Why and how consumers choose to lay down the big bucks
Whether it’s a new handbag or new boat, big-ticket purchases fulfill a need.
It could be status, recreation or fashion, but the reasons behind purchasing items beyond the life essentials can be many. So why do consumers spend the big bucks, and how have recent market forces affected buying trends?
Sweet Emotion
For jewelry designer and manufacturer Llyn Strong, who draws on 25 years in the business of bling, the purchase of her work is based purely on feeling. “Jewelry is a very emotional purchase, good or bad,” she said. Strong creates custom pieces for both longtime customers and walk-ins.
“I have some men who want to make someone happy and some who just want to give a gift right away,” she said. “People attach so many memories to jewelry. It goes back as far as recorded history.”
Michael McDunn, custom furniture maker for more than three decades, said customers for his handmade pieces want to own something unique that can be handed down.
Sticker Shock
For some without a lot of disposable income, attaining a desired big-ticket item may take saving or serious consideration. McDunn said that his customers pay up front, but others “save up.” And for a piece that may cost thousands of dollars, there’s a justification process that a customer has to reach, said Strong.
Both Strong’s and McDunn’s customers pay up front or on a credit card. Strong doesn’t extend credit, but will lay away. McDunn also makes layaway agreements on a case-by-case basis, calling it “a good two-way street.” Some clients who just went through the process of building a house initially dismiss the furniture cost after dealing with a string of contractors, he added.
Trends
According to the Luxury Institute’s 2013 State of the Luxury Industry report, consumers with a net worth of at least $5 million say they plan to spend more on travel, dining out and wine while reducing spending on jewelry and handbags. Over the last few years, Strong said she has witnessed some changes, too, including the disappearance of small galleries.
At the height of the downturn, people weren’t spending, she said. “At first people were scared, they weren’t buying or they wanted to deal,” she said. “The middle has gone away,” she added, and Strong has responded by increasing lower- and higher-end pieces.
McDunn experienced the same effect. “People who could afford it weren’t buying,” he said. These days, customers are looking for higher quality, less quantity: buying smaller homes and filling them with nicer pieces. “People are looking for an heirloom to pass along to family,” he said.
An Investment
Beyond emotion, some buyers wish to purchase as an investment. The Art Investment Council calls the “complex, opaque and unregulated” art market difficult to navigate and recommends getting advice before purchasing. Strong advised that if you invest in precious stones, be prepared to spring for something large and hold on to it for 20 years.
And as far as investing in furniture, it can endure for generations, said McDunn: “It can potentially show up on ‘Antiques Roadshow.'”
Cultivating Relationships
Purchasing big items can spring from relationships. According to the Luxury Institute, making the customer feel special and injecting humanity into the experience is essential.
Strong agreed, adding that she consults with customers before beginning a design and offers complimentary beverages. “It’s all about the experience,” she said. “Many of my good friends started out as customers.”
Adding education or a unique experience is also a hallmark of building lasting relationships. Strong offers gemstone roundtables that allow customers to handle and learn about stones valued from $300 to $500,000.
In the past, McDunn conducted classes, many attended by some customers. Once they learned the process of creating custom furniture, said McDunn, they understood, “We’re buying a chunk of this guy’s life that he put into this piece.”
