’t long ago that luxury primarily meant the accumulation of designer clothes, expensive jewelry and fancy cars. For some, it still does. But for many consumers, the new luxury is something seriously different.
For some, it’s about owning top technology-based products. Consider: The four brands most admired by Americans with six-digit incomes in a recent survey by the marketing specialist Affluence Collaborative were Apple, Microsoft, Best Buy and Sony.
For others, such as the Hundleys, the new luxury is about investing in a lifestyle experience that not only can help improve health but also escalate the experience of such mundane acts as baking a pizza at home. Sales of outdoor artisan pizza ovens at Kalamazoo Outdoor Gourmet — similar to ovens used at pizza parlors — were up 48% last year and are up 74% so far this year.
“It creates an experience — and isn’t consumable,” says Pantelis “Pete” Georgiadis, president of Kalamazoo. “You can keep enjoying it for a long, long time.”
For others, it’s about buying luxury goods only when they’re on sale — or at a steep discount. Nearly three in four wealthy women say they’ll only purchase luxuries if they can get a good deal, reports a recent survey by AgencySacks, a branding firm that consults for some of the nation’s top luxury brands.
Luxury spending slid 7.8% last year to $10.1 billion, says Spending Pulse, a consumer spending monitor from MasterCard. It’s bounced back up for the first five months of 2010. But even affluent customers continue to seek out discounts, bargains and sales, says Tim Murphy, chief product officer at MasterCard. In a recent MasterCard poll, some 64% of all consumers said they were shopping sales. “A few years ago, you’d just market access to the affluent. Now, you must market access — with a discount.”
All this was driven by the recession. “The recession made everyone stop and rethink luxury and value,” says Pedraza. “Even though we’re coming back, that realization has stuck.”
The new world of luxury is less about designer labels and glitz and more about shopping savvy and an I-feel-good-owning-this mentality. Marketers want to know: Will it last?
Pedraza certainly thinks so. He says that Apple and Sony are emerging as the newest luxury designer labels.
“With Apple, you get a better design, a better function and a better luxury experience than you do with most other luxury brands,” he says.
Pedraza recently asked the CEO of a giant European luxury apparel brand to name the company that he viewed as his toughest competitor. Without batting an eye, the CEO, whose company Pedraza won’t name due to client confidentiality, said it was Apple.
Apple declined to comment.
Not a need, but a want
But Yolanda Cummings, who works as a finance professional in Columbus, Ohio, says that to her, there are few things closer to luxury than owning her new Apple iPad. “I don’t need it. I just wanted it because it’s new, different and intriguing,” she says. She paid about $699 for it. She already has a $300 Apple iPod touch and $1,600 Apple MacBook.
“I used to go overboard buying clothes,” she says. “Now, I’m more inclined to purchase new technologies.”
Andrew Sacks, who is president of AgencySacks, says he bought an iPad the first week it was introduced.
“Part of it is escapist luxury,” he says. “We’re living in a world where it’s difficult to control a lot of things, so there’s a feeling that owning new technology allows me to be more organized, more efficient and have more time.”
The recession, he says, has helped to rejigger his own definition of luxury.
Recently, Sacks says, he reached into his closet and discovered a black leather John Varvatos jacket that he’d casually purchased several years ago for $1,500 at a New York boutique. He put the jacket in his closet — and forgot it about it.
But when he recently rediscovered it — post-recession — his view of the jacket had changed entirely. “I was a little embarrassed that I could take something so expensive and put it away and not even have it on my mind,” he says. “Today, I’d do a lot more research before even considering such a purchase.”
For Don Contreras, luxury is the flat-screen Sony TV that he plans to buy and install in the gazebo in his backyard.
On weekends, the federal government physician from Albuquerque likes to do yard work and prune the fruit trees he has in his backyard. But he also likes to watch sports on TV. By placing the Sony TV in his gazebo, he says, he’ll be able to do both.
He only wants a Sony, he says, because that’s the only electronics brand that he trusts. But he’s waiting to buy it until he finds a really good deal.
“I’m not an impulsive buyer,” he says. “I can wait.”
Executives at Sony have concocted a new term for the brand: “functional” luxury.
In a tough economy, says Stuart Redsun, marketing chief at Sony Electronics, “You don’t have to worry about your product breaking down quickly.”
Beyond that, he says, the functional luxury is from the product providing a new experience — such as the new Sony Cyber-shot camera that lets folks shoot panoramic photos or new 3D TV sets that let folks experience home viewing of movies in a new way.
Another example: Sony soon will be the first consumer electronics maker with a Google feature built into its TV sets. Folks watching any show will be able to use a special remote to search Google on the same TV screen.
Sony also has pushed the value message hard. Over the holidays, for example, it bundled a new Sony TV, PlayStation gaming system, game and Blu-ray movie for $900 less than it would cost to buy the items separately.
“We sold out of all the units in that promotion,” notes Redsun. It recently rolled out a similar bundled deal that ends July 17.
Value and luxury have become synonymous.
At Neiman Marcus, “our customers’ way of shopping has changed,” says Karen Katz, CEO of Neiman Marcus Stores. “She is responding well to the opening and middle price points.”
For example, many Manolo Blahnik designer shoes at Neiman Marcus typically sell for at least $500 — and some for upwards of $900. But in the spring, Neiman Marcus had great success selling a Manolo Blahnik ballet flat for $395. “Our customer was very happy to have a Blahnik shoe for under $500,” says Katz.
Bargain in the bag
It’s no accident that Coach, whose handbags used to start at about $250 — and whose average retail price for a handbag hit close to $350 before the recession — launched a new line last year, Poppy, which starts at $198.
Beyond that, Coach has added more bags at lower price points — and made them more function for women carrying devices from iPhones to iPads, says Michael Tucci, president of Coach’s North American retail division. “The last thing I want you to get from this is that Coach got cheaper. We got more compelling from a value standpoint.”
Consumers have responded. Coach sales are up 8% for first nine months of its fiscal 2010
Value, of course, is in the eye of the purchaser.
To Lori Wachs, a hedge fund partner from Philadelphia, nothing says luxury value like getting top-notch designer clothing at 40% to 70% off — simply by visiting a website.
Several times a week, she visits the luxury discount site Gilt.com, where shoppers have a restricted amount of time — sometimes a matter of hours or even minutes — to order luxury goods before someone else beats them to the limited number of items.
While Wachs won’t say exactly what she’s spent in the past 18 months, she says she’s spent “thousands” of dollars on the 100 or so items she’s purchased. Among them, a Chloé handbag, originally priced at $1,500, that she snatched for about $600.
“There’s an adrenaline rush when there is a certain brand that you love,” she says, “and after you click on it, you wait to see if it’s been added to your basket — or to someone else’s cart.”
In two years, Gilt Groupe has amassed more than two million members, says CEO Susan Lyne.
“A lot of people feel like chumps if they pay full price,” says Lyne. “When you get a deal on a luxury item, it makes you feel smart.”