Middle Class Consumers Buy Luxury Goods by Cutting
Seattle, WA, September 27---A Kent, Wash., school-district manager spends almost $2,500 on a luxury vacation to Tahiti, complete with a skipper for her chartered catamaran -- but buys discount clothes and eats "whatever vegetable is on sale that week."
An executive of a nonprofit in Tacoma, Wash., stocks up on toilet paper and other basics at Costco and Target, and splurges on imported pasta and gourmet foods from Metropolitan Market and Trader Joe's.
Luxury isn't just the exclusive territory of the super rich.
American middle class consumers are "trading up," paying a premium for luxury items they value with high end features or cachet, compensating by "trading down" in other areas.
"New luxury" products and services appeal to the 47 million households making $50,000 or more a year, according to marketers and researchers who have coined a word for this trend: "masstige" -- prestige for the masses.
The "mass affluent" pay $3 for coffee at Starbucks, buy $27 Isaac Mizrahi pumps at Target and stock their kitchens with imported Italian dinnerware from Williams-Sonoma and $5,700 Sub-Zero refrigerators.
"This phenomenon is best observed by going into Costco. It's piled high to the ceiling with stuff that ... were luxuries the day before yesterday," said James Twitchell, author of "Living It Up: America's Love Affair with Luxury."
Two Seattle-area companies are among the new luxury leaders: Issaquah-based Costco and Seattle-based Starbucks. Others include The Cheesecake Factory; Samuel Adams beer; American Girl dolls; BMW; Whirlpool; and Victoria's Secret.
New luxury products are distinguished by better design, ingredients or packaging -- technical advantages that "translate into functional benefits that consumers can see, touch, describe," said Michael Silverstein, a marketing expert who co-wrote the 2003 book, "Trading Up: The New American Luxury," that popularized the concept.
Among the demographic drivers of this trend, according to Silverstein: higher levels of education, an increase in disposable income and greater numbers of working women with more influence on spending decisions.
People have always saved a little here to spend a little there, said Carl Obermiller, professor of marketing at Seattle University.
What's different now: a steadily rising standard of living and brand-name goods that are more available and more affordable than ever. For better or worse, almost anyone can have a taste of luxury.
"It used to be middle-class Americans didn't know what the super rich bought or did," Obermiller said. "Now we can emulate them. ... It's not just what yacht they're buying. It's what shoes they wear."
To afford luxury, middle-class consumers have to make tradeoffs. Where one indulges, another economizes.
Becky Hanks has 68,000 miles on her 6-year-old Toyota Camry and plans to drive it "until it dies." But the school-district communications manager doesn't scrimp on travel. Last year, it was a trip to the British Virgin Islands. In 2002, she and some friends chartered a 37-foot catamaran in Tahiti. The price tag: nearly $2,500 per person.
"Living the high life is not a part of my day-to-day experience. It's a major treat," said Hanks, of Des Moines. "I save up for it and ... just eat up every moment."
Elizabeth Bonbright Thompson's primary splurge is part of her day-to-day experience: gourmet food.
"I'm pretty picky about my food," she admits. She enjoys cooking elegant meals at home for her family with fresh-baked breads and imported foods, but shops discount retailers like Costco for most staples.
"It's the fresh smell of the herbs. It's a visual and sensory high" to shop at high-end markets, said Bonbright Thompson, executive director of the state Child Care Resource & Referral Network. "I guess I'm choosing to pay a little more for that personal gratification."
