The following study is published courtesy of National Jeweler
Stevens, Pa.-Unity Marketing’s latest study on how the wealthiest Americans spend on luxuries shows a downturn in consumption since January and suggests that the aspirational consumers are starting to behave more like middle-class consumers.
After rising in January, a recent slide in the Luxury Consumption Index–a Unity Marketing measure tracking consumer confidence among “affluents” and “ultra-affluents”–suggests that the road to recovery for the luxury market may not be a smooth one. The index dropped from 86.9 points in January 2010–the highest level reached since September 2007–to 77.6 points in April 2010.
“The rise in the index back in January was a result of new year optimism,” Pam Danziger, president of Unity Marketing, said in the report. “Even though the index dropped 9.3 points in April, it is still higher than it was in October 2009. Thus there is every indication that the recovery as measured by luxury consumer confidence is slowly but surely on track.”
Danziger added, however, that the decline does predict a slow down in luxury expenditures.
A closer look at the latest index reveals that structural changes are taking place in the luxury consumer market, with affluent consumer confidence splitting according to income.
Those with incomes of $250,000 or more, the “ultra-affluents” representing the top 2 percent of U.S. households, increased their spending on luxury by 22.6 percent, while the “aspirational affluents,” those with incomes between $100,000 and $249,999, increased their spending by only 1.9 percent from the fourth quarter 2009 to first quarter 2010.
According to Tom Bodenberg, chief consumer economist for Unity Marketing, luxury consumers are more committed than ever to saving over the next 12 months, with some 46 percent of luxury consumers saying they will save more, as compared with only 29 percent who expect to spend more on luxury in the next 12 months.
“The aspirational affluents which make up some 21 million households are going back to acting like middle-class rather than luxury class consumers,” Danziger said in the report. “This shift will have significant impact on luxury marketers and retailers’ revenues over the next six to nine months.”
Marketers should be cautious about their prospects over the next quarter or two, Danziger said, but they should also know that spending by the ultra-affluents is alone not enough to sustain the luxury market. In order to generate real growth, marketers and retailers are going to have to entice the aspirationals back to spending.
Unity Marketing’s Luxury Consumer Index is calculated from the results of Unity Marketing’s quarterly Luxury Tracking Survey, which measures affluent consumers’ spending and brand preferences in a survey of 1,200-plus affluent consumer households.