Consumers juggle expenses to indulge in luxe life

By Jolayne Houtz
Seattle Times consumer-affairs reporter

HEATHER MCKINNON / THE SEATTLE TIMES

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A Kent school-district manager spends almost $2,500 on a luxury vacation to Tahiti, complete with a skipper for her chartered catamaran — but buys discount clothes and eats "whatever vegetable is on sale that week."

An executive of a nonprofit in Tacoma stocks up on toilet paper and other basics at Costco and Target, and splurges on imported pasta and gourmet foods from Metropolitan Market and Trader Joe's.

Luxury isn't just the exclusive territory of the super rich.

American middle-class consumers are "trading up," paying a premium for luxury items they value with high-end features or cachet, compensating by "trading down" in other areas.

"New luxury" products and services appeal to the 47 million households making $50,000 or more a year, according to marketers and researchers who have coined a word for this trend: "masstige" — prestige for the masses.

The "mass affluent" pay $3 for coffee at Starbucks, buy $27 Isaac Mizrahi pumps at Target and stock their kitchens with imported Italian dinnerware from Williams-Sonoma and $5,700 Sub-Zero refrigerators.

	You know you're trading up when: You start the day with a $3 latte from Starbucks instead of a 99-cent cup of coffee from 7-Eleven.

"This phenomenon is best observed by going into Costco. It's piled high to the ceiling with stuff that ... were luxuries the day before yesterday," said James Twitchell, author of "Living It Up: America's Love Affair with Luxury."

Two Seattle-area companies are among the new luxury leaders: Issaquah-based Costco and Seattle-based Starbucks. Others include The Cheesecake Factory; Samuel Adams beer; American Girl dolls; BMW; Whirlpool; and Victoria's Secret.

New luxury products are distinguished by better design, ingredients or packaging — technical advantages that "translate into functional benefits that consumers can see, touch, describe," said Michael Silverstein, a marketing expert who co-wrote the 2003 book, "Trading Up: The New American Luxury," that popularized the concept.

Among the demographic drivers of this trend, according to Silverstein: higher levels of education, an increase in disposable income and greater numbers of working women with more influence on spending decisions.

People have always saved a little here to spend a little there, said Carl Obermiller, professor of marketing at Seattle University.

What's different now: a steadily rising standard of living and brand-name goods that are more available and more affordable than ever. For better or worse, almost anyone can have a taste of luxury.

"It used to be middle-class Americans didn't know what the super rich bought or did," Obermiller said. "Now we can emulate them. ... It's not just what yacht they're buying. It's what shoes they wear."

Consumers speak

To afford luxury, middle-class consumers have to make tradeoffs. Where one indulges, another economizes.

	You opt for the "near-luxury" 3-series BMW ($29,300) over a Pontiac for $21,300.

Becky Hanks has 68,000 miles on her 6-year-old Toyota Camry and plans to drive it "until it dies."

But the school-district communications manager doesn't scrimp on travel. Last year, it was a trip to the British Virgin Islands. In 2002, she and some friends chartered a 37-foot catamaran in Tahiti. The price tag: nearly $2,500 per person.

"Living the high life is not a part of my day-to-day experience. It's a major treat," said Hanks, of Des Moines. "I save up for it and ... just eat up every moment."

Elizabeth Bonbright Thompson's primary splurge is part of her day-to-day experience: gourmet food.

	Pontiac

"I'm pretty picky about my food," she admits. She enjoys cooking elegant meals at home for her family with fresh-baked breads and imported foods, but shops discount retailers like Costco for most staples.

"It's the fresh smell of the herbs. It's a visual and sensory high" to shop at high-end markets, said Bonbright Thompson, executive director of the state Child Care Resource & Referral Network. "I guess I'm choosing to pay a little more for that personal gratification."

Local luxury leaders

At Costco, customers can simultaneously trade up and trade down at the same checkout stand.

	You splurge on a Coach watch for $205 rather than a $22.99 Timex at Target.

Jim Sinegal, co-founder and CEO of Costco, calls his 441-warehouse chain "the epitome" of new luxury. Costco is the largest seller of Dom Perignon champagne in the country and one of the largest retailers of diamonds, he said.

Peek in the shopping carts being rolled out of any Costco Warehouse, and you'll see evidence of masstige spending: a $205 Coach watch nestled next to a bag of boneless, skinless chicken breasts; a 12-pack of Duracell batteries sandwiched next to a $40 bottle of imported French wine.

Sinegal believes consumers are feeling "a loss of rapture with low-price, low-quality merchandise. They're more enamored with high-quality items they can keep and count on."

Starbucks has more than 8,300 stores and is approaching $5 billion in coffee-drink sales. Somebody at Starbucks headquarters has done the math and found there are some 19,000 possible coffee combinations to order.

	Timex

And that's a big part of Starbucks' allure — getting a superior cup of coffee exactly the way you want it, said Anne Saunders, Starbucks' senior vice president of marketing.

"Getting something that's uniquely created — that's really hard to get today," she said.

With the mainstreaming of luxury, the purveyors of new luxury are confronted with a paradox: How to offer affordable luxury while maintaining exclusivity.

"If everybody can buy an indulgence, then the indulgence has lost its value," said Twitchell, who is also a professor of English and advertising at the University of Florida.

Thus, the emergence of a tandem trend: "massclusivity," or exclusivity for the masses.

Starbucks recently began selling limited quantities of rare coffees from around the world — coffees so precious, they say, "that to miss them once could mean you'll never experience them again."

The story behind the coffee, and its limited availability, "is part of the romance of it," Saunders said.

Helping define us

Twitchell says consumers are drawn to products that tell a story.

"Starbucks — don't get me wrong, it's good coffee. But it's just coffee. The difference is it's coffee with a story," he said. "The taste of modern luxury is not inside the product. It's inside our imagination."

New luxury items help define us, to ourselves and others, and feed our emotional needs, Silverstein said.

The way consumers define luxury has changed, too.

Pam Danziger, whose Unity Marketing firm in Stevens, Pa., tracks the luxury market, said luxury used to mean simply owning the item — the Chanel bag or the Tiffany brooch. Today, consumers prize how the item makes them feel.

"The idea is it gives us a lift — it's about wearing the fur on the inside of your jacket," Danziger said.

American consumers enjoy incredible affluence across all income levels, Danziger notes. "Our basements, our attics, our closets are full ... We don't need any of this stuff," she said. "People feel entitled to luxury."

What's the cost?

Is it troubling that we're buying all this stuff we don't need to somehow lift our spirits?

	You spring for an American Girl for your daughter's birthday ($84) and forgo the $11 Barbie at Wal-Mart.

Obermiller, of Seattle University, said there may be a cost across society when people go upscale without also cutting costs.

Personal bankruptcies in the United States have nearly doubled in the past dozen years, and they've increased 2½ times in Washington during that time.

"It's easy to get in over your head" in a society that seems to glorify overspending and overconsumption, he said.

Silverstein dismisses worries about excessive materialism as a "media concern."

"This is about making better decisions, consuming less," he said. "It is not about reckless consumption. ... It is actually a celebration of consumer intelligence and knowledge."

Yet even some consumers have conflicted feelings about their access to the trappings of affluence.

A Coach collector

Laura Clenna, of Seattle, likes the quality and clean, simple style of Coach handbags, and she has amassed an impressive collection — 10 in all. The last one she bought cost more than $200.

	Barbie

The King County elections worker drives a 2000 Toyota Land Cruiser, which her husband drove before she "fell in love with it" and took it over.

She shops sales and discount retailers for basics such as underwear and children's clothes, but says buying luxury items is still "a difficult thing in my head."

"My mom was a secondhand-store shopper. I didn't have these things growing up," she said. "It makes me feel good — and it's just nice to get into heated leather seats."

Pause.

"It's totally disgusting!" she laughs.

Jolayne Houtz: jhoutz@seattletimes.com and 206-464-3122.

Times researcher Gene Balk contributed to this story.

Copyright © 2004 The Seattle Times Company

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