Super-Affluent Consumers Seen Offering Opportunities for
LOS ANGELES, CA While consumers at the mid-range of the market may be feeling the pinch of an uncertain economy, the ultra-affluent consumer continues to represent a strong and growing market one that kitchen and bath dealers and designers would do well to pay attention to, if they want to tap into this highly profitable arena.
That's the opinion of Reed Fry, of the Newport Beach, CA-based Fry Communications, and Kevin Henry, director of strategic marketing for KuppersbuschUSA, who spoke about "Today's Affluent Consumer" at the recent K&B West Conference held in Los Angeles.
Consider the following:
- The number of U.S. households with an annual income of $100,000 or more has increased from 3 to 7% in the past five years.
- Some 11 million U.S. households have a net worth of $1 million or more a number that has doubled in the past five years.
- Two million U.S. households have a net worth of $5 million or more, up 10-fold in the last 5 years.
- The top 1% of the population, controls 46% of the nation's personal wealth.
- The top 20% of the population controls 91% of the nation's personal wealth.
- The top 20% purchases 50% of all retail goods.
Is it any wonder, then, that kitchen and bath dealers and designers are looking more seriously at the ultra-affluent market as a niche that's rife with both profit and growth potential?
However, to truly tap into this market, it's essential to understand what drives these affluent consumers, Henry believes. "Once you cross over a certain economic level, it's all about personalization, especially in the kitchen side of it. The kitchen takes on a completely different aspect at the high end, becoming a symbolic metaphor for their position in society," he states.
An aging baby boomer is also driving this market, with many of these consumers wanting to slow down and see the fruit of their years of labor, according to Fry. "The affluent marketplace has more than doubled in the past five years, including hard working baby boomers searching for what they've missed." He explains that these consumers are looking to pamper themselves with things and experiences that give them a sense of fun or "wow."
By the same token, these baby boomers unlike the generation Xers who come after them are less interested in just having the latest high-tech gadgets than they are in finding luxury products that create a sense of comfort and familiarity.
To that end, the home is critically important. In fact, some 42% of these baby boomers say that their house is their top investment priority, whether the economy is good or bad, up from 31% in August of 2001, according to Fry.
And, the emotional interest in the value of the home is also having a strong impact on consumers' desire to invest in their homes, particularly the kitchen and the bath.
But understanding the high end of the market is critical even for dealers and designers whose clients don't own mansions by the sea. The reason for this, Fry explains, is that, "the affluent attitude has gone mainstream" in recent years. "Everybody wants to be treated like somebody special and they are willing to spend disproportionately in specific areas to achieve that feeling," he believes. And, the kitchen and bath are two areas that tie into both the lust for luxury and the desire for a safe, comfortable haven.
To that end, Fry suggests that designers focus on products that create luxury experiences the bath as an escape, the kitchen as a gourmet center as a way to capture the high-end consumer. Luxury products that have emotional resonance will also appeal to this market.
And, unlike in years' past, dealers and designers need to remember that they are no longer just selling to a female decision maker. As Henry explains, "[The super high end] has become male dominated which means big appliances, big knobs and big kitchens are the driving point."
Henry also reminds kitchen and bath dealers to adjust their
mindset when selling to the ultra affluent. "Remember, these
consumers want to spend money, and they look to the kitchen dealer
for justification. I tell my dealers, 'We don't sell kitchens, we