The wealthy turn to the web before buying
Advice from friends or family carries considerable weight in shaping spending decisions, but many wealthy consumers are now turning to the web for the bulk of their inspiration and education on potential high-end purchases, according to Milton Pedraza, CEO for The Luxury Institute.
According to the institute's latest Wealth Survey, nearly two-thirds (64%) of Americans with annual incomes of at least US$150,000 said they go directly to the web sites of known providers for information on luxury goods and services, while 57% said that they solicit input from friends and family.
Best recommendations These two sources of pre-purchase information are the two most frequently cited and deemed the best sources by wealthy individuals taking part in the July 2008 survey, which examined the key factors driving buying decisions in seven luxury categories (fashion, handbags, jewellery, wealth advisors, vehicles, holidays, and real estate).
The second most trusted luxury purchase information, preferred by 16% of the wealthy, comes from professionals with relevant expertise in a particular field, such as travel agents, realtors or stylists, to name a few. Consumers with a net worth of at least US$5 million and those earning more than US$300,000 per year reported a strong preference for consulting with such professionals, viewing them as the best and most trusted sources of luxury purchase information.
Search brand status Google - the company that vowed to "do no evil" - has done a saintly job of providing wealthy consumers with what they want online, Pedraza noted. Wealthy web users find Google to be a useful tool on several fronts, and the cumulative effect is tremendous brand prestige and top honours (in the search engine category) in the institute's 2008 Luxury Brand Status Index survey.
Google was placed ahead of both Yahoo! and MSN, which ranked second and third respectively. Web users with an average income of US$348,000 per year, and an average net worth of US$3.5 million, evaluated ten search engines across four criteria: innovative stature, helpful and relevant content, appropriate advertising, and ease of use. Google also carved out a dominant position within the luxury niche.
In fact, the search giant has become a favourite 'first stop' web site for gathering information on luxury goods and services, named specifically by 13% of wealthy consumers in the survey. The closest (but still distant) competition came from Consumer Reports, mentioned as a favourite web site by 3% of respondents, followed by 2% each for Amazon.com and the official sites of Lexus and Coach.
Limits on luxury e-purchases But despite its ease of use and the instant availability of vast amounts of information, the internet is apparently much more useful as a research tool than as an actual luxury retail channel, for several categories (vehicles, for example). Nearly three out of four wealthy shoppers (73%) said that they are only comfortable signing automobile purchases at a showroom, while 61% would only buy real estate or luxury jewellery in person.
These, Pedraza pointed out, are among the higher priced luxury items and they all have tactile qualities that are often better experienced rather than simply being seen on a web site. They are also among the most highly customisable products, and more than one-third of the wealthy insist on choosing fashion apparel (38%) and wealth advisors (35%) in person.
Travel was found to be the category in which wealthy shoppers, especially women, have the highest comfort level for making online purchases. Only 11% of the wealthy said that are only comfortable booking travel with a human agent. Interestingly, men cited the need to book through a live agent twice as frequently as women (14% compared with 7%), and the very wealthy (with a net worth greater than US$5 million) tend to insist on face-to-face interactions with a travel agent twice as often as those with a net worth of less than US$1 million (24% compared to 12%).
Luxury purchase drivers The relative importance of factors that influence buying decisions of wealthy consumers varies by the type of luxury product or service, as well as by the specific demographic characteristics of the shopper. For example:
- Fashion Referrals from friends and family and direct visits to provider web sites are the two best sources of advice, with both earning mentions from one in five wealthy individuals. Women are almost 50% more likely than men (24% compared to 16%) to identify these sources as the best when shopping for luxury fashion items. Younger, wealthier, and higher-income respondents are especially likely to consult a professional (such as a personal shopper) on fashion matters.
- Jewellery Because of the uniqueness of the designs and the complexity of the materials involved in making these items, jewellery is a category in which professionals have great influence, especially with older, wealthier and higher income individuals. Overall, 19% of wealthy consumers said that professionals provide the best sources of advice for luxury jewellery purchases, just ahead of family referrals and visiting provider web sites, both of which were cited as the best source by 17% of the wealthy overall, and by 21% of wealthy women.
- Automobiles Wealthy car buyers rely most heavily on ratings and reviews on web sites for evaluating luxury vehicles, with 23% saying that web sites such as Edmunds.com provide the best vehicle data. Consumers earning less than US$200,000, those with a net worth less than US$1 million, and women, were all especially keen on such review sites.
- Luxury travel Online travel booking may have been one of the first examples of customer-friendly e-commerce but, even after a decade and a half, some 20% of wealthy travellers still prefer booking their trips through professional travel agents, owing perhaps to the exotic and remote destinations and unique experiences they want. The tendency to prefer a travel agent rises steadily with age, while those of comparatively modest means prefer to go directly to a travel provider's web site or to use a search engine for booking trips.