They often have (but are not limited to) a high income, and are the product of a
change in the mind-set of consumers, leading to extensive consumption of luxury
goods in selected areas. The rapid development of the luxury market in Japan
can be attributed predominantly to the rising numbers in group 2.
These consumer rich have become the main customer base for many luxury
companies. (10) They tend to be young, single, have a higher salary than members of the
middle-class, and use their money freely for personal lifestyle consumption (11). Their distinctive feature is that they do not have enough assets or income to
show premium consumption in all aspects of their lives. Some members of this
group with lower income are “trading-up”, spending disproportionately in areas with emotional importance to them while
economizing in others (12). Individually, these shoppers may spend relatively small amounts, but their
large numbers form a substantial amount of luxury sales. Many of them are on
career paths that will have their income rise quickly, making their CLV worthy
of recognition (13).
Figure 2.1 shows all luxury consumers, grouped into three consumer levels that represent
different social environments and imply different marketing approaches. The
levels will be detailed in section 3.2 in the three-level luxury marketing
model.
In a study by the Nomura Research Institute, as of 2006, the wealthy class in
Japan with financial assets worth 100 million yen or more consists of
approximately 865,000 households. (6) But these HNWIs (high net worth individuals) are not necessarily the most
interesting customers for premium companies. Not all people who maintain
luxurious consumer lifestyles have large investments or other wealth-producing
assets. So while a high income or high net worth enables luxury spending, more
important is a certain personal and cultural predisposition to it. (7)
Takahashi (2005) seperates two different groups of 'new rich' that are of
interest to luxury companies due to their customer lifetime value (CLV) (8) and high spending on luxury goods. Group 1 became rich through the changes
caused by the economic recovery after the lost decade in the 90s, such as the
IT-bubble, the retirement of the baby boomer generation starting in 2007 (9) and other structural changes within the society. IT-millionaires, the silver
market (the retirement rich), and super-salarymen (who became rich by
performance based salaries) all belong to this group. Group 2, called the
consumer rich (Tsuchiya 2007) are not rich by definition of their assets.
Figure 2.1 classifies luxury consumers in Japan into two groups depending on when they made
their wealth (the long-standing rich and the new rich). The third area consists
of the consumer rich (Tsuchiya 2007), consumers who are not rich by their
assets (less than 30 million yen in liquid assets), but exhibit luxury
consumption in certain areas. This group includes normal middle-class luxury
consumers that are trading-up. The diameter of the circles represents the
assets owned, the vertical position of the circles shows the income level. In
order to simplify numbers, an exchange rate of 150 yen/euro (end of 2006) has
been taken.
Consumer levels. The areas shown as level 1, level 2, and level 3 represent consumer levels from
the three-level luxury marketing model found below in table 3.1, representing
different social environments and marketing approaches.
Possible developments. The arrows represent possible transitions over time from (1) young professionals
to successful professionals with high assets, (2) young entrepreneurs to owners
of successful enterprises that are not listed on the stock market, to
entrepreneurs after a successful IPO, and (3) from corporate climbers to “super-salarymen”, who command high performance-based salaries. The most important feature about
these transitions is a change in consumer level from 2 to 3 (see the
three-level luxury marketing model in section 3.2) and with it a change in
social environment.
In figure 2.2 the model from figure 2.1 is made more complicated by seperating consumer level
3 and consumer level 2 into two groups, respectively. Instead of three
different social environments that are differentiated by the extent of their
networks, we now have 5 different groups defined by their kind of networks they
form and have contact to.
Old rich. The traditional rich families and old business owners in this group tend to keep
their social networks closed even from the new ly “winner rich. Some of them are admitted to their exclusive club, but some will
never enter it.
Winner rich. They are the real winners of the time after the bubble. They have extensive
social contacts but not all of them make it into the exclusive company and
social networks of the traditional old rich. The spending patterns of the
winner rich tend to be less conservative than of the old rich.
Silver market. A combination of the retiredcorporate warriors who were born during or immediately after the war and
the dankai-generation, the Japanese baby boomers, born between 1947-49.
Rising class. These young business owners, young professional lawyers, doctors and
accountants, and young corporate climbers show heavy lifestyle consumption and
are big in numbers.
Trading-up class. These middle-class consumers with higher than average income still form a
substantial part of the customers of many luxury companies.
6 Miyamoto et al. 2006: 4, 7 Davis 2006; Nunes et al. 2004: 16, 8 Customer lifetime value means the total estimated profit from a business
relationship with a customer over the life of relationship, 9 The approximately 7 million baby boomers will receive 50 trillion yen (ca. 320
billion euros) in retirement allowances. See Usui 2006: 60; Hakuhodo 2004;
Hakuhodo 2006a; Higushi et al. 2004,
10 Takahashi 2005: 11.
10 Takahashi 2005: 11.
11 Takahashi 2005, Usui 2005, Tsuchiya 2007, 12 The term was coined by Silverstein and Fiske 2005: "At the high end, consumers
are trading up, paying a premium for high-quality, emotionally rich,
high-margin products and services. At the low end, consumers are relentlessly
trading down, spending as little as possible to buy basic, low-cost goods and
services.", 13 Chadha and Husband 2006: 58.
