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The U.S. Luxury Market Continues to Boom

Description:    The international luxury market continues to generate dynamic revenue growth for the leading
                marketers. The aggregate results of the 25+ leading global luxury marketers in 2005 show average
                revenue growth of 10.9 percent. This follows average growth of 14.5 percent in 2004, according to
                a new study on the luxury market. The fastest growing luxury companies in this longitudinal study
                of the luxury market include Orient Express Hotels, Compagnie Financière Richemont, Coach and
                Polo Ralph Lauren, all reporting growth of 18 percent or higher in 2005.

                U.S. luxury market reaches $1 trillion in 2005
                The luxury market in the U.S. was equally strong last year. We estimate the total luxury market to
                have reached $1,002.2 billion in 2005, up 11.6 percent from $898 billion in 2004. This includes
                luxury purchases by affluent consumers in the four luxury categories Unity tracks — home luxuries;
                personal luxuries, like fashion, jewelry, wine and spirits, pets; automobiles and luxury experiences,
                such as travel, dining, entertainment.

                “The key metric we used to track the U.S. luxury consumer market is the average amount spent by
                affluent households buying what they perceive of as ‘luxuries,’” Pam Danziger. “In 2005 the typical
                luxury consumer spent $52,588 buying luxuries, up 3.8 percent over the average amount spent in
                2004 of $50,640.

                “But that is only one value that we use to measure of the total size of the luxury market. We also
                factor in the overall percentage of affluent households buying luxuries and the total number of
                affluent households which numbers 30.2 million, including the near-affluent consumers (incomes
                $75,000-$99,999) who occasionally trade up to luxury,” Danziger says.

                Key trend in luxury — Shift to experiences
                In 2005 the dominant trend in the luxury market was a shift in spending more – significantly more
                – on experiential luxuries; in other words, the things people do rather than material goods one has
                or one owns. The typical luxury consumer spent $22,746 on experiences in 2005, that is nearly
                double what they spent in 2004. Luxury consumers also spent nearly 20 percent more buying
                luxury automobiles, a highly experiential luxury good.

                While spending on experiences and automobiles went up, luxury consumers spent less overall on
                home luxuries, down 4.6 percent to $19,990. Out of the nine product categories classified under
                home luxuries, only three posted an increase in average spending. They were luxury kitchen
                appliances and kitchen and bathroom fixtures; kitchenware, cookware and cook’s tools; and garden
                and outdoor luxuries. “In keeping with the experiential trend in luxury, the only home categories
                where luxury consumers are spending more are the ones that are experiential in that they function
                and are used in the home, not the purely decorative home categories,” Danziger explains.

                Spending on personal luxuries like luxury apparel, fashion accessories, jewelry and watches, wine
                and spirits, pet luxuries and pens and desk accessories, rose 5.6 percent to $10,007 in 2005. A
                moderating factor in the growth of personal luxuries is that the super-affluent households (incomes
                $150,000 and above) didn’t hold up their high 2004 spending levels, while spending on personal
                luxuries among the near-affluent ($75,000 to $99,999) and the affluent ($100,000 to $149,999)
                increased at a significant rate.

                Luxury goods hold less allure to the affluent – Life-changing experiences is what they crave
                We predict the trend toward experiences will continue to grow as luxury consumers spend more on
                life-changing experiences, while their need for more luxury goods wanes. “Today’s luxury market is
                less about ostentation and materialism and more about a search for meaning and emotional
                fulfillment,” Danziger says. “While luxury consumers live a very comfortable and materially
                enriched life, they are well aware that buying more stuff isn’t going to give them the real fulfillment
                they desire.”

                This is particularly prominent among the baby boom generation (which makes up 57 percent of all
                households with incomes of $100,000 or more), the leading edge of which turns 60 this year. At
that life stage, they have already acquired the material trappings of luxury, so buying another mink
coat, diamond necklace or designer handbag just doesn’t have the same appeal. But even the
GenXer luxury consumers, who are at a more materialistic life stage and who spend proportionately
more on luxury goods than boomers, also exhibit an equally strong passion for experiences.

“When we ask luxury consumers about the source of their greatest luxury satisfaction, consistently
the majority says that experiences give them the most pleasure. Luxury goods just don’t provide
the same luxurious feelings. And the more affluent you are, the more value you place on
experiences. Luxury marketers, especially those grounded in the traditional luxury goods business,
need to understand this experiential shift and develop strategies to turn their luxury goods into a
real experience for their customers,” Danziger explains.

About This Luxury Report 2006
This Luxury Report 2006 is the definitive study of the luxury consumers’ buying and spending
preferences, written by Pam Danziger, the nation’s leading expert on the ‘new luxury’ market. This
report provides vital market size, growth and demographics for anyone and everyone that sells
luxury, from marketers, advertisers, retailers, service providers. The Luxury Report 2006 is an
essential tool to understand the dynamics of the luxury market, today and into the future.

This important new study of the luxury market provides the results of a four-year longitudinal
research study of the luxury market, which combines qualitative and quantitative methodologies.
This report is compiled from detailed statistics collected in eight waves of Unity’s quarterly Luxury
Tracking surveys during 2004 and 2005. In 2005 over 4,000 luxury consumers were surveyed. The
average income of respondents in 2005 was $139,075 and the gender distribution was 65 percent
female and 35 percent male. The average age of respondents was 42.9 years, with 47 percent of
respondents being Baby Boomers and 38 percent being GenXers.

More details about products and brands included in Luxury Report 2006 Details about what these
luxury consumers bought, how much they spent, where they made their purchases, and in certain
categories the luxury brands they patronized are reported in four major categories of luxury.
Significantly more product categories and more brands were included in the 2005 Luxury Tracking
surveys, notably:

Home Luxuries
- Art and Antiques (Specific data is collected on already-framed reproductions; unframed
reproductions; custom-framed art or reproductions; other custom framing; original art; sculpture,
statues, 3D art; antique furniture and collectibles; wall decor)

- Electronics and Photography Equipment (Computers; iPods and other MP3 devices; cameras;
cellular phones; televisions; DVD/video players; audio equipment; home entertainment systems;

- Furniture, Lamps and Floor Coverings (Lamps and lighting; upholstered furniture; wooden
furniture; rugs and floor coverings)

- Garden and Outdoor (Patio furniture; grills; lighting accents; fencing; power gardening
equipment; decorative pots; garden statues; chimeneas and outdoor stoves; garden shelters;
water gardens; porch and patio decorative accents)

- Home Decorating Fabrics, Wall and Window Coverings (Wall coverings, such as wall paper; ready-
made curtains, drapes; window coverings, such as blinds, shades; home decorating fabrics for
custom upholstery, curtains, drapes, etc.)

- Kitchen Appliances, Bathroom Equipment and Building Products (Kitchen appliances, such as
stoves, ovens, refrigerators; bathroom equipment, such as tubs, showers, toilets, fixtures; kitchen
equipment, such as cabinets, countertops; air conditioning/filtration systems; water systems)

- Kitchenware, Cookware, Housewares (Small appliances; cookware; bakeware; cutlery; storage
and organization; barware)

- Linens and Beddings (Sheets and pillowcases; comforters, spreads; pillows and pillow accents;
bath linens; mattresses and box springs; duvets and shams; feather beds and mattress covers;
table linens)
- Tabletop, Dinnerware, Stemware, Flatware (Dinnerware, including fine china, ceramic or
stoneware, serving ware and decorative accents; crystal and glassware decoratives, stem ware,
serving pieces, barware; flatware, including sterling silver flatware, serving pieces, decorative
accents and other flatware)

Personal Luxuries
- Clothing and Apparel (Women’s casual, dress/business, formal/evening, outerwear; men’s casual,
dress/business, formal/evening, outerwear; teen’s clothing; children’s clothing; baby clothing)

- Cosmetics, Fragrance and Beauty Products (Fragrances, perfumes; bath and body lotions; face
care; hair care; cosmetics and makeup; sun and tanning products)

- Fashion Accessories (Women’s handbags, shoes, brief cases, and fashion accessories, such as
scarves, belts; men’s wallets, brief cases and men’s fashion accessories, including shoes, belts,
etc.; luggage for men and women)

- Jewelry (Women’s and men’s jewelry by type, including necklaces, earrings, bracelets, rings,
bridal/wedding, pins and brooches; women’s and men’s jewelry by material, including 14k and
above gold, sterling silver, platinum, gold plate or vermeil, costume jewelry; and women’s and
men’s jewelry by stone, including diamonds, other precious gemstones, semi-precious gemstones,
pearl, faux or man-made, no gemstone content)

- Watches (Women’s and men’s watches by style, including formal/dress or casual/sports)

- Wine, Liquor and Spirits (Wine, champagne, vodka, whiskey, rum, scotch, cognac, bourbon,

- Pens, Writing Instruments and Desk Accessories

- Pet Products

Automobiles (including brands Acura, Audi, BMW, Cadillac, Jaguar, Infiniti, Land Rover, Lexis,
Lincoln, Mercedes, Porsche, Saab, Volvo)

Experiential Luxuries
- Dining

- Entertainment

- Home Services

- Spa, Massage, Beauty and Cosmetic Services

- Travel (Foreign and domestic luxury hotels, commercial air, resorts, cruises, group tours,
adventure travel, private air travel)

Now you can make critical business decisions based upon facts — not beliefs, assumptions or
This report provides the facts and figures you need to develop winning marketing and business
strategies. By working with the facts, not fantasies, you have a much better chance of success
marketing to the luxury consumers. This report gives you a horizontal view of the luxury market,
recognizing that luxury marketers compete not just with companies within their vertical product
niche, but across all luxury categories as well.

Within each category of luxury, the key drivers for purchase are studied, such as role of luxury
brand in purchase decision; the influence of sales price on purchase; where the shopper bought
their last luxury; why they bought luxuries; whether their luxury purchases were made a gifts; and
other motivational factors.

Special feature: Find out which of the four different types of luxury consumers are your best
A special feature in Unity Marketing’s Luxury Report 2006 is a psychographic profile of the four key
            types of luxury consumers. These include:

            -X-Fluents (Extremely Affluent) who spend the most on luxury and are most highly invested in
            luxury living;

            -Butterflies, the most highly evolved luxury consumers who have emerged from their luxury
            cocoons with a passion to reconnect with the outside world. Powered by a search for meaning and
            new experiences, the butterflies have the least materialistic orientation among the segments, yet
            they spend nearly as much as the X-Fluents on luxury;

            -Luxury Cocooners who are focused on hearth and home. They spend most of their luxury budgets
            on home-related purchases;

            -Aspirers, those luxury consumers who have not yet achieved the level of luxury to which they
            aspire. They are highly attuned to brands and believe luxury is best expressed in what they buy
            and what they own.

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