• by Athena Kokas , November 16, 2006

Remember the opening scene from "Breakfast at Tiffany's" where we first meet Holly Golightly? She arrives at the famed jewelry boutique just after sunrise to window-shop in undisturbed solitude, dreaming of the treasures that live just behind the glass but miles beyond her reach.

When it comes to luxury goods, many Americans used to find themselves just like Holly--on the outside looking in. Those days appear to be over, as the luxury market is undergoing a paradigm shift that is delivering more and more upscale brands into the hands of an expanded consumer audience.

What is behind this new market dynamic? Rather than the result of a single cause, the trend is rooted in a variety of factors occurring at the same time. Call it a Perfect Storm, where increasing personal wealth is met by a greater availability of luxury products and information, and a consumer attitude that is applying a more holistic definition to the very concept of luxury.

The Perfect Storm starts with the ongoing decentralization of wealth in America. Currently, 14% of US households have incomes of $100K+. This is expected to grow to 20 million HH by 2010. While only 20% of the population, this group controls 82% of discretionary income, money that's likely to be earned vs. inherited. Thus, more people can afford the kinds of luxury products that were once the domain of a privileged few.

Product portfolios are also expanding, with brands like Louis Vuitton, Prada and Chanel marketing items like wallets and lipsticks at prices that allow consumers to tap into the luxury ideal without breaking the bank. The availability of these brands has decentralized as well; what once required a trip to the brand's own boutique in Paris or Milan can now be found at the average American shopping mall. And if that's not enough, you can go online to find a wide variety of luxury brands that can be delivered right to your door.

The proliferation of new media touchpoints enables luxury consumers to seek out information as never before. Luxury marketers used to advertise exclusively in high-image titles such as Vogue and Vanity Fair, but today's luxury buyer is taking advantage of digital forms of communication. In fact, traditional media usage by upscale consumers is on the decline: time spent with TV, radio, magazines and newspapers averages only 7.9 hours per week, the lowest since the early '80s. This compares with an average of three hours per day in digital media like online (excluding e-mail), video devices and MP3 players.

The Internet has revolutionized information and shopping for all kinds of consumers, and the luxury buyer is no exception. In proprietary research conducted for a luxury client, 26% of luxury consumers said they watch the Paris fashion shows online, 70% turn to the Internet first for more information when they spot a luxury item that interests them, and 78% will buy such items online vs. traditional retail channels.

In short, in terms of what's being sold, how it's communicated and who is buying it, we truly are witnessing the democratization of luxury in America. But it's not simply a matter of supply and demand; it's also driven by a shift in definition--where "luxury" has gone beyond the item that is bought, to the experience and emotional feeling that consumers get from owning it.

Luxury is no longer something we buy for external reasons, to look good to other people. It's something we buy to feel good about ourselves. It appeals to the highest human need, and that is to become the person we are inside. Luxury is no longer a lifestyle, but a means to a lifestyle.

This is especially true as Baby Boomers enter the luxury market en masse and bring their iconoclastic world view with them. Research shows that among consumers' top ten reasons for purchasing luxury items, four centered on the desire for self-fulfillment, enjoyment and the experience of ownership. None touched on the status-seeking, conspicuous consumption model of old.

The story, then, is that people are buying luxury these days for new and different reasons, and this reality affects everything from a brand's marketing to message content to media opportunities.

For today's luxury marketers, keeping consumers in perspective will be the key to slicing a bigger piece of the $92 billion pie, and luring today's Holly Golightly, who can finally do more than just dream.