TORONTO – Despite high unemployment, and a soft job market, younger Canadians are driving much of the growth in the sale of luxury goods.
A study done by American Express Business Sight says that from 2009 to 2011, sales of luxury items increased amongst the majority of demographics, but the biggest increase was among Generation Y consumers.
Between 2009 and 2011, Generation Y – people born after 1983 – increased spending on luxury fashion items by 33 per cent, 74 per cent on travel, and 102 per cent on fine dining.
“The luxury market is turning its eye to the younger generation,” Colin Temple, vice president and general manager of merchant services with American Express Canada, said. “This demographic set has become integral to business growth as older generations start to exit the market.”
The increased spending on luxury items though is also causing some people to fall into debt trouble, experts suggest. Darren Dicky, general manager of Debtmanagers.ca, tells Global News that he is seeing more and more customers in their mid-20s seek his services.
“We’ll see the statements, the amount of these luxury items, Ticketmaster, liquor stores, clothing stores, are a lot higher in that younger age group,” Dicky said.
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Minimum payments are a huge problem Dicky said, as many consumers believe they can remain financially stable just making the minimum payments, and fail to account for financial emergencies such as the loss of a job.
“It’s this never, never plan. Where you are making the minimum payment … They think ‘I can finance everything, bed, TV, holiday,’ everything is a monthly payment,” Dicky said. “You’re trucking along fine making minimum payments when the budget is balanced, then something happens.”
Paying just the minimum payments and always increasing credit limits is much like slowly boiling a pot with a frog in it, Dicky suggests. The frog does not notice until it hits the boiling point and it’s too late – that boiling point is when the credit payments become impossible to pay.
Though Laurie Campbell, CEO of Credit Canada Debt Solutions, says the problem is not just a lack of knowledge regarding credit, but also rampant consumerism.
“This generation is a generation of ‘get it now, worry about it later,’” Campbell said. “Young people really haven’t got the tools or the education to manage money properly.”
The parents of Generation Y consumers, the Baby Boomers, also increased spending on luxury items, though not nearly as much as the younger generations.
Baby Boomers, according to American Express, increased spending on luxury fashion by 24 per cent, travel by six per cent, and fine dining by 15 per cent between 2009 and 2011.
Seniors in fact were the only group surveyed where spending on luxury items decreased. Though seniors spent two per cent more on luxury fashion between 2009 and 2011, they spent three per cent less on travel, and one per cent less on fine dining.
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