In the Current Economy, the Highest-Income Affluents Have Cut Their Spending the Most
In the latest luxury consumer survey conducted after the stock market implosion Unity Marketing found that the ultra-affluents are changing their luxury lifestyles
By Pam Danziger
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.