Affluent consumers continue to moderate their spending habits as the U.S. recession deepens, according to Unity Marketing, according to RAPAPORT. "The affluents are taking a direct hit in this recession and so are changing their lifestyles to conserve cash," the consumer insights firm reported. The 1,166 consumers surveyed, who had an average income of $199,200, told Unity Marketing that they spent 6.4 percent less on luxuries during the fourth quarter than in the third quarter of 2008. Luxury fashion accessories, kitchenware, electronics and upscale home furnishings were the hardest-hit categories.
Pam Danziger, president of Unity Marketing, said, "Specific changes they are making to their lifestyle, according to our latest survey, are reducing the times they dine out, and [they are] shopping less frequently. Affluent shoppers are showing a new frugality that may well become a habit once this recession ends." Unity's Luxury Consumption Index (LCI) stood at 41.7 points at the beginning of 2009, little changed from its historic low of 40.3 points set in the third quarter of 2008.
"The slight improvement measured in the LCI at the end of the fourth quarter 2008 measures a small uptick in affluents' feelings about their current financial situation and their expectations for the country in the next 12 months," Danziger explained. "This may well be a result of the Obama inauguration and hopefulness that the new administration will be effective tackling the problems in the economy."
Unity was quick to point out that affluent consumers expect to save and invest more in the coming year, so extra cash will not make it to the retail counter. "By these measures, we feel the luxury sector of the economy will continue to falter throughout 2009 and be slower to recover than the mid-market as the recession eases," Danziger noted.
Thomas Bodenberg, Unity Marketing's chief consumer economist, said, "If we look at the LCI results in a positive light, the downward spiral in the past several quarters has leveled out. At the same time there are a number of key factors behind the index that continue to moderate the affluent consumers' outlook. For example, the collapse of the credit markets and the inaccessibility of easy credit has hindered the financing of major discretionary purchases. This is hurting the luxury automobile sector especially, as our survey shows that the purchases of luxury cars have declined throughout 2008."
Bodenburg noted that even widespread promotions from luxury retailers have not enticed affluent shoppers to the stores. Rampant restructuring in the financial sector, with huge losses of high-paying jobs and reduced or eliminated bonuses, is at the heart of the drop in discretionary purchasing, he said.
Throwing your money around is so pre-recession, says Associated Press in its report on human behavior in crisis. As the economy weakens, the wealthy and the businesses that cater to them say it's more common — even chic — to scale back extravagant spending and play down affluence. Retailing experts call it luxury shame, or stealth wealth.
From Rodeo Drive to Fifth Avenue, that means one thing: Hide the labels.
Some shoppers are asking cashiers at high-end stores to put their purchases in plain white paper bags. Others want their expensive clothes and jewelry shipped home so they can walk out of the store without any bags at all.
"There's a sense of there being a gaucheness in spending in excess and coming home with a Louis Vuitton or Chanel bag," says Lucyann Barry, a personal shopper and stylist for New York's ultra-rich.
For one self-conscious client, Barry recently delivered a $1,200 Gucci handbag disguised as a gift so the rest of her family wouldn't know she had bought it herself.
Of course, plenty of rich people have become decidedly less so as stocks, homes and businesses have declined in value during the recession. And they're cutting back. Holiday sales were down at Neiman Marcus, Tiffany & Co. and Saks Fifth Avenue.
Despite the slump, the affluent still maintain lifestyles that would seem extravagant to the vast majority of Americans — hundreds of dollars spent at exclusive restaurants, thousands dropped on shopping sprees.
What's different now is the extra care some are putting into making themselves seem more like everybody else.
"I'm trying to be more covert," said Edward Douglas, of Randolph, N.J., who owns a small manufacturing company that he says has so far been unaffected by the recession.
One of his luxuries is vacationing with his family in the Bahamas, and although he still intends to go this year, he's planning on flying commercial instead of by private jet.
Robert Jones, who owns businesses including a nightclub and two restaurants, now spends $400 on a regular hotel room for his family rather than shelling out $1,000 for a suite.
And instead of chartering a private plane for business trips, he's signed up for CoGoJets' "jetpooling" service — the jet-set equivalent of sharing a taxi.
"A lot of us are downsizing not only because we have to, but because we think it is the right thing to do," he said.
At the trendy Intermix clothing store in West Los Angeles, some shoppers are still willing to drop $10,000 on a shopping spree that might bring home a couple of ostrich skin handbags, a pair of shoes and a designer dress.
But instead of walking out with one of Intermix's prestigious shopping bags, they often have their purchases shipped to their homes. They also come to the store dressed down in jeans and a T-shirt, a clerk observed.
"The fashionista is now a recessionista," said Burton M. Tansky, president and CEO of Neiman Marcus, which is throwing more invitation-only events for small groups of its best customers.
The fashion industry itself appears to be waking up to the new subdued shopping mood among the well-heeled. That means more understated colors and prints, says fashion consultant Robert Burke, who has previewed the collections of several major designers that are to be displayed next month in New York.
In Hollywood, a place that usually accepts any excuse to throw a party, holiday gatherings were sparse last year — even among people who could afford them.
And while Hollywood power brokers will still eat and greet at Spago in Beverly Hills or Chinois on Main in Santa Monica, they're less likely to splurge on those $300 bottles of wine.
"People want to look as though they are respectful that this is a recession," said Barbara Lazaroff, who with her ex-husband and business partner, Wolfgang Puck, operates upscale restaurants in Beverly Hills, Las Vegas and other cities.
In the run-up to this year's Golden Globe awards, Daily Variety reported dozens fewer sponsors lined up to hustle their wares at swag suites, those hotel rooms where celebrity nominees drop by to pick up bags filled with thousands of dollars' worth of designer trinkets.
"We have this culture of luxury shame," says Hollywood publicist Michael Levine. "I think it's become kind of shameful to express over-affluence."
But there's another way of thinking about it: Maybe, if the super rich really want to help out their fellow Americans, living a less luxurious lifestyle isn't the way to go. Money dished out on pricey dinners and clothes keeps people employed.
"We better hope they don't stop spending too much," says Milton Pedraza, founder of the Luxury Institute, which tracks spending on luxury goods.
Not to worry, says Barry, the personal shopper and stylist, who has seen firsthand the difficulty wealthy people have in giving up luxury cold turkey.
"Rather than buying six jackets at Chanel, let's say, they may buy one jacket," she said. "There's a big difference in getting out of the car with six Chanel shopping bags and getting out with just one."
