Public Relations & Social Marketing Insight

Luxury in the form of premium experiences are seeing the most action in terms of spending, while high-end goods are lagging in comparison, according to new findings from a study by Boston Consulting Group.

The key finding of BCG’s Luxe Redux report is that there has been a shift in spending habits, where 55 percent of spending comes from luxury experiences rather physical goods. In addition, experiential luxury purchases grew 50 percent faster worldwide year over year than sales of luxury goods.

The American economy depends mightily on consumer spending, so this report bodes well for a healthier 2016, economists say. The wage gap and the economy’s failure to produce adequate income improvements even in a healthier economy have stymied spending for months. But that’s recently been changing, as reflected in this report.

Although there seems to be an increase in disposable income and wages, that could be a problem for retailers as more consumers are choosing to spend on experiences instead of accumulating material objects. Younger shoppers are especially prone to spending on experiences, according to a PwC survey published last year, which found that millennials said that more than half (52%) of their holiday spending would be experience-related, compared to 39% for older consumers. 

Consumers are also choosing to save or pay off debt rather than spend, and when they do, they are increasingly favoring investing in home improvements. Retailers' recent earnings reports reflected these trends, as apparel-heavy retailers like Macy's, Kohl's, and J. Crew reported disappointing results while home improvement retailers beat expectations. These changes are forcing legacy retailers to reconsider their marketing strategies and physical stores, offering more value to the consumer with no-cost online resources and free in-store events....