Asian American Consumer Clout Over Premium Brands

No one in California will be surprised to learn that Asian Americans determine the outcome of the tight competition among the top three premium auto marques in the U.S.

In 2008 10.4% of new BMW sales of 249,113 (or 25,908 units) went to Asian Americans, according to industry analyst R. L. Polk & Co. That’s 231% of the 4.5% Asian American representation in the general population.

In relation to total sales, Mercedes-Benz did even better, selling 12.2% of its 225,128 new car sales (or 27,466) to Asian Americans, for 271% of our proportionate share. And that was during a slump year when Mercedes-Benz sales had fallen 11.2% from its record year in 2007.

No data is available on what percentage of the 151,567 Lexuses sold in 2008 went to Asian Americans, but anecdotal evidence suggests it’s disproportionately high, albeit skewed heavily toward older, first-generation Asian American females. Overall the median age of a BMW buyer is 46, Mercedes is 50 and Lexus is 53.

BMW capitalized on its popularity with Asian American professionals to take the top spot during the first six months of 2009, in the depths of the Great Recession, selling 93,563 units to 90,060 for Lexus riding the popularity of its RX300 and the new IS300. Mercedes-Benz was a close third with 85,130. That was followed by a sizeable gap down to the fourth spot held by Acura at 51,082 and fifth-place Cadillac at 48,583.

But carmakers know that in the premium car segment the margin of victory is razor thin. For example, this October BMW lost its lead for the first time since May as Lexus raised total monthly sales to 21,091 against BMW’s 19,272 and Mercedes’s 18,351. Only 1,819 cars separate the top spot from number two, and 921 separate numbers two and three. That’s about the number of Benzes and Beemers parked at the San Gabriel Town Center and Del Amo Fashion Mall on any given Sunday.

Premium cars aren’t the only products over which Asian Americans enjoy oversized consumer clout. Fashion brands like Louis Vuitton and Prada, Apple computers, smart phones, premium liquor and pop music are some other areas where Asian American consumers loom large in sales success. Most recently, the rise to the top of the charts by Far East Movement’s “Like a G6” shows how Asian Americans can power a national Billboard pop chart topper. It’s no secret that the Asian American hiphop group spent years diligently working the Southern California Asian event and club scene to build up a loyal following that powered its rise to number one.

It’s baffling to many: how can so few influence the oucome of marketing battles fought in a market as immense as the U.S.?

This disproportionate impact owes to several factors that focus Asian American consumer clout into the rather small consumer segments that determine the success of premium brands.

The first is geographical distribution. Asian Americans are concentrated in top metro areas like San Francisco Bay, Los Angeles and New York City where premium brands must fight for a place in the cultural leading edge. For example, in 2008 there were 1.4 million Asians in Los Angeles County alone out of a total population of 9,862,000. In proportionate terms Asians in the U.S. were growing at a faster rate than any other group.

The second is education. Our high rates of graduation from top universities translate into both an appreciation of quality and the wherewithal to afford it. For example, Asian Americans outnumber Whites in the elite 9-campus UC system. Even in leading private universities like Stanford, Harvard, Yale, Princeton, MIT, Columbia, Duke and UVA, Asians outnumber all other minorities combined, comprising upwards of 28% of the student body. These educational credentials translate predictably into better-paying occupations. About 52% all Asian Americans are professionals, managers or business owners, compared with about 35% for Americans as a whole, according to Census Bureau data for 2008. The numbers are expected to skew even more toward Asian Americans when the 2010 Census results are tabulated.

The third factor is cultural. Exposure to more than one culture gives Asian Americans a more cosmopolitan perspective with which to evaluate products and brands. Tastes are also influenced by above-average status consciousness. Possibly due to a desire to overcome stereotypes that depict us as less acculturated and sophisticated, Asian Americans tend to put more emphasis on quality and taste in purchases that impact their images — cars, clothes, homes, gadgets, music, food, entertainment.

Taken together, these three factors focus Asian Americans disproportionately on connoisseur brands like BMW, Mercedes-Benz, Gucci, Apple laptops, B&O stereos, Grey Goose vodka, in precisely the markets that set industry trends. Consequently, the 15.5 million Asian Americans who make up a rather small percentage of the U.S. population become a far larger percentage of the consumers who matter to premium brands.