October 7, 2010
Luxury consumers are expected to open their wallets and buck projections of meager spending growth this holiday season, according to a consumer market analyst.
While the recession is officially over and household income is beginning to rise, most shoppers are still hesitant to spend at pre-credit crunch numbers this holiday season. However, affluent consumers have shown willingness to keep buying luxury products even in the face of a tepid economy.
“We’re seeing upticks in special areas like computer and automobiles, and luxury consumers are typically more recession-proof than Joe Consumer, so we’d expect to see upticks in the luxury market as well,” said Pam Goodfellow, senior analyst at BigResearch, Worthington, OH.
Holiday hopes
Ms. Goodfellow provided data based on BigResearch’s Consumer Intentions and Actions Survey from September 2010. She said there are five facts marketers need to know about consumers headed into the holiday season, some positive and others less so.
The first good sign for luxury brands is that more consumers are spending more on gifts and fewer shoppers are spending less.
5.3 percent of consumers say they plan to spend more on gifts than last year – a three-year high and up 1.5 points from last year.
Meanwhile, 35.5 percent of shoppers plan to spend less, the lowest rate in three years and a 4.6 drop from September 2009.
The remaining 32.1 percent say they plan on spending the same amount of money on gifts as they did last year, a 3-point increase over last year.
“2010 has broken the trend of consumers cutting back for the holiday seasons,” Ms. Goodfellow said. “Shoppers are showing improvement from the last two seasons, but hesitation lingers.
“This represents more cautious optimism than full recovery,” she said.
Likewise, while consumers are still focused on the practicality of their purchases, they are more likely to use credit cards to augment their disposable income than they have been since before the recession began.
Perhaps the best sign for luxury brands is that the temptation to spend exists.
In particular, automakers and travel and hospitality services should be optimistic.
12.2 percent of shoppers plan on purchasing a car or truck in the next six months, while 13.5 percent of consumers plan to make major purchases on vacation and travel in the same time period, both four-year highs.
Cautious optimism
Still, the news is not entirely good.
Only 27.4 percent of consumers are confident or very confident in the chances for a strong economy, only slight higher than a 12-month low.
That figure represents the lowest consumer confidence has been in September in the past eight years, according to BigResearch.
Additionally, consumers continue to worry about unemployment as it affects themselves, others and the economy as a whole.
“Consumers are cautiously optimistic when it comes to spending for the holidays,” Ms. Goodfellow said. “However, if anything happens to the financial markets, it could put optimism at risk.”
Final Take
Peter Finocchiaro, editorial assistant at Luxury Daily, New York
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