Affluent Americans -- those in households making over $100,000 per year -- may be just 20% of U.S. households, but they represent 70% of consumer wealth. They are also twice as likely to buy things, and spend 3.2 times what everyone else spends.
But since the recession, are the 58 million adults and 24 million households that belong to the affluent category still buying? According to a new survey-based study by Ipsos Mendelsohn, they are, in fact, starting to feel better about the economy after their sentiment dipped to a low in April this year.
"Everything is coming slowly back; I'm not worried about inflation or excesses in the marketplace" were typical survey comments. Most affluents also said they see recovery in a year and a half, with 40% of respondents saying the economy will be back on track by 2013. Fifty-two percent believe they will be better off in a year, while 28% said they will not be, and 20% are unsure.
The study, based on online surveys, also asked affluents to look at the past decade and how their quality of life had changed. The majority -- almost 80% -- said their lives are more intertwined with technology, while nearly 60% said their lives are more complicated and more stressful. About 47% said their lives are "more fun," while a third of respondents said life has become easier. About a quarter said they are more isolated.
"I think that they recognize the pros and cons of technology, but with all that they continue to buy with great enthusiasm," says Stephen Kraus, VP and chief research and insights officer at Ipsos Mendelsohn. Kraus tells Marketing Daily that sales of e-readers and tablets to affluent consumers have doubled over the past six months. "So while they love buying new technology, they recognize that it has made life more stressful," he says.
The study also suggests the blush is off ostentatious investment, and on experiences. Affluent consumers are focusing on travel (72% of respondents) with redecorating and investing in the markets coming in a distant second and third. About 27% said they planned to buy a new vehicle, while only 11% said they will invest in real estate or buy luxury items like expensive watches. Unfortunately for the watercraft market, only 4% said they plan to invest in sailboats and power boats.
Kraus says materialism has been replaced by affluent consumers' desire to spend on experiences. "Back in '05 everyone was getting rich and there was such a joy in consumption and acquisition," he says. "Now, with the future in doubt, the focus has changed. And there is also the importance of family, and family travel. Affluent consumers seek anything that brings families closer together."
And that is tied to the association between stress and connectivity. "The last bastion used to be the airplane, but now you can get Internet on the airplane, so almost the new status symbol is the ability to become truly disconnected," says Kraus.
When asked on a product-category level how their interest in different products will change over the next half year, there was a much bigger uptick in intent among men than women over things like autos, electronics, alcoholic beverages, home and garden, clothing and accessories, personal care and wellness, and insurance. Ipsos also found that men were generally more optimistic than women. But in personal care and wellness, women were more likely to say they would purchase premium brands. They are also spending more time on Groupon.com, Amazon and etsy.com.
The study also found a big behavioral difference between people making less than and those making more than a quarter million dollars a year. For instance, more of those in the $250,000-and-up club are planning to buy and redecorate houses and grounds, invest in fine watches and apparel, and get plastic surgery this year than in 2010.
Kraus says that difference reflects something else about the U.S. economy that has been in process since the middle of the last century: The rich are getting richer and the middle and upper-middle class are disappearing. "Some people have used the phrase 'Tiffany Recovery' to describe what's happening in the high end," he says. "Meanwhile, if you think about luxury back in 2005 and 2006, everyone was talking about the aspirational luxury shopper. But those folks have disappeared and haven't come back, and we don't expect them to come back."
He points out that people making $250,000 and up -- while they constitute 1.5% to 2% of the population -- own a third of the net worth in the U.S., "so even within the affluent range there is a huge concentration of wealth that has grown over the last 30 years."
Even the very wealthy, however, are moving away from ostentatious luxury items as status symbols. Kraus says that although sentiment has moderated somewhat from when the recession first began "and there were anecdotal stories about people going to Bergdorf Goodman and asking for items to be put in plain brown paper bags," people now want luxury brands that are seen as smart.
He notes a new campaign for Ford's Lincoln brand with the line, "It's not just luxury. It's smarter than that." "The Maybachs and Bentleys are not viewed with the same cachet as they were," says Kraus.