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Luxury Consumer Confidence Plummets in Second Quarter

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Luxury consumers’ confidence plummeted during the second quarter 2006, dropping 14 points down to 99.2 from a high of 113.2 at the close of the first quarter. This follows two consecutive quarters of rising luxury consumer confidence. The index is based upon a survey of over 1,000 luxury consumers (average income $147.9k) conducted in July 2006. “All values used to calculate the Luxury Consumption Index dropped sharply in Unity’s most recent Luxury Tracking survey,” explains Pam Danziger, president of Unity Marketing and author of the soon to be published Shopping: Why We Love It and How Retailers Can Create the Ultimate Shopping Experience. “How they feel about their personal financial health dropped. How they feel about their prospects over the next 12 months dropped. Their expectations about future spending on luxury dropped. But most significantly, luxury consumers' feelings about the financial health of the country declined the most. At the close of the second quarter, nearly half (47 percent) of luxury consumers believed the country was worse off compared to three months ago. Only 16 percent felt it had improved,” Danziger said. Commenting on the decline in the consumption index, Thomas Bodenberg, Unity Marketing’s economic forecaster said, “A number of factors contributed to luxury consumer worries. On the home front, gasoline prices have remained high which threatens more price inflation. They also faced a decline in the housing market, electoral uncertainty as the election season starts to heat up and a reduction in the rate of economic growth. Luxury consumers too are worried about the long term impact of continued unrest in the Middle East, Iraq, and Afghanistan.” Declining luxury consumer confidence led to slow growth in luxury market Despite the steep decline in luxury consumer confidence, the luxury consumers maintained the same level of overall spending as in the first quarter. Luxury consumers spent $221.8 billion on luxuries in the second quarter, up a scant .7 percent from total spending of $220.2 billion in first quarter. With the exception of experiential luxuries, the luxury market declined in all categories in the second quarter. The market for home luxuries was down 5.7 percent to $48.3 billion. The personal luxury market, including fashion, jewelry, watches, pens and writing instruments, wine and spirits, declined 8.7 percent in the quarter to $29.9 billion and the market for luxury automobiles was down .9 percent to $60.8 billion. By contrast, the market for experiential luxuries grew in the second quarter 10.7 percent to reach $82.8 billion, with the market for luxury travel, dining, entertainment, home services and spa/beauty services increasing during the quarter. “The growth in the experiential luxury market is not surprising in the face of luxury consumers’ growing feelings of anxiety. When they feel bad, they will spend money in the areas of their life where they gain the greatest personal satisfaction and happiness and that is toward experiences. For most luxury consumers the experience of a night out on the town or a romantic weekend getaway gives them far more personal pleasure than buying another designer handbag or a new high tech television set,” Danziger explains. These findings are based upon Unity Marketing’s quarterly luxury tracking study which surveyed 1,012 luxury consumers (average income $147.9k and age 43.4 years). Information about their purchases, spending, store and brand preferences were collected on four major categories of luxury goods and services, including home luxuries; personal luxuries (clothing, fashion accessories, jewelry, watches, cosmetics, wine and spirits, pet luxuries, and pens); automobiles; and experiences (dining, travel, home services, spas/beauty services, and entertainment). Unity Marketing publishes its Luxury Tracking Study quarterly with the next due in September/October 2006. About Unity Marketing’s Luxury Consumer Tracking Study Every quarter Unity Marketing conducts a Luxury Consumer Tracking Study among 1,000+ luxury consumers. Year-end 2005 statistics compiled from the four 2005 tracking studies are published in Unity Marketing’s Luxury Report 2006 — Who Buys Luxury, What They Buy, Why They Buy. In the tracking study detail purchase information is collected on these categories of luxury: Home Luxuries: -Art, Wall Décor & Antiques -Electronics and Photography, such as computers, televisions, home entertainment centers, cameras, PDAs, etc. -Home Decorating Fabrics, Window & Wall Coverings -Furniture, Lighting and Lamps, and/or Floor Coverings, including rugs -Outdoor, Lawn, Patio & Garden Products, such as lawn furniture, patio accessories, plants, grills, etc. -Kitchenware, Cookware & Housewares -Kitchen Appliances and Bath & Building Products, such as cabinets, bathtubs, etc. for home remodeling -Linens & Bedding -Tabletop, Dinnerware, Flatware, Servingware, Decorative Accents Personal Luxuries: -Automobiles and/or recreational vehicles, such as boats, RVs, etc. -Clothes & Fashion Apparel -Fashion Accessories, such as handbags, wallets, suitcases, shoes, etc. -Fragrance, Cosmetics and/or Beauty Products and Skin Care regimes -Jewelry -Watches -Pet Products -Wine & Spirits -Pens & Writing Instruments Experiential and Luxury Services: -Travel and vacations -Dining and restaurants -Entertainment -Personal and health services, such as beauty treatments, spa, massage and cosmetic procedures, health club, country club, etc.; -Home services, such as landscape, housecleaning, home remodeling, home decorating, party planning and catering, etc. -Luxury brands & magazines Also included in the tracking study are measures of luxury brand awareness and usage as well as magazines luxury consumers purchase. Special Luxury Research: What Influences Luxury Consumers When They Shop for Specific Luxuries Each quarter a topic of special interest to luxury marketers is researched. In the 2Q2006 study, luxury consumers were asked about what influenced their most recent luxury purchase in all categories. The specific influences included in the survey were style and design; good value for price; store where purchased; brand or designer of product; exclusivity; internet research and information; on sale; recommendations of friends; articles and reviews and advertisements. Also included was a question about the motivations for luxury purchases. For more information email: pam@unitymarketingonline.com or go to (http://www.unitymarketingonline.com)

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