In the luxury market recovery, ultra-affluents and young affluents will drive growth
Luxury marketers looking to take advantage of the rising tide of affluent consumer sentiment need look no further than two key segments: the Ultra-affluents (those with income $250,000 and above) and the young affluents (aged 40 and under), Danziger advises. "The future of the luxury market is going to be split along demographic lines. First is income. Ultra-affluents who make up only 2 percent of the entire economy increased their spending by 40 percent from the third to the fourth quarter. Ultra-affluents represent a very small number of households, but their power as consumers is phenomenal. As a group they spent over 4.5 times more on luxury than lower-income affluents in the fourth quarter.

"The second most important demographic that will define the future of the luxury market is age. Young affluents (those 40 years and younger) outspent their elders by nearly 2.5 times in the fourth quarter," Danziger continues. "Given their youth, young affluents are in an acquisitive lifestage where they have a strong appetite for luxury brands and consumer goods. The more mature Baby Boomers are reaching a new lifestage where their focus is on life experiences, rather than acquiring more stuff. As the recovery progresses, the Baby Boomers are unlikely to return to their previous levels of spending."

Demographics also highlight the key challenges for luxury marketers in the recovery ahead. "Ultra-affluents spend huge amounts of money yet they remain a very small niche market, representing only 2.5 million households as compared with 21.5 lower-income affluents. Young affluents also make up a significantly smaller share of affluent households, representing less than 40 percent of all affluent households compared with 60 percent of the more mature households," Danziger says.

Luxury brands need to find new platforms to help them connect with the two most powerful demographic segments for the future