April 18, 2011
Despite the recent economic crisis, luxury retail spending has gained momentum as affluent U.S. consumers continue to regain confidence, according to a survey from American Express Publishing and Harrison Group.
Luxury consumers are expected to spend an extra $26.6 billion on luxury goods this year. According to the sixth annual American Express Publishing and Harrison Group survey, spending on luxuries, excluding cars and travel, is set to rise 8 percent to $359 billion compared to 2010.
“The key finding is that affluent Americans have emerged from the recession happier, more confident people who have become adept at discerning real value in the products and services they acquire,” said Cara S. David, senior vice president of corporate marketing and integrated media at American Express Publishing, New York.
“This puts more pressure on brands,” she said. “As their spending intentions increase, the number of factors they consider as they prioritize these decisions has increased – family, health, finances, purchase intentions and image all play a factor, in varying degrees.
“Family is first, image is last.”
The Survey of Affluence and Wealth in America polled more than 1,800 individuals with a household discretionary income of more than $100,000. The four groups in the survey – upper middle class, affluent, super affluent and wealthy – represent 10 percent of the U.S. population.
Worry wart no more
The survey found that rich families save an average of a quarter of their incomes annually, and 34 percent of respondents said they were looking forward to spending more money this year.
While nearly three-quarters of respondents are very optimistic about their own future, only 30 percent share that optimism about the future of the United States, per the survey.
The survey reveals that the more money the respondents have, the less anxious they are.
In addition, the survey found that 70 percent of respondents are high-tech consumers, preferring to make purchases online versus the 30 percent who prefer shopping in-store
The high-tech shopper makes more money through logical purchasing via a passion for the Internet, the ability to comparison shop and transparency, according to the American Express Publishing survey,
“As it relates to the luxury retail market, most transactions are still made in the retail environment, face-to-face with the brand representative – stress-free, hassle-free, balanced interactions are key,” Ms. David said. "Which brings us to the other surprise – the low scores affluent Americans give sales personnel.
“This is a really big issue for retailers,” she said. “Affluent Americans are taking more of the decision-making into their own hands because they don’t believe they can trust salespeople to know enough about the products to help them decide.”
Science of shopping
The American Express Publishing survey delved into the psychological aspect of what motivates purchasing pathways.
Purchasing decisions are driven by specific needs, in which 57 percent of respondents were replacing something, 35 percent said they were upgrading an existing piece and 25 percent said they were purchasing something for a specific occasion.
The survey also found that 71 percent of respondents choose to make a purchase from personal experience, 37 percent from family and friends and 35 percent from point-of-sale elements such as salespeople and the in-store experience.
What should luxury retailers and brands take away from this survey?
Ms. David said they need to invest in their face-to-face salespeople and associates.
“At the end of the day, affluent consumers are vying for margin dollars – kind of a tug ‘o war with the brands,” Ms. David said. “Every dollar they save is thought of as profit – assests retained.
“Salespeople on the frontline are your best defense against margin erosion, articulating the details of distinction that are a necessary component of the value proposition,” she said.
Rachel Lamb, Elizabeth Zelesny, editorial assistants on Luxury Daily, New York