The behavior of luxury consumers has become more value-driven as an effect of the 2008 recession and has perhaps become less ostentatious in the wake of the emergence of the "Occupy" movement, according to luxury consumer research firm Unity Marketing.
So what do high-income buyers of luxuries - including luxury home furnishings, appliances and decor - want in 2012?
"This new affluent customer is keen on finding value when they shop so they look to maximize their investment in spending," said Unity Marketing President Pam Danziger. "They expect the goods and services they buy to deliver the maximum return on their 'luxe' investment. Luxury marketers must make sure their brands give these customers a high yield when they buy."
Even as some luxury clothing and accessories brands report record profits, U.S. luxury consumer confidence and spending is in decline, according to a Unity Marketing survey.
"Luxury consumer confidence as measured in the Luxury Consumption Index (LCI) took a deep dive to levels not seen since the recessionary period of 2008 and 2009," said Danziger.
Corresponding with the decline in luxury consumer confidence was nearly 15% drop in the average amount spent on luxury in the fourth quarter of 2011. This result comes from a Luxury Tracking survey conducted Jan. 7-18, 2012, among 1,333 affluent luxury consumers with an average income of $286,300.
"Looking over the course of the last two years, the LCI lost more than it gained. At the start of 2012 the percentage of luxury consumers expressing a definite willingness to spend more on luxury (one of the major components of the index) was down," Danziger said.
Tom Bodenberg, Unity Marketing's consumer economist, characterized these consumers as "non-committal."
"There appears to be a trend of non-conspicuous consumption - perhaps as fallout from the 'Occupy' movement, among North American luxury consumers," Bodenberg said. "The buying behavior will shift to an almost 'hidden' form of consumption of luxury goods - where ostentation is minimized. The actionable demand for luxury goods and services, on the whole, is flat and still substantially below the levels of two to three years ago. What is interesting is that this apparently 'recession-proof' segment of the marketplace has also been greatly affected by the downturn."
Bodenberg added: "Media reports of a 'renaissance' in the luxury market appears to be limited to an extreme top tier of consumers, a small number compared with the bulk of the luxury marketplace potential."
Danziger said the recent survey, focused on the top 20% of U.S. households, finds many of the customers who indulged in luxury purchases pre-recession do still have cash in hand, "but now shy away from these extravagances."
Danziger added: "Marketers need to recognize these customers are thinking more like investors when shopping for high-end goods than consumers. If your brand doesn't deliver a suitable return on investment, they'll turn to competitive brands that will give them high quality without such an extravagant investment."
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