October 26, 2011
Although affluent consumers’ confidence fell sharply from the spring, there has not been a drop in intention to spend during the holiday season, according to findings from a recent study by the American Affluence Research Center.
Consumers are most likely to be spending in-store -- in regular department stores and in specialty boutiques -- and online, which has been steadily gaining share. The rich may still be spending because they still have a positive image of their own personal worth, as opposed to those less well-off.
“We are seeing some pockets of strength, particularly in the wealthiest of the consumers who are really the prime prospects for luxury goods,” said Ron Kurtz, principal of American Affluence Research Center, Atlanta. There are three factors that could be contributing to this phenomenon, according to him.
“The first is that during the recession, there was a large amount of uncertainty about personal compensation that has dissipated for the affluent and they’re feeling more comfortable about their personal situations lately,” Mr. Kurtz said. “People are also at the point of wanting to do nice things for themselves and for others to offset the gloomy environment.
“The third is that brands and retailers are doing whatever they can to coax the affluent and the enhancement of products and services and improved value to get them to spend,” he said.
Participants in this survey consisted of 499 individuals who make up the top 10 percent of wealthiest U.S. consumers.
They have an average household income of $282,000, an average primary residence value of $1.1 million, an average net worth of $3.1 million and average investment-worthy assets of $1.7 million.
Affluent consumers are becoming more comfortable with their spending habits and, in fact, intend to spend more this year than last, according to the research.
For instance, 3 percent of the U.S.’s wealthiest individuals plan to spend more on holiday gifts than last year. Sixty-nine percent expect to spend the same amount and 28 percent intend to spend less.
Approximately 10 percent of consumers that will spend $4,000 or more on gifts plan to spend more than last year. In addition, 51 percent will spend the same amount and 40 percent will spend less.
For both men and women, the top item that they wished to receive for the holidays is some sort of currency, such as a gift card, money or check.
Apparel and accessories are the second choice for both women and men at 33 percent and 42 percent, respectively.
The third choice for women is fine jewelry at 26 percent and books, CDs and DVDs at 23 percent for men.
Another big item this year is tablets.
“These people are realistic about how long it’s going to be before stock market and unemployment returns to prerecession levels,” Mr. Kurtz said. “They’re basically looking at three years or more until we get a real turnaround in those factors.
“Given the negative news that was going on in July and August in the stock markets when the survey was being conducted, the affluent are still relatively positive about spending,” he said. “And, in contrast to what kind of news that was going on in the market and in the environment, it’s somewhat encouraging to see that they still plan to spend.”
Channeling holiday spirit
Consumers will be spending on a variety of channels this year.
The Internet has seen the most share of total dollar value in holiday gift purchasing by the affluent.
The channel is named by half or more of all demographic segments except the highest net worth and older-than-60 groups, both of which are over 40 percent, according to the study. All groups indicate intentions to maintain or increase the share of business given to the Internet in 2011.
Based on total dollar value of holiday gifts purchased, traditional department stores have been losing share to other sources among the total group of affluent households, according to the study. However, they have remained a strong spending outlet for consumers in the highest net-worth group.
Additionally, specialty retail stores have been losing share to other sources among the total group of affluent households, according to the study.
“The thing is, this is a segment of the population which is fairly constant over time,” Mr. Kurtz said. “I know that some would like to say that there are new trends emerging over the years, but that’s over-blowing what those people are like.
“There has been a consistency for 30-40 years about being careful spenders, good savers and are focused on enduring style and fashion and quality,” he said. “They are not ones to jump on any kind of gimmick or new fads in the business.”
Rachel Lamb, associate reporter on Luxury Daily, New York