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Luxury Consumers Are Feeling More Positive about their Finiancial Status

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Reversing a downward trend in luxury consumer confidence tracked since the second quarter 2004, the Luxury Consumption Index rose 5.3 points to reach 100.9 at the close of the first quarter 2005. In a survey of 732 luxury consumers (average income $132.8k) conducted in association with Unity Marketing’s quarterly luxury consumer tracking study, 36 percent of respondents said their financial condition was better off now than at the end of 2004. “Despite rising gas prices and a feeling of uncertainty about the economy as a whole, luxury consumers in the first quarter of 2005 are beginning to see light at the end of the tunnel in terms of their personal financial status,” says Pam Danziger, president of Unity Marketing and author of Let Them Eat Cake: Marketing Luxury to the Masses — as well as the Classes. “Consequently they spent more buying luxuries in the first quarter 2005 compared to last year, $11,726 up 11 percent over $10,596 reported in 1Q2004.” Prospects look strong for the rest of 2005 in terms of luxury spending. Some 28 percent of luxury consumers expect to spend more buying luxury over the next twelve months. Further a majority (55 percent) expect their financial status will continue to improve in the next twelve months. Luxury consumers spent more on cars and experiences in 1Q2005 In the first quarter 2005, luxury consumers spent considerably less buying luxuries for their homes compared to last year, with home luxury spending down 43 percent from $6,779 in 1Q2004 to $3,872 on average. Following a spending pattern identified throughout the 2004 tracking year, when luxury consumers spend less on home luxuries, they spend more on experiential luxuries, like travel, dining and entertainment. Spending on experiential luxuries rose 70 percent in the first quarter 2005, up from $2,501 to $4,249 in 1Q2005. While spending on personal luxuries, like fashion and fashion accessories, jewelry and luxury cosmetics, remained about even with last year, luxury consumers spent more buying luxury automobiles in the first quarter 2005, up 48 percent from $30,793 to $45,594 on average. “Intuitively it makes sense that when luxury consumers spend more time out and about, traveling, dining and attending the theatre, they don’t focus their attention on their home surroundings. And that is the pattern that Unity’s quarterly luxury tracking study has verified. How much luxury consumers spend on luxuries for home is in an inverse relationship with how much they spend on experiences. When home spending goes up, experiential spending go down and vice versa. “For luxury home marketers, they have to look to the younger luxury consumers, members of the GenXer (born 1965-1976) and Millennial (1977 and after) cohorts, as their primary target markets as the luxury baby boomers continue to emphasize spending their luxury dollars on things to do and places to go, rather than acquiring more material goods,” Danziger explains. Unity Marketing’s benchmark index of luxury buyers is calculated from a sample of over 700 upper-income households throughout the United States. This panel, with household incomes over $85,000 represents one of the largest longitudinal studies of high-end luxury consumption of goods and services. Panelists reported purchasing behavior of luxury goods and services over the past three months, as well as attitudinal and expectation data about luxury brands and categories, their households and the health of the economy in general. Unity Marketing publishes its Luxury Tracking Study quarterly with the next due in June 2005. For more information, visit http://www.unitymarketingonline.com/reports2/luxury/luxury3.html or call Pam Danziger at 717-336-1600.

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