Third Quarter Luxury Market Update from Unity Marketing

Furniture World Magazine

Luxury consumers’ confidence in the economy took a hit in the third quarter with the Luxury Consumption Index dropping to 96.0, down 6.7 points from the second quarter, according to Unity Marketing’s latest tracking study of the luxury market (www.unitymarketingonline.com). Their feelings of uncertainty played out in the stores, in the travel sector and at service businesses that cater to the affluent.  The average amount luxury consumers spent on luxuries in the third quarter (July-September) dropped 35 percent, from an average of $4,275 in the second quarter to $2,779 in the third.  “There is a myth in luxury marketing circles that the affluent are immune to economic ups and downs.  That isn’t true any longer.  In fact, luxury consumers with their surfeit of material wealth have no pressing need to go shopping, dine out or travel when they don’t feel confident,” explains Pam Danziger, president of Unity Marketing and author of the new book on luxury, Let Them Eat Cake:  Marketing Luxury to the Masses — as well as the Classes. “Luxury consumers can wait it out when times are tough and that is just what they did in the third quarter.  In the third quarter only 19 percent of luxury consumers said they spent more on luxuries, as compared to 35 percent who spent more freely in the second quarter,” Danziger continues. Luxury consumers turned attention homeward; Foreign travel and fine dining took hit During the third quarter, luxury consumers bought more home luxuries with the greatest increase tracked in home electronics and photography; linens and bedding; kitchenware, cookware and housewares; and furniture, lamps and floor coverings.     By contrast, personal luxury spending was off, down 35 percent to $750 in the third quarter, with the purchase of jewelry and watches dropping steeply.  Personal luxuries include clothing and apparel, fashion accessories, beauty products and luxury automobiles. Also negatively impacted in the third quarter was spending and participation in experiential luxuries.  Particularly hard hit was foreign travel, which dropped from 79 percent purchase incidence in second quarter to 50 percent in the third.  Fine dining also experienced a decline, with the average amount spent dropping 50 percent to $375. “Luxury consumers’ feelings of finanicial stress kept them homebound in the third quarter.  In the months when we would expect travel to rise, it actually declined, with foreign travel really taking a hit.  Because they spent more time at home, luxury consumers devoted attention to home improvements, adding new entertainment systems, redecorating and remodeling.  In the third quarter luxury home marketers will see a boost, while those selling personal and experiential luxuries would have felt the pinch,” Danziger says. Consumer confidence predicted to rise in fourth quarter with renewed spending The luxury consumer is expected to return to the stores and service providers in full force during the fourth quarter.  The negative feelings from the third quarter will subside as the stock market rebounds and the political uncertainties from the election campaign are resolved.  A Unity Marketing survey on holiday spending conducted right after the election predicted a spending increase of 6.3 percent among the more affluent gift shoppers, significantly higher than the 4.5 percent expected among the less affluent. Unity expects the luxury market to make up any shortfall experienced in the third quarter with strong spending in all luxury categories through the rest of the year. About the Luxury Tracking Study; Unity Marketing’s Luxury Tracking Study is fielded quarterly among a sample of affluent consumers.  This report summarizes the third wave Luxury Tracking Survey, fielded during October 2004, recording luxury purchases from July-September among a total of 717 affluent consumers with household incomes of $75,000 or more.  Average household income was $136,500.  Luxury product categories included in the quarterly survey:  -Home Luxuries: Art & Antiques; Electronics & Photography; Fabrics, Wall & Window Coverings; Furniture, Lamps & Floor Coverings; Garden & Garden Products; Kitchenware, Cookware & Housewares; Kitchen Appliances, Bath & Building Products; Linens & Bedding; Tabletop. -Personal Luxuries: Automobiles; Clothing & Apparel; Cosmetics, Beauty & Fragrance Products; Fashion Accessories; Jewelry; Watches. - Experiential Luxuries: Luxury Dining; Entertainment; Travel; Spa, Massage & Beauty Services. Unity Marketing publishes its Luxury Tracking Study quarterly with the next due in January 2005.  For more information, visit http://www.unitymarketingonline.com/reports2/luxury/luxury3.html or call Pam Danziger at 717-336-1600.