The online market for luxury goods in the USA continues to develop at a rapid pace, according to Milton Pedraza, CEO for The Luxury Institute, which has published its findings on the internet usage habits of the country's most wealthy consumers.
The purchase of apparel and accessories on the internet grew by 41% in 2005, while sales of jewellery and watches grew by 31%, according to the company's research, which also noted that Tiffany reported a 47% increase in shoppers at its web site during 2005.
The key, Pedraza says, is converting clicks into sales. The average wealthy American uses the internet seven days a week, for an average of 3.2 hours per day.
Group behaviours
Those under the age of 50 and worth more than US$5 million are the heaviest users.
Approximately half (51%) of wealthy consumers interviewed told the Luxury Institute that they use the internet to research products and services, while only 43% said they buy products and services online "occasionally" or "frequently".
But younger consumers, and those with higher incomes and net worth, showed a stronger tendency to buy products and services online - and they are also more likely to use instant messaging, read a blog, and buy music online.
The internet's uses
E-mail was found to be the "killer application" for the wealthy. Almost all wealthy consumers (92%) interviewed said they use the internet to send and receive e-mail.
The second most popular use of the internet cited by the wealthy was checking news and weather (58%), followed by planning travel (42%), and paying bills (40%).
Only 2% of the wealthy use the web for gambling, and high-income young men were the group found most likely to use the web for adult entertainment.
Almost all (98%) of the wealthy said they use the web at home, and more than two-thirds use the web at work, including more than 80% of wealthy people between the ages of 21 and 49, and more than 80% of wealthy individuals with annual income between US$200,000 and US$500,000.
Reaching the wealthy
According to company's research, the most effective way to reach wealthy consumers online is through search engine results, including paid placements. In fact, search results are the only online marketing method viewed as being more effective than ineffective by luxury consumers themselves.
Click-through banner ads were seen as being the least effective way to create a positive impression and to get browsers to buy a product, although the youngest and wealthiest consumers were unexpectedly receptive to click-through ads.
In terms of building a database, younger wealthy Americans are generally happy to provide real contact information in exchange for access to special reports and white papers.
Women are more likely to sign up for free email alerts in exchange for contact information. Nearly one-third of consumers worth US$5 million or more had visited a web site after being prompted in another medium (such as print or TV).
Internet concerns
The biggest online concerns of the wealthy were, perhaps predictably, hackers and spammers. Many Wealthy Americans (59%) said they were worried about email working as a conduit for viruses, unsolicited junk e-mail, and possible identity theft - and these concerns increased with age. But 85% expressed concern over being tracked via large corporate databases.
Blogging trends
Many wealthy consumers said they read blogs on at least a weekly basis, and 28% reported being very familiar with blogs. Frequent blog readership was found to be highest among the youngest wealthy consumers, and also generally among men of higher levels of income and wealth. The youngest and the wealthiest were also found to be most likely to operate blogs of their own.
Luxury goods online
The web is also developing secondary markets in luxury goods - some that provide real value for buyers and sellers alike, according to Pedraza. For example, Portero (a trader of luxury goods through eBay) certifies and guarantees every item it sells against fraud and forgery. Indeed, instead of depressing sales of luxury goods, Portero provides quick liquidity for stores unloading last year's fashions to make room for the new. And by eliminating transaction risks, the company adds trustworthiness, objectivity, and competence to the buying and selling process.
According to Pedraza, "We believe that luxury goods firms should, and will, eventually control secondary markets for their products. Think of what pre-owned cars did for luxury automakers compared to traditional used car dealers, in terms of brand control, customer loyalty and profitability."
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