Luxury goodsYes, wealthy consumers appear to be spending again, and luxury retail is showing improvement. But some analysts are predicting that one of the lasting effects of the Great Recession will be a generational shift in the luxury goods that will force retailers to change how they sell.

Baby boomers, who had been the backbone of the luxury market, have lost a lot of their net worth as their investments and property values tanked. That could lead retailers to start focus on the boomers' children, the echo-boomers of Generation Y, a sizable cohort of consumers who came of age at the turn of the millennium.

The boomers will continue to feel the effects of recession after the recovery, said Edmund Jay, senior VP of American Express Business Insights. Speaking to retailers at the recent WWD Apparel and Retail CEO Summit, he showed the merchants a graphic showing how most senior and boomer consumers cut back more deeply in their spending on luxury items during the recession than consumers from generation X or Y. And after the recession, seniors' and boomers' spending hasn't increased as sharply as it has among generation Y.

"Merely a Hiccup"

Those so-called millennials will account for the growth of luxury retail going forward, says Pam Danziger, president of consulting firm Unity Marketing. Even as generation X hits the peak earning ages of 35 to 54, the cohort is too small to support the market on its own.

"Gen X-ers are merely a hiccup. . .we have to wait for the millennials," says Danziger. Those 25- to 34-year-olds have the appetite for luxury, but not the cash -- at least not yet. "Affluence comes with middle age," she says.

In that context, it makes sense for Neiman Marcus to recently announce it will open a chain of outlets aimed at "aspirational" shoppers, carrying lower-price designer merchandise than it carries its mainline stores, notes Danziger, author of Putting the Luxe Back in Luxury.

Many millennials are what Danziger likes to call HENRYs -- an acronym coined by Forbes for high earners, not rich yet. But some of their characteristics have troubling implications for the luxury market.

The New Frugality Is Sticking

For example, Danziger notes that 25- to 34-year-olds aren't marrying at the same rate as their parents' generation, which means household income could stall. It's no coincidence that nearly 80% of affluent consumers -- in households with more than $100,000 in annual income -- are married. Household income rises about 60% when both spouses work, says Danziger.

Also, the millennials have different ideas of what luxury means, and they don't value status symbols like their parents did, says Danziger. A new frugality movement arose during the recession and is sticking, she claims. For example, she notes that in her research, she found the top fashion boutique brands among ultra-affluent shoppers -- with household incomes over $250,000 a year -- were Banana Republic, Ann Taylor and Ann Taylor Loft.

"There's a lot of competition bubbling up from the masses," says Danziger.

Shoppers will go through the good-better-best selection in department stores and may choose the better product over the top-of-the-line if the value is right for the price, says Danziger. That suggests merchants should hold down the prices in that "better" middle range and raise prices at the "best" level, where they're appealing to a narrower audience.

Danziger calls the new luxury shopper a "tempered pragmatist," who gets power from being a smart consumer and focuses on superior quality and performance. That means retailers will have to adjust their value message to give consumers a reason to pay the prices they ask, she says, adding: "We have to stop selling the sizzle and go back to selling the steak."

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bcheerful3

Regardless of where you shop the majority of the goods are mass produced in Chinese sweatshops that not only take US jobs away, but exploit the children of the third world. If one can afford it, buying luxury is maybe one way around that paradigm. Most people will buy tons of crap rather than make one quality purchase. Americans need IMO to rethink this. Less is more when it is quality.

November 10 2010 at 3:18 PM Report abuse rate up rate down Reply
thomasva6

good luck with that. alot of the boomers kids are sitting at home playing on the internet playing video games and mooching off their parents.

November 10 2010 at 11:01 AM Report abuse +4 rate up rate down Reply
Len

Nonsense. Most Boomers didn't go broke during the Great Recession. If they had a few bucks on the market then, they have a few bucks now. The problem is those trying to poll what people do tend to shade the results in a way that proves their premises. Like Sam Clemens liked to say back in the day, "there are lies, there are damned lies and there are statistics."

November 10 2010 at 12:16 AM Report abuse -1 rate up rate down Reply
kickedout100time

thank you mr. el presidente, i always wanted to work for a billion people whom are bare footed, living in huts and have a push cart they call a car.

November 09 2010 at 7:03 PM Report abuse +2 rate up rate down Reply
1 reply to kickedout100time's comment
Len

Pay attention. The next great sea change will be in automobiles as the electrics take over. No, I don't mean Priuses. I mean cars like the new Jaguar. It can go 60 miles on its batteries without the engines starting. Notice, I said engines. It also does 0-60 in 3 seconds, 0-100 in 5.5 seconds, the quarter mile in 10.3 seconds (156 mph), and it has a top speed of 208 mph. The engines by the way are two small turbos that weigh 30 lbs apiece and produce 188 hp. They power the batteries. Oh, I left something out. It has 4 electric motors (one for each wheel) and their combined power is 780 bhp and 1180 ft lbs of torque. Lamborghini is working on a car that weighs 2200 lbs and does 0-60 in 2.5 seconds. Porsche plans to sell in 2012 the 918, a hybrid that does 0-60 in 3 seconds. Notice: 3 seconds, 2.5 seconds, 3 seconds. One one-thousand, two one-thousand, three one-thousand: blam! Those electrics are the vanguard to a thundering herd so fast your wife or girl friend will think your stupid for insisting in always driving in reverse. So much for your Corvette, Mustang or Camero (and all those pickups and SUV that will be old, slow and embarrassing to drive). Even those people that are barefoot and living it huts (they do have TV's) will laugh and point fingers at the losers on the highway driving cars slower than ox carts.

November 10 2010 at 12:30 AM Report abuse rate up rate down Reply
kickedout100time

thats what we need = a new refined presidente elect,,,, mr. barry hussein punjab maharajah soetoro obama !

November 09 2010 at 7:02 PM Report abuse rate up rate down Reply
jmetcalf1955

most of the so-called "millenials" it has been my misfortune to meet are unemployed and/or unemployable, most of them fancy themselves "i.t. gurus" as one put it... the truth is they have no job skills, and no experience, if the luxury retailers are counting on them, they're in for a rough time.

November 09 2010 at 6:20 PM Report abuse +1 rate up rate down Reply
Iselin007

Next they will be eating curry chicken and drinking Ripple at the camel races!

November 09 2010 at 4:42 PM Report abuse +2 rate up rate down Reply
Iselin007

You know they were going to kiss India butt that's why there were no jobs being created it was a big stall and procrastinate an do nothing plan.

November 09 2010 at 4:40 PM Report abuse +2 rate up rate down Reply
Iselin007

Ain't is but you ain't !

November 09 2010 at 4:33 PM Report abuse +1 rate up rate down Reply
Iselin007

You wanted to get rid of the US workforce back in the 1980's because of the average age of 35 now your gonna get whats commin jerkweeds

November 09 2010 at 4:32 PM Report abuse +4 rate up rate down Reply