Stevens, PA—If luxury spending by U.S. affluent consumers has chilled as some studies have suggested, then it will be incumbent upon luxury marketers to come up with new and creative ways to generate growth.
“Affluents are keeping their heads down and conserving cash in the current uncertain economic environment. They will need extra incentives to encourage them to spend,” says Pam Danziger, president of Unity Marketing and lead researcher on the quarterly Luxury Tracking Study.
According to a Unity Study conducted among 1,269 luxury consumers (average income $264,300) on April 9 to 15, fewer than one-fourth of these luxury consumers surveyed said they expected to spend more on luxury in the next 12 months. More than half said they would spend the same.
“The survey found that spending on luxurygoods and services during the first quarter 2013 was off by nearly 20% from fourth quarter 2012,” Danziger says. “What is even more troubling is the typically high-spending ultra-affluent segment (top 2% of U.S. households by income, starting at $250,000) was primarily responsible for the decline in spending. The HENRYs (“high earners not rich yet,” with incomes $100,000-$249,900), on the other hand, spent slightly more in the first quarter than they did fourth quarter 2012. A pull back in luxury spending by ultra-affluents will be especially challenging for heritage luxury brands, as compared with more accessible and affordable premium brands.”
Luxury Consumers Hoarding Cash Like Corporations?
Under this latest measure of affluent consumer confidence, not only are their expectations for spending stalled at current low levels, the average amount affluents spent on luxurygoods and services during the first quarter 2013 tracked at the lowest levels send in the last two years.
Commenting on the results of the latest survey, Tom Bodenberg, chief consumer economist for Unity Marketing, said, “While one would think that stock market gains should translate readily into greater appetites for discretionary purchases, it appears that consumers may be hoarding cash–just like corporations do. Further, employers and investors are still unsure as to the impact of Obamacare on their bottom lines, let alone to the outcomes of legal challenges to Obamacare in various states. Therefore, expansion—typified by greater hiring—is put on hiatus.”
Danziger believes marketers can help the situation by tapping into new customer segments, deliver new marketing messages through new marketing media and present new product offerings.
“And above all, marketers need to position their luxury goods and services as a value proposition for the customers,” Danziger says.
Unity Marketing will host a 45-minute webinar at noon on May 23 EDT to review the results of the latest Luxury Tracking Survey and what the Luxury Consumption Index projects for the next six to nine months. www.unitymarketingonline.com