American Marketer


Low consumer confidence study does not affect luxury consumers

June 2, 2011


Affluent consumers demand customer service

Consumers’ short-term outlook on business, the economy and gas prices have led to a purchasing slump and pessimistic outlook in May, but this may not apply to luxury consumers.

Although spending confidence was up in April, research from the Conference Board Consumer Confidence Index has shown that certain factors in the environment and economy have made consumers hesitant when it comes to spending. However, these factors do not affect the truly wealthy American consumers.

“It’s a variety of factors, because we haven’t had any significant job growth and there hasn’t been robust growth that we’ve been accustomed to after a recession like this,” said Lynn Franco, director of Consumer Research Center, New York. “The high gas prices also accounted for diminishing purchasing power.

“We saw that there wasn’t a huge change in consumer conditions and hasn’t been a change in the pace of economic growth,” she said. “The recession is having a greater impact on consumers who are on a tight budget and influenced by increases in food and gas, while high-end consumers are not very influenced by it and are better financially positioned are more likely to spend."

The monthly Consumer Confidence Survey is based on probability-design random sampling and is conducted by Nielsen Co.

The survey provides information and analytics around what consumers buy and watch.

Comfortable luxury consumers

Although things are looking grim for the average consumer, this may not have any effect on the luxury consumer.

Ron Kurtz, president of the American Affluence Research Center, agrees with Ms. Franco and her analysis of the study.

“The decline in consumer confidence of the general public is not particularly relevant to the luxury industry,” Mr. Kurtz said.

“Only a small portion of the population, perhaps as little as the wealthiest 1 percent of United States households, are the foundation of the luxury industry and they are not that concerned by those issues,” he said.

The Index stands at 60.8 – of 100 – down from 66 in April. Furthermore, the Expectations Index declined from 75.2 from 83.2 last month.

Furthermore, consumers’ assessment of the current economy and conditions are more pessimistic than last month.

For instance, those claiming that business conditions are “good” decreased from 15.5 percent to 14.6 percent, and those claiming business conditions are “bad” increased from 35.9 percent to 37.1 percent from last month.

Consumers analyzing the job market found it was less favorable than last month. An increase from 42.4 percent to 43.9 percent stated that jobs are “hard to find,” where those stating that jobs are “plentiful” went from 5.6 percent to 5.1 percent.

Looking forward

The truly affluent are less likely to worry about economic recessions, as they were never truly affected.

However, studies from American Affluence Research Center showed that wealthy consumers were ready to spend again (see story).

“Our spring survey of the affluent showed they are returning to higher levels of spending and this is showing up in the reported sales and profits of upscale retailers and brands in recent weeks,” Mr. Kurtz said.

Indeed, strong numbers from powerful luxury brands such as Louis Vuitton, Gucci, Saks Fifth Avenue, Hermes and LVMH Moet Hennessey Louis Vuitton showed extremely high numbers in the first quarter (see story).

“Brands should focus on the importance of focusing their efforts on the small segment of the population that can afford and appreciate true luxury products,” Mr. Kurtz said.

Final Take
Rachel Lamb, editorial assistant on Luxury Daily, New York