THE LUXURY MARKET: A Necessity in an Expanding Economy

IN San Francisco’s I. Magnin & Co. shoppers can buy, for $500, an 8-ft. cloth-covered, motorized kangaroo that pops a 3-ft. kangaroo out of its pouch. But they had better hurry, because the store sold out its supply once and had to scour Europe for more. In Beverly Hills a thoughtful fellow sent a birthday present to a department-store executive “who has everything”: a brush specially designed to clean the lint from his navel. R. H. Macy, Manhattan’s mass department store, offers French beaded purses for $99.50; Sears, Roebuck, the farmer’s friend, catalogues a $3,210 diamond ring for the farmer’s wife, a $718 electric golf cart for the farmer. Last week, at the Summer Gift Show in Chicago’s Merchandise Mart, prices were up as much as 100% over five years ago, but the show had the most successful run in its history, with sales 50% ahead of last year. One puzzled firm reported selling 200 Egyptian camel saddles at $100 apiece last year, could not figure out what for. Said Ted Russell of the gift firm of N. S. Gustin: “I’m flabbergasted. The whole trend is amazing.”

In 1956 a great and growing number of Americans are willing and able to buy products considered luxuries (or unheard of) by their fathers, and even by themselves a generation ago. Says Lever Bros. Chairman Jervis Babb: “The great mass of American families have graduated from a people who work for a living to a people who work for luxury. Price is no longer a basic standard. People buy for value. The store’s problem is not to get rid of steaks, but to move the hamburger.”

Statistically, the explanation is simple. Americans are making more money, have more to spend. Disposable income (after taxes) stood at $270.6 billion last year v. $206.1 billion for 1950, $150.4 billion for 1945. And since 1940, U.S. discretionary income—the amount remaining from disposable income after subtracting food, clothing, housing, other necessities—has increased sixfold. There are other reasons. People have a greater feeling of security about the future induced by continued prosperity; they feel free to spend. They have more time to buy and to enjoy—roughly 1,200 more leisure hours annually than their grandparents had. Their tastes have been upgraded to an appreciation of quality.

The gold-plated and mink-trimmed whatnots are only the smallest part of the luxury market. To U.S. economists, the amazing fact about the new luxury market is the broadening and democratization of both the market and the luxuries themselves. Gone are the days when luxury meant a private railroad car, a steam yacht, a Newport château. From an emphasis on the ostentatious things that go with ceremony, luxury has focused on the convenient gadgets that make life easy for the many.

Along with the relative decline in exhibitionistic spending has come a decline of the class that practiced it. Compared to 1929, the $100,000-plus income group (after taxes) today is less than a fifth as large, accounts for only a sixth of the aggregate income it accounted for in 1929, provides only .038% of national luxury income v. more than a third in ’29. But while the apex of the pyramid has shriveled, the middle has filled out: there are now 30.6 million families with personal incomes of $4,000 or over who account for a luxury income of $41.4 billion. In the words of a Los Angeles broker: “Before World War II there were at least 50 really big yachts here. Today there are only 15 left, but there are at least 3,500 smaller boats.”

In this new mass market, old distinctions between luxuries and necessities have a way of disappearing fast, and yesterday’s luxury becomes today’s need. Thus, one day in January 1950, by federal fiat, the TV set was suddenly transformed in effect from luxury to necessity. This happened when the Bureau of Labor Statistics decided that TV sets belonged on the list of the hundreds of items it uses to compile its cost-of-living index. Three years later, by BLS “decree,” automatic laundry service and biscuit mix also became necessities. It is easily conceivable that in time the same road will be taken by air conditioning, electric blankets, power steering, and a thousand other amenities. This is the familiar old American process of raising the standard of living.

It is also a new twist on the old historians’ axiom: the more luxury, the quicker a nation degenerates. This was true enough in Babylon, Greece, Rome, Bourbon France and Czarist Russia, where luxury perched atop a pyramid of misery, ignorance and hopeless poverty—Fabergé eggs sprouting from a dungheap. But in the U.S. luxury has come to mean not a declining economy but an expanding one. It is not a historic nightmare but a large part of the American dream. In the words of Ben Franklin, who saw ahead of his time: “Is not the hope of one day being able to purchase and enjoy luxuries a great spur to labor and industry?”