Even The Rich Feel Pinched, Await New Presidential Leadership
Unity Marketing's Luxury Consumption Index fell to 54.4 points--its lowest ever--with 41% of luxury consumers reporting that they plan to spend less on luxury goods in the year ahead.
Unity, a firm specializing in marketing to affluent consumers, says the latest drop of 9.1 points this quarter follows a steep decline (23.8 points) at the close of the fourth-quarter 2007. While the confidence index first began to tick downward last March, evidence of plans to curtail spending didn't crop until later in the year. Now, the company says in its study, "we expect luxury consumers to be conservative in their spending at least until the Presidential election when new leadership may provide an emotional lift."
What that means for marketers is that these consumers are going to be more resistant to luxury messages. While 41% of luxury consumers say they expect to spend less on luxury in the next twelve months, only 13% expect to spend more. And 71% say the overall financial health of the country is worse now than it was three months ago.
While the good news is that the index detected an uptick in home luxury good spending, which it says may indicate that the decline in confidence is bottoming out, there are other signs that those catering to the affluent are feeling a little pain. An AP report says that Blake W. Nordstrom, president of Nordstrom, which has been one of the strongest performing luxury chains, took a 36% cut in compensation last year.
For marketers, the trick is providing luxury goods so compelling that well-shod consumers just can't say no. JustLuxe.com recently introduced LuxeConcepts, for example, which combines a personal-shopping twist with its Web offerings, personally introducing a prospective buyer to the specific vendor, whether it's a $220,000 yacht charter to the Greek Islands or a $6,500 handmade handbag from a world-renowned designer.
The site has about 500,000 unique visitors, and Gilbert Gautereaux, president of LuxeMont, a vertical media company with a community of upscale web sites, including JustLuxe, says he expects revenues to increase 40% this year.
While Unity's study focuses on consumers earning $100,000 plus per year (with an average income of $173,400 and age of 45.9 years) Gautereaux says he's seeing signs that the really rich--the 1% or so of the population earning $1 million or more per year--are also feeling constrained, but in different ways.
Even millionaires are delaying their purchases, he says. "That seems particularly true if much of their wealth is based in real estate," he says, adding that people don't seem that nervous about the stock market's volatility. "I think at this level, people really understand the ebb and flow of markets, and their portfolios are pretty well balanced." At its JustLuxe.com, for example, travel continues to be the most searched and purchased area, followed by yacht charters, and private aircraft.
And even among the very rich, with $15 million or more, he says that while spending isn't down, people are tending to behave a little more conservatively around their splurges, "perhaps as much due to the green movement as the economy," he says. "We've seen private jets repositioning themselves as tools, not toys--appealing to consumers on the time versus money equation, for example."