September 26, 2011
Approximately 32 percent of affluent consumers in the United States plan to cut back on key revenue drivers for luxury brands, especially jewelry, custom apparel, handbags and watches, according to the Wealth Survey from the Luxury Institute.
Sixty-four percent of survey respondents said that the prices of luxury goods are too high and do not deliver enough value, which is why consumers are spending mainly on practical purchases. Despite this, affluent consumers reported that they planned to spend money on luxury travel and technology in the upcoming year.
“It’s all about experiences,” said Meera Raja, marketing manager of the Luxury Institute, New York. “Travel is not about flaunting your most recent extravagant purchase, but it’s about partaking in a unique experience and spending time with your loved ones.
“Wealthy consumers are spending, but spending more practically, so companies that provide relevant and personalized customer experiences will be rewarded,” she said.
The Luxury Institute produced "The Wealth Survey: The State of the Luxury Industry According to U.S. Consumers 2009-2011."
The company surveyed wealthy U.S. consumers who make at least $150,000 per year about their attitudes towards luxury brands and future spending plans.
Losing luster
The Luxury Institute found that consumers are still planning to cut back on luxury spending in 2012, although this group is smaller than it was in 2009.
For example, during the same time in 2009, 45 percent of wealthy respondents planned to decrease spending on luxury goods. This year only 32 percent plan to cut back.
In addition, one-third of affluent consumers reported spending less on luxury goods and services in the last few months due to the current economy.
Contrastingly, 10 percent of affluent respondents reported spending more on luxury goods in the past few months.
Still, more than half of the wealthy consumers reported that they have been spending more practically on luxury items in the last year.
In fact, 39 percent of the affluent consumers said that they have only been buying products and services they need, not what they want.
Of those affluent consumers surveyed, 39 percent said they have cut back on luxury jewelry spending, and 34 percent said they have cutback on custom apparel.
Additionally, 33 percent of consumers reported cutting back on luxury handbags and watches.
Consumers indicated that prices of luxury goods were too high, and 28 percent of respondents said that discounts on luxury brands enticed them to buy luxury goods.
Going the distance
Despite the less-than-positive answers in terms of planned luxury spending, there are still affluent consumers who are willing to spend the money for goods and services that will provide them with an experience.
For example, 18 percent of consumers plan to spend more for luxury travel, which is the highest percentage for any industry.
Indeed, luxury hotels have been upping their marketing campaigns and, in some cases, completely rebranding to give their company a boost in the eyes of consumers.
For instance, the Ritz-Carlton is now asking its guests to let the brand “stay with them” through a multiplatform brand revitalization (see story).
In addition, Starwood Hotels & Resorts recently initiated the first new branding campaign in three years for its Luxury Collection hotels (see story).
Affluent consumers also reported that they plan to spend more money on technology in the upcoming year.
Overall, the study found that many affluent consumers are still reeling from the effects of a weak economy and have been deterred from luxury brands that did not uphold high standards.
“Wealthy consumers worldwide are feeling that luxury brands are becoming a commodity," Ms. Raja said. "Many believe that the design, value, quality and craftsmanship of luxury products are decreasing.
“Marketers need to focus on the products themselves and the foundation upon which their luxury brands were built,” she said.
Final Take
Kayla Hutzler, editorial assistant on Luxury Daily, New York
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