Young, broke and spending on luxury
Despite being burdened with large student-loan debt and high unemployment rates, millennials are the fastest-growing segment of luxury shoppers.
This post comes from Julie Halpert at partner site The Fiscal Times.
Shaun Spellman, a 27-year-old owner of an Internet marketing firm, recently paid $300 for the newest Android cell phone on the day it was released, even though he believes it will drop in price within a few months.
But for Spellman, the benefit of having the latest technology is worth it. Though he's saving for an October wedding and a new home, "that doesn't stop me from making some purchases that I consider necessities." He skimps in other areas, driving a 1997 Camry and eating out only when he has a daily deal coupon.
Spellman is part of a generation that represents the fastest-growing segment of luxury goods and services purchasers. Although some millennials -- those born between 1980 and 2000 -- are launching promising careers, most are burdened with large student loans, and thousands are unemployed (millennials make up one of the highest unemployment rates in the country). Despite all this, they are making luxury purchases a priority.
According to a February report by American Express Business Insights, these young consumers increased their spending on premium luxury fashion by 33% in 2011 over the prior year, outpacing every other demographic, including boomers, which increased luxury spending by 19%. Young shoppers also led the way on jewelry spending, with an increase of 27% in 2011, while boomers' spending on jewelry only increased 4%.
The results were based on aggregated spending data from 2009 to 2011 that analyzed in-store and online spending at premium and discount luxury merchants. (Post continues below.)
Boomers remain the biggest buyers of luxury goods and services, at 50%, while millennials spend only 3%. Still, millennials are changing their behavior most dramatically, says Peter Niessen, a vice president of American Express Business Insights for the retail industry.
Millennials are often turning to flash sales and daily deals to get luxury goods at a bargain. They also trade up and down in discretionary categories, for example eating at less expensive restaurants, like fast-food establishments, says Christine Barton, a partner in The Boston Consulting Group's Dallas office.
"When we look at the luxury market, millennials are the growth engine going forward," says Jason Dorsey, a millennials expert and the chief strategy officer for The Center for Generational Kinetics. He said brands represent a lifestyle. And with every move tracked through social media, luxury goods provide a strong visual representation "that either I've made it or I want to tell you I've made it," he says.
While their boomer parents didn't grow up with flat-screen televisions or cell phones, millennials are "constantly bombarded with the latest and greatest electronic gadgets, and they're also subject to more peer pressure regarding the ownership of these items," says David Bakke, an editor at Money Crashers Personal Finance.
So while their parents coveted the latest style of blue jeans, younger people want the most modern iPad and a 4G smartphone, he said. They view these items as must-haves, not discretionary.
In addition to technology purchases, millennials are the fastest-growing age segment for travel services in 2010, growing 20%, according to American Express. Hotels are responding by adding more technological amenities such as complementary high-speed Internet and iPads in every room.
Where is the money coming from? While many millennials are struggling, there are a significant number of affluent young professionals willing to splurge on discretionary items without thinking about the long-term consequences, according to Dorsey. They also tend to favor credit cards, and many have financial support from their boomer parents.
More on The Fiscal Times and MSN Money:
Heck, if they didn't change the TV broadcast signals to digital, I'd still be using my 13" picture-tube, with one speaker.
Designer clothing: all manufactured goods were designed by someone, therefore the concept is flawed.
I could go on, but clearly the individuals interviewed for this article want to be poor...
I don't know about the statistics that the other people wrote about, but what I do know is that these are the very people that we - the taxpayers - will bail out when they default on their student loans. What exactly will they learn? No need to be responsible and pay debt....just go out and spend, spend, spend. Where have I heard that philosophy? Oh that's right, our President, who likes to think we can spend our way out of economic hard times.
Poor kids these days. They haven't learned from parents or society that being successful is usually a life long process. Being financially independant requires living below their means. It takes disipline. It requires seeing the big picture. And it also takes denying instant gratification. It also takes a lot of hard work.
These are all the things I see young people are doing wrong today. I also think over indulgent
parents are to blame. It doesn't do the kid any good in the long run, to spoil them. It doesn't teach them about the real world. A lot of kids are walking around these day's thinking their career as a rap star, sports star, etc. is just around the corner. I was alway's taught that dreams are great,
but you should establish a career first so you can support yourself. Kids are brain washed by T.V,
and so called stars about what success really is. Your chance of suddenly becoming a star and making millions, is very very slim...almost zero. There is no substitute for working hard and living within your means. That would be my advice to the kids. Good luck. Money is nice, but it isn't everything. Why not do what you enjoy? and become a working, productive member of society.
There are going to be a lot of kids in for a rude awakening. You can't mooch your way through life.
Or feel your entitled. That is just plain pathetic.
ROTFL! Yesterday's parents raised coddled, spoiled brats who return to the 'parent palace'. My working-class parents raised me in an unpleasant environment, thus motivating me to never return. My drive for survival still has me waiting quite a while before buying any product. I just got my first flat-screen tv yesterday because my old set was obsolete. I just started to text on a hand-me-down cell phone. If you want to live independently, you have to choose your luxuries. Due to this, I was able to amass $45k in investments/savings never earning over $30k a year by the time I was age 29. I took classes, traveled, owned entry-level electronics and paid cash for it all. I bought a house while single at age 27 without needing a co-signer.
It is great that we have choices. As long as a person can avoid credit card debt they cannot pay off each month and don't fall behind in their monthly payment then buy what you want.
Some savings would be nice, a retirement account would be nice, insurance would be nice. But there are choices. If you make a bad choice don't go crying to the government for handouts. If it is your fault then find a way to solve your own problem Food stamps and other welfare is for those that are truly unfortunate because of physical or mental problems not for people that just make poor choices. I just laugh at the occupy babies wanting to have the tax payers take care of their student loans, while texting on their i phones.
With only 3% of the luxury purchases for Millenials compared to 50% for Boomers, the 33% and 27% increases in luxury and jewelry spending are just barely out of the noise on whether this is a true trend or not.
As for the technology and gadgets, it may have formerly been considered a luxury (and it still really is) but in the millenial generation a smartphone and data plan are basically a necessity good, only given up when one is in poverty. As a millenial without a smartphone I'm still unsure what my feeling is on this.
I don't think this article "proved" anything, but I'll agree with the general theory: those millenials with good jobs will buy luxuries at a faster rate than even their boomer parents, while those without the necessary good jobs will keep trying to keep up with the Joneses and failing. This all leads to the furthering of the hourglass economy coming our way.
i think the closer you get to the year 2000 the worse the milennials get. Being born in 1983 most of my friends and aquantances are college grads and are beginning or are in the middle of successful careers. My wife and I are self-made and are doing pretty darn well at 28.
Which statistics/marketing wizard coined the phrase "luxury market'? When did we stop being market targets and become "necessity market targets", or "discretionary market targets", or even "luxury market targets"? And how in the world is travel categorized as a "luxury"?
The only thing interesting about this article is the one line devoted to how the millennials are paying for these "discretionary" items. "They also tend to favor credit cards, and many have financial support from their boomer parents."
Credit cards ARE luxuries you morons. ALL credit card purchases ARE luxury purchases. And what genius decided that debt financing and deficit spending is somehow a good thing when dealing with personal expenses, but no so much for governments?
Being born in America means that you have the opportunity to have a good life.
It doesn't mean you have a birthright to the good life.
If the Government keeps giving things away, we won't even have the opportunity.
If you run off the wealthy, who is going to pay the bills we've run up?
Pretty f_k_ing stupid thinking. Do they not take into consideration that aging changes preferences?
As a scientist, I've always loved technology. I bought the Apple II computer serial no. 00809. I amazed people with my super-slow phone modem that could connect to NASA-Goddard's computer and the rudimentary things available on the new Internet. I had the first cable TV in the neighborhood. But I could afford them and used them extensively!
I have a "poor man's smart phone", an LG-800G that costs $49 from Tracfone and comes with 1200 anywhere min/year of phone use (Internet use deducts 1.5 min/min) for $99 (a little over $8/month with NO hidden charges). I can download apps, games, movies, and pdf books through my PC so it doesn't cost me any cellphone time to do so - or use them. I check prices on Amazon.com (my favorite store) when I'm out in brick-and-mortar stores. I have a jpg file of a graph of fish that's arranged horizontally by beneficial omega-3 fats and vertically by mercury to use when I'm shopping and see fish on sale. And, of course, the phone takes stills or lo-res video. My friends and relatives with much more expensive cellphones often ask me to show them how to put that kind of stuff on their $300 smartphones which they use almost strictly for phone calls and where they don't average 100 min/month with their expensive plans!
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