At a Premium
At a Premium
A dive into the state of the luxury retail market and a look at how the high-end eyewear arena stacks up
By Erinn Morgan
Have you heard the one about the disappearing consumer? According to Greg Furman, founder and chairman of the luxury marketing council, it’s no joke. “The ‘Aspirational’ consumer—people with household incomes from about $150,000 to $500,000—have all but disappeared from the spending marketplace,” he says. “That contingent really floated the luxury boat for a long time and really distracted luxury brands, so much so that many started to create low- to mid-tiered lines to appeal to them. But, today they’re just not spending.”
Luxury market expert Pam Danziger, president of Unity Marketing, echoes this thought. “Affluents with household incomes above $100,000 are really the heavy lifters of the economy—they represent about 20 percent of the households but account for more than 40 percent of consumer spending,” she says. “Right now, the affluent consumer is in a wait-and-see mode.”
Brad Childs, vice president of the 10-store, Pittsburgh-based Eyetique, says this is not the case in the luxury eyewear market. “The luxury market is as strong and alive as ever. That affluent demographic is still going to buy a luxury product,” he says. “But they are going to do their research and buy for the best possible price. They are still buying; they’re just buying smarter. “Similarly, luxury market consultant and speaker Christopher P. Ramey, president of Affluent Insights, points to the optical market as one of the bright spots in the luxury downturn. “Eyewear is an affordable luxury,” he says. “It’s one of the few positive industries.”
The bottom line is that luxury consumers—across all categories—have simply become more savvy shoppers. This fact necessitates a new mentality and approach on the part of luxury retailers.
While U.S. consumers are more cautious about spending today, some still see fit to part with their dollars. What motivates the upper-middle class population to spend such a vast amount of their income on discretionary goods and services? That’s the much-debated subject of a newly released book, entitled “Bourdieu’s Demon.” Penned by Premium Knowledge Group CEO Richard Baker, the book’s goal was to uncover the impetus behind the spending patterns of this group of well-educated people (sample age of 48) who earn very high salaries.
“Our conclusion is that the more continuously successful subset of this upper middle-class population (approximately 25 percent) consume very differently than the other 75 percent,” says Baker. “That is, the individuals whose earned income continuously increases (decade to decade) use their discretionary spending as an investment in increasing their intellectual capital, social capital, and cultural capital.”
This finding fell perfectly into step with research conducted by the French sociologist Pierre Bourdieu, who discovered the same pattern. “We were able to replicate his findings in our data among the U.S. upper-middle class,” says Baker. “This subset not only earns more, they also spend more and are less price sensitive.”
How could these findings be used in the luxury market? “It’s my expectation that luxury merchants will focus more and more on this subset of people,” says Baker. “They will target this group in very specific and personalized ways.”
When it comes to eyewear, Baker says the requirements of this subset will be for products that have “an interesting (and meaningful) narrative and for channel experiences that amplify this narrative.”
“This consumer has been in this recession for four years,” says Danziger. “They’ve learned new ways of shopping, including on the Internet. They are consumer-technology empowered—and they now have all tools and tricks to become very smart shoppers.”
STATE OF THE MARKET
So, who’s buying luxury goods today? According to Ramey, “Today, luxury marketers are really focusing on the 3.1 million people in North America who have investable assets of $1 million in the bank—that’s the community that’s still spending,” he says, noting that this money could be from income, inheritance, trust funds, investments, etc. “That’s the community buying $5,000 eyewear or a $250,000 watch. That’s who’s left standing.”
Still, he notes that this group, along with the purchasing-conscious ‘Affluents,’ is now “value and values” driven. “The recession caused a recalibration of values,” says Ramey. “The affluents discovered they really don’t need copious amounts of stuff. This is also the core reason we’ve seen a real shift to an experiential retail environment.”
According to several luxury retail experts, the ‘Affluent’ or ‘Aspirational’ buyer won’t be rushing to the luxury register anytime soon. “We just don’t see [it] coming back, especially not to the degree they spent before real estate got squishy and Europe went downhill,” says Ramey.
Instead, this consumer is becoming less materialistic. And, at the same time, they and their wealthier, still-spending counterparts, are demanding better pricing and smarter shopping experiences. “The rich are savvy shoppers,” says Danziger. “They are getting smarter and the marketplace is responding by giving them options.”
What’s the state of the luxury eyewear market in the U.S.? Luxury market sages say it’s one of the lesser-affected categories. “When you look at the luxury fashion accessories categories, sunglasses are still the third-most popular category behind handbags and shoes,” says Danziger. “It’s really an even more important category because it’s not gender specific.”
Furman says eyewear has prevailed in luxury because of its collector appeal. “But, it’s a category that requires a more consultative play on the part of the salesperson, which is a role that requires a lot of sophistication with developing a level of comfort and trust,” he notes.
At the same time, purveyors of optical luxury say they definitely see the effects of the ongoing economic downturn. “Everybody’s a lot more cautious when buying,” says Eddy Mamelok, owner of 20/20 Optical in Greenwich, CT, where the average pricepoint for a frame-only sale is $300. “More and more customers want to use their old frames over again, a lot are buying $150 to $200 frames, and we’re seeing a lot less multiple-pair sales.”
The latter is, in large part, because lenses have become so much more sophisticated—and more expensive.
“Digital and free-form lenses can range up to $700, so when you marry an expensive lens with an expensive frame, people are only getting one,” says Mamelok. “In these times, super high-end just isn’t what people are looking for, even in Greenwich, which is the Gold Coast.”
Online competition, even for the luxury dollar, has also become a factor in the eyewear arena. Still, some high-end retailers say they are confident that they can provide a better experience to win over the luxury customer.
“Vendors that don’t sell online to protect our exclusivity really help us,” says Childs. “Plus, luxury customers always want me to roll out the red carpet for them and the Internet will never do that. It’s hard to sell a $3,000 frame over the web. Luxury is luxury, and consumers want to touch and feel what they’re buying. Luxury is not a need, it’s a want—and this consumer wants the experience.”
Still, Eyetique has determined it to be smart business to diversify over the past few years, including purchasing two value-priced eyewear stores. This retailer also has some plans for the future.
“We’re building some business models online,” says Childs. “One is for Eyetique.com, where we’ll have a lot of cool e-commerce features. The other is Threeguysoptical.com, where we hope to get a little piece of the market share where Warby Parker and 1-800-CONTACTS are so successful.”
Luxury Spending Second Lowest Level after 2Q10 Peak
Credit: Unity Marketing’s quarterly luxury spending statistics taken from its Luxury Consumption Index
How can retailers, including eyecare professionals, get a leg up on the lackluster luxury market? Here are a few, targeted ideas:
■ GET INTERACTIVE. Furman says the smartest retailers realize they need to ask for (and reward) referrals from their best luxury customers.
“Invite them to share the names of two or five friends and reward them with products or events for bringing other customers to the table,” he says.
■ EDUCATE ON PRICE-VALUE. “All the research shows that if the customer understands a product’s price-value relationship, then price is no object,” Furman says.
At Eyetique, Childs says they have to fight the price question every day. “If someone says, ‘I can buy those up the street for $150,’ I say, ‘Let’s talk about that.’ And I explain why that particular product might cost a little more at our store.”
■ KEEP IT REAL. Mamelok is front and center at his upscale optical shop every day of the week. “My business has been solid and steady since the original economic dip in 2009,” he says. “I believe the difference is that I’m the owner and I’m here every day. People like that—owner-operated is the key.”
■ STAY FOCUSED. At the upscale Black Optical, which has two locations in Tulsa, OK, owner Gary Black’s philosophy is to be the master of one thing: premium, “unbranded,” hard-to-find products.
“A lot of stores carry a little of this and a little of that and they’re not the master of anything,” says Black. “Create the niche and master it, and then you become the destination for the customer you are targeting.” EB
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