In the Current Economy, the Highest-Income Affluents Have Cut Their Spending the Most

Furniture World News

For luxury marketers that are counting on their most affluent consumers to see them through the current economic crisis, evidence is mounting that even the most wealthy shoppers can't provide them protection. A new Unity Marketing survey of luxury consumers fielded October 3-8, while the stock market was in free fall, found that ultra-affluents who represent the top 2 percent of U.S. households are changing their lifestyles and shopping behavior. On a year-to-date basis the ultra-affluent consumers (incomes $250,000 and above) have cut their spending on luxuries by nearly 20 percent. By comparison, luxury consumers with incomes from $100,000 to $249,999 cut their spending by some 10 percent in the first three quarters of 2008 vs. the same period in 2007. "The results of the most recent luxury tracking survey challenge the conventional wisdom that the most affluent are immune to economic ups-and-downs," says Pam Danziger, president of Unity Marketing, a consumer insights firm that specializes in the luxury consumer mindset. "This time the ultra-affluents are being hit in the source of their wealth: the value of their homes and their stock portfolios. In a sign of their pain, some 44 percent of ultra-affluents said that the value of their investments have decreased by 25 percent or more and 31 percent said the value of their homes have dropped by 25 percent or more. Nearly half said that their financial situation is worse now than it was three months ago. "In a dramatic reversal of the 'wealth effect,' half of the ultra-affluents said they are spending less on luxury now as compared with twelve months ago and 55 percent expect to spend less on luxury in the next twelve months," Danziger explains. How ultra-affluents are saving money Ultra-affluent shoppers are taking action to cut their expenditures. About half of the ultra-affluents surveyed said they are: Shopping more strategically, such as preparing lists, researching purchases and comparison shopping. - Going shopping less frequently. - Reducing the number of times they dine out. - Cutting their spending on personal fashion purchases, such as shopping sales, visiting outlets, and opting for less premium brands. Danziger concludes, "It is not all doom-and-gloom for luxury marketers. The latest research shows that the luxury consumers are still indulging in their favorite luxury brands. What is changing is that they are being more selective in the luxuries that they buy. For example, instead of splurging on a whole new outfit including a dress, handbag, shoes and piece of jewelry, the newly frugal ultra-affluent shopper will treat herself instead to just one item, be it the handbag, a new pair of shoes, or the dress -- which ever one really grabs her fancy. "This latest survey emphasizes how luxury brands need to stay connected with their customers and understand the dramatic changes in attitude and mindset that are taking hold among the ultra-affluents. By understanding their customers better than their competitors, luxury brands will be able to weather the current economic storm," Danziger advises. About Unity Marketing's Luxury Consumer Tracking Study These findings are based upon Unity Marketing's quarterly luxury tracking study which surveyed 1,161 luxury consumers (average income $210,700). Every quarter Unity Marketing conducts a Luxury Consumer Tracking Study among 1,000+ luxury consumers. For more information on what the latest Unity Marketing Luxury Tracking survey found for the third quarter and what it predicts for the vital fourth quarter holiday season, call Pam Danziger at 717-336-1600 or request more infomation through this link. For media: Pam Danziger available for interview. Charts, tables and graphs available on request. For more information go to www.unitymarketingonline.com. Coming Soon: Luxury Consumption Index (LCI) to be released shortly: This will predict affluents' spending for the coming months. Home Furnishings Market: New study of home furnishing market released