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U.S. Affluent Households Adopt Austerity Measures

Luxury Consumption Index Falls to 2008 Level
May 6, 2014 11:51 AM   By Jeff Miller
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RAPAPORT... U.S. retailers that market to affluent households will need to be at the top of their game this year to convince consumers to spend.  Affluent consumer confidence dropped in April to levels that have not been seen  since late 2008, according to Unity Marketing's  exclusive Luxury Consumption Index (LCI). The survey also revealed that affluent shoppers expect to save and invest their financial gains during the next 12 months, as opposed to spending on luxury or high-end goods and services. 

Pam Danziger, the president of Unity Marketing, said,  "The decline in the LCI in April is rooted in a move toward the middle in affluents' attitudes toward their financial status. That is, 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 percent 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 12 months."

Affluent consumers account for about 20 percent of U.S. households, but more than 40 percent of all consumer spending.

Danziger stated that retailers must quickly understand their customers' cautious approach to spending and keep focused on delivering meaningful value to their target audience. "That means we must position our brands, our stores and our experiences as an 'investment' in the customers' quality of life, which will mean greater personal satisfaction and comfort, as opposed to an expense that leaves the customer cash-poor and in a weakened financial position.  So marketers need to focus on how the brand, the store, the services and experiences delivers a return on the customers' investment," she said.

The survey  revealed that affluent consumers today will shop for a specific item, rather than  shop for recreation or inspiration. Unity Marketing added that this austerity trend was also revealed in most recent shopping metrics, with 76 percent of affluents shopping through Internet stores and 68 percent buying from discount department stores or websites,  outranking any other type of retail destination in April.

Tom Bodenberg, Unity Marketing's consumer economist, said, "It appears that a significant portion of the marketplace believes that fiscal conditions, which are the chief drivers behind consumer confidence, are neither improving nor declining.  These conditions translate into reduced marketplace demand, especially for luxury and discretionary spending.   So, we see no upticks, and a decline, as the market is not as optimistic as it was one quarter ago.  But I think this decline may be more due to the influx of a new generation with needs that might not be entirely confirmed, let alone expressed, by luxury." 

Since the great recession, U.S. shoppers, in general, have grown accustomed to expecting less from retailers.  "What makes this time different is that the American economy has been working under lowered expectations for almost seven years, currently.  Seven years of graduating college classes implicitly lowering expectations. Seven years of less-than-full employment and sub-optimization of economic output.  Have the roosters come home to roost?  No, there will still be a marketplace for the material expression of value, worth, identity and aspiration.  It will make marketing even more of a challenge."

Unity Marketing surveyed 1,436 affluent consumers with an average income of $260,100, all of whom  shopped for one or more luxury or high-end product during the first quarter 2014.

 

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Tags: affluent households, consumer, Jeff Miller, Jewelry, luxury marketing, Pam Danziger, spending, unity
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