We asked John McAteer, Google's retail director, to fill us in:
Q: What are the biggest misunderstandings that marketers and retailers have about millionaires?
A: There's this deep-seated conviction that the wealthy are very idle people--a sort of "ladies who lunch" crowd. They often don't understand just how time-poor their rich customers are--90% of millionaires in our survey work, and often at very demanding jobs.
Q: So when do they shop?
A: Whenever they have time--and usually on the Internet. Nearly all of the millionaires interviewed--94%--say they have made a luxury purchase online in the last six months. And you have all these high-end stores spending so much to create a great in-store experience, yet 56% of the millionaires actually prefer shopping at a retailer's Web site to visiting the store. Millionaires are also more likely to use department store Web sites and luxury brand Web sites than affluents.
Q: How else are they different from affluents?
A: We were surprised by just how much information they wanted online. Just over 90% of millionaires say they always or often read other customers' reviews online, for example, compared with 68% of affluent shoppers. And online advertising had an impact on 93% of millionaires' clothing purchases, compared to 62% of the affluents.
Q: How do they decide what to buy?
A: The Internet is the leading influence, with 82% of respondents saying they use it. Word-of-mouth comes in second, with 78%, and magazines next, at 68%.
Q: Sales have been declining at even the swankiest stores, and consumer confidence has fallen to an all-time low. How shaken up are these shoppers?
A: We know these high-end customers are cutting back just as everyone else is. And while they haven't lost more money than middle-class consumers in the last few months, as a percentage of wealth, the dollar amounts are obviously much greater.
Q: Will these affluent shoppers pull back even more?
A: We're pretty much in uncharted water, and that's what makes this even more of a tenuous selling season.
Q: But cutting back is relative, right?
A: Yes. Internet shoppers who are affluent spend approximately $60,000 a year on luxury goods. Millionaires spend more than three times that amount--about $200,000.
Q: Are luxury retailers misreading their customer base?
A: To a degree. For example, if you ask an affluent shopper what great customer service is, they'll talk about things like convenience and flexibility. If you ask retailers, they often think it's whether a customer gets a friendly greeting. Editing is another example. Certainly, people who believe they have a sense of style want to shop at a store that also has a sense of style. But they want breadth--they want some editing, but they want choice and breadth, too.
Q: What can retailers do?
A: To a degree, retailers are stuck--they've already made the capital expenditures on inventory, and they have to move it off the shelves. And it's clear we're seeing promotional activity and markdowns much earlier in the season than we have in the past.
This audience is motivated by markdowns, too. People who have money often have it for a reason--they got it because they're smart. They're going to shop and compare for lots of traits when they go shopping, and price is more of a consideration this year than it has been in the past. It's probably more important to include a range of price points--even a value option--in merchandise selections.
Q: What kind of marketing changes should these brands consider?
A: When you have less to spend on marketing, and consumers have less to spend on your product, it's more important than ever to spend your money as efficiently as possible, and get the best ROI. If you know consumers are looking for your products online, make sure you're reaching them there.