American Marketer


Consumer confidence reaching recession-level lows: study

February 16, 2012



Affluent consumer confidence has dipped as low as seen in the depths of the recession in 2008 and 2009, indicating that luxury shoppers lack commitment, according to findings from a study by Unity Marketing.

In addition, the study found that there was a decrease of 15 percent in the average amount spent on luxury in the fourth quarter of 2011. Indeed, luxury confidence has been up and down for the past few months due to the stock market and warnings of a double-dip recession.

“I think it is really important that marketers not get caught up by the spectacular results that some companies are reporting and conclude that things are rosy in the luxury market across the board,” said Pam Danziger, president of Unity Marketing, Stephens, PA.

“Our study shows luxury consumers are not committed to spending more on luxury goods in the next 12 months, so marketers have to work that much harder to encourage them to buy,” she said.

The latest Luxury Tracking survey was conducted January 7-18, 2012 among 1,333 affluent luxury consumers with an average income of $286,300.

Slippery slope
A number of components may have contributed to the lack of consumer confidence, including the stock market and the correlation between the presidential elections and what it means for the economy.

Luxury brands have been reporting high numbers from 2011 overall as well as the final quarter of last year (see story).

Marc Jacobs

For example, luxury conglomerate LVMH Moët Hennessy Louis Vuitton – which owns famed labels such as Christian Dior, Louis Vuitton, Bulgari and Marc Jacobs – saw a 16 percent revenue increase, reaching $31.1 billion, according to the company.

In addition, luxury retailers Saks Fifth Avenue and Nordstrom saw a 7.8 percent year-over-year increase and a 12.7 percent year-over-year increase, respectively.

However, this may not continue to be the case.

In fact, at the start of 2012, the percentage of luxury consumers expressing a definite willingness to spend more on luxury was down, per Ms. Danziger.

Donna Karan

Upping the ante
However, this may not mean that luxury consumers will not buy.

Rather, that they are noncommittal. This is likely a trend stemming from non-conspicuous consumption, according to Unity Marketing.

To get consumers to start buying again, brands need to step up their marketing efforts to entice purchases and some are already starting to do so.

For example, jewelry brand Cartier took a starring role in the latest episode of CW’s television series Gossip Girl this week, tremendously upping its product placement in front of many impressionable aspirational and affluent consumers (see story).

In addition, luxury brands are expected to use various channels including social media and television to amplify the chatter leading up to and during the Academy Awards (see story).

Meanwhile, others are launching multichannel, international campaigns, such as Michael Kors’ #FallingInLoveWith campaign for Valentine’s Day (see story).

Michael Kors' Valentine's Day campaign on Instagram

“For 2012, I think marketers need to focus on delivering a high return on luxury consumers’ investment in their brand,” Ms. Danziger said. “If they don’t deliver, luxury consumers have many, many viable options that they can buy confidently and affordably.

“But while I am cautious about luxury consumers spending in the luxury goods sector, we see strong growth potential in luxury experiences, notably travel,” she said.