|Sep. 11th, 2013|
What The Latest Market Research Says About Generational Luxury Buyers
Photo Credit: Aleshyn Andrei | Shutterstock
Two recent market research reports have provided some fascinating insights into the attitudes and buying preferences of three age and income-related demographics — the Millennials, the Gen-Xers and the Boomers. Both studies have been published within the past two months: one is a study facilitated by Bob Shullman of Shullman Research Center and the other is by Ralph Bowden and Judith She of the Bowden's Market Barometer.
First, the Shullman Report entitled Generational Differences in Luxury Consumers' Attitudes And Buying Plans was published July 2013. It became clear how the three generations mentioned above have evolved into three very different sets of personal financial goals, and purchasing needs and wants. According to the Shullman report, Millennials are more optimistic about the U.S. economy and their own personal financial situations than their older counterparts. Equally significant, the same attitude holds true when it comes to Millennials' current spending plans, while affluent Gen-Xers and Baby Boomers are taking a more cautious view.
This report, whose conclusions were based on Mr. Shullman’s market research surveys, includes selected insights for the two upper-income household segments profiled — the top 39 percent of adults (with $75,000 or more in household income) and the top 3 percent ($250,000 or more in household income) — as well as by the three generations profiled. In case you don't know, Millennials are considered to be adults born in 1980 or later (with an age range of 18 to 33), Generation X includes those born between 1965 and 1979 (aged 34 to 48), and Baby Boomers were born between 1946 and 1964 (aged 49 to 67).
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The focuses on consumers' economic points of view and attitudes, and their luxury purchasing habits. Here are some salient points from the study:
- Millennials are optimistic, entrepreneurial, and loyal to familiar brands. For both household-income segments, the younger Millennials are more optimistic about the U.S. economy than either the Gen-Xers or the Boomers.
- For those making $75K and above, 44 percent of the Millennials said they were either optimistic or very optimistic about the U.S. Economy. The Gen-Xers ranked in at 26 percent and the Boomers at 27 percent
- For those making $250K and above, 55 percent of the Millennials said they were optimistic or very optimistic, whereas 31 percent of the Gen-Xers and 29 percent of the Boomers said the same.
In regards to personal financial goals, Millennials appear quite entrepreneurial — they want to be challenged and are interested in quick profits and increased incomes. For those making $75K and above, 32 percent reported that having fun while being challenge were important goals, while 26 percent of the Gen-Xers and Boomers agreed. 36 percent of Millennials making over $250K had the same answer, with Gen-Xers coming in with 31 percent and Boomers staying at 26 percent.
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Further cementing the Millennials' entrepreneurial, rose-colored perceptions were their views on making quick profits and whether they want to be rich. 26 percent of those making $75K+ wanted to make as much money as quickly as possible, while only five percent of X's and six percent of Boomers felt the same way. For those making over $250K, the Millennials still lead the pack with 18 percent of them looking to get rich quick (as opposed to only 10 percent of Gen-Xers and five percent of Boomers).
When asked how important being rich was to them, 23 percent of the Millennials making over $75K answered that it was a major goal, whereas only three percent of Gen-Xers and seven percent of the Boomers answered the same. For those making over $250K, 20 percent of Millennials, 16 percent of the Gen-Xers, and eight percent of the Boomers reported being rich was important.
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Psychographics and Brand Loyalty:
In a series of questions, many of which relate to shopping attitudes, Millennials in high-income segments indicated that they love to shop. While remaining somewhat loyal to brands they have known since childhood ("I usually buy the brands my parents bought"), they also seek out superior services, look for exclusive designer products, and are more open to celebrity-endorsed items than are older high-income adults. Here are some interesting and contrasting results found when they answered survey questions:
"I love to shop":
- Income of $75K+: 53 percent of Millennials, 49 percent of Gen-Xers, and 32 percent of Boomers.
- Income of $250K+: 55 percent of Millennials, 43 percent of Gen-Xers, and 33 percent of Boomers.
"I usually buy brands my parents bought":
- Income of $75K+: 39 percent of Millennials, 22 percent of Gen-Xers, 14 percent of Boomers.
- Income of $250K+: 32 percent of Millennials, 11 percent of Gen-Xers, eight percent of Boomers.
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Luxury Buying Behaviors:
“Among adults with household incomes of $75K or more, the Millennials are more likely than their older counterparts to have bought 'luxury' products and services in the past 12 months, and those who did purchase luxuries bought them more often.”
What did they buy?
“Among the three upscale adult generational segments, Millennials in the $75K+ household income group are most likely to have purchased designer clothing and premium beers when they made their most recent luxury purchase, while those in the $250K+ group focused on premium cosmetics and fine liqueurs.”
Who bought and how many did they buy?
50 percent of Millennials, 25 percent of Gen-Xers and 34 percent of Boomers bought a luxury item or service within the past year.
In the $75K+ bracket, Millennials bought 4.8 luxury items, while Gen-Xers and Boomers both bought 3.6. However, of those who make over $250K, Millennials bought 6.6 luxury items, Gen-Xers bought 7.4 and the Boomers bought 4.9 items.
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How did they buy it?
According to the report, “Millennials in both high-income segments are more likely than the older generations to have used a computer, a tablet, or a smartphone to make their luxury purchases.”
How did they pay for it?
“When it came to how they paid for their most recent purchase, Millennials were less likely to buy on credit and more likely to have saved up for their luxury purchases if they did not have the cash on hand.”
This last answer, given the entrepreneurial and optimistic attitudes of Millennials, is somewhat surprising. Maybe given their experience in seeing some of the problems older generations have faced from purchasing big-ticket items on credit, they may be a bit more cautious in using cards.
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Now, onto the Bowden's Market Barometer, which is a subscription research and trends newsletter whose main focus is on all aspects of real estate, real estate development, and resort real estate. It is an interesting collection of diverse subjects and often uses data from the National Association Of Realtors, The Urban Land Institute and other reliable sources.
Some of their most recent data (August/September 2013) are included here because it provides additional information about real estate purchasing trends of the Millennials, Gen-Xers and Boomers.
According to a recent survey conducted by the National Association of Realtors (NAR), the largest contingent of buyers continues to be Baby Boomers with 32 percent of recent purchases. Gen-X accounted for 31 percent, followed by the Millennial generation with a 28 percent share.
Within the next 10 years, the number of mature (65+) households is projected to increase by nearly 10 million and it is predicted that a large number will look for new housing opportunities. Of all the groups, Boomers more often prefers recently built homes. The number of those who may be moving from one home to another in the 65+ age bracket is projected to increase from 1.2 million per year to 1.6 million annually over the next decade.
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The Gen-X Second Home Market Trend:
Representing just 21 percent of the total population, the 66 million Gen-Xers aren't considered a large group in contrast to the Boomers and the Millennials. However, they are more likely to be able to afford a new home and move up in status. Based on NAR data, the recent Generation-X homebuyer was 39-years-old, in their peak earning years, with a median income of $93,100. The Gen-Xers primarily comprise of families and are currently in the stage of life when they move often — approximately 20 percent of Gen-X households moved in 2009.
According to NAR, Gen-X was the largest home-seller group, reflecting their viability as move-up buyers. Fannie Mae’s March 2013 survey supports a growing contingent of sellers, reporting that 26 percent of respondents felt it was a good time to sell, almost twice the 14 percent rate of a year earlier. It must be remembered also that the move-up market may look dynamic because of the past five years of pent-up demand.
The Millennial Fixer-Upper Trend:
At nearly 80 million, the Millennial generation is the largest in history. Millennials, according to the NAR survey, are drawn to fixer-uppers. Recent sales show that the group purchased homes that were ten years older, on average, than their older cohorts. Also, brokers in San Francisco are reporting that the contingent of luxury home buyers under the age of 35 has grown by two-thirds in recent years, presumably due to successful stock market activities. Whether they see older homes in terms of future investments or just as purchases they can afford remains to be seen, but it's a good guess after taking the Shullman data into account.
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