Confidence among affluent consumers, measured in Unity Marketing's Luxury Consumption Index (LCI), dropped sharply in early April 2014 to a level not seen since during periods of the Great Recession in late 2008 and early 2009.
The tracking data showed affluents went through a recovery period, when pent up demand boosted affluent spending on luxury in 2010 and 2011, but since 2012 spending has slowed as affluents' attitudes turned down.
"The decline in the LCI in April is rooted in a move toward the middle in affluents' attitudes toward their financial status," said Pam Danziger, president of Unity Marketing and lead researcher for the new study How Affluents Shop. "Rather than feeling more positive, they see their financial status neither rising nor falling in the immediate future. As a result, they are in a holding pattern with 61% of the more than 1,400 affluent consumers surveyed saying they expect their level of spending on luxury goods and services to remain the same over the next twelve months, and 22% expect their spending to drop. That leaves a scant 16% inclined to indulge in more high-end purchases."
The survey findings signal the rest of 2014 will be challenging for brands and companies that target the affluent shoppers, who make up only 20% of U.S. households, but account for more than 40% of total consumer spending.
"While the new survey results aren't revealing a doom-and-gloom scenario yet, it does mark a mood toward austerity where affluent consumers will need extra coaxing in order to indulge in luxury spending," Danziger said. "That means when it comes to shopping, the need to find a specific item, rather than a desire to shop for recreation or inspiration, ranked as the top reason why affluents went shopping for high-end goods during the first quarter. That austerity also resulted in internet shopping (76%) and visits to discount department stores or their websites (68%) outranking any other type of retail destination, as measured by both usage and individual shopping occurrences (both average 5.4 shopping occurrences during the three-month study period)."
She concluded, "The fact is, the middle-class, middle-income consumers remain hard hit by the recession, while the affluent have largely regained spending power, but they certainly haven't forgotten what happened and returned to their free-spending ways."
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