For the first time in nearly two years, there is evidence that the recession may be moderating among the affluent. However, luxury goods marketers should not celebrate yet; the evidence also shows that affluent consumers are changing their patterns of consumption, and these changes may outlast any economic downturn.
Unity Marketing's exclusive Luxury Consumption Index (LCI) continues to drag after hitting an historical low in the third quarter 2008. In the latest survey of 1,034 affluents (average income $207,000) the LCI showed a very slight improvement of 1.5 points. The in-depth survey was conducted April 3-8, 2009 and included questions about their financial situation and luxury lifestyle, as well as their luxury purchases and spending in the past three months.
Pam Danziger, president of Unity Marketing, a consumer insights firm that specializes in the luxury consumer mindset, says, "We see positive signs in the latest reading of affluent consumers' financial prospects, specifically:
- Affluents are beginning to feel somewhat better -- or more correctly, less badly -- about their personal financial situation now as compared with three months ago.
- Likewise, they feel the country as a whole is moving in a more positive direction than they did three months ago.
- Affluents are beginning to feel somewhat more optimistic about their future financial situation in the coming twelve months. This more positive long term perspective is especially important since one-fourth of the affluents said their personal financial situation had declined significantly, while 39 percent said their financial situation had declined somewhat in the current economic recession."
Danziger continues, "But despite these positive indications, over 40 percent of all the affluents surveyed said they plan to cut their spending on luxuries in the next twelve months. So we are seeing a long, slow crawl to higher levels of affluent consumer confidence. At the same time, there continues to be trouble ahead for luxury marketers, as the affluents are holding back on their expectations about spending more on luxuries for the remainder of the year."
Commenting on the results of the latest survey Tom Bodenberg, Unity Marketing's chief economist says, "We remain cautious about the luxury market's prospects after the recession. It is likely that there will be an uptick in luxury consumer spending once the recession has played its course, as some affluents will relieve pent-up demand for luxury goods as a vehicle of lifestyle aspiration and expression. At the same time the media's focus on 'recession chic' – personal expression that deliberately excludes luxury goods – may leave a lingering distaste for conspicuous consumption and parading luxury labels."
To learn more about the latest luxury consumer survey and the LCI, click here.