Global luxury market trends continue to be the subject of wide speculation in mass media. According to www.jckonline.com , Jim Taylor, vice chairman of the Harrison Group, presented results of the annual "Survey of Affluence and Wealth in America, 2010," produced by his company and American Express Publishing, to 200 luxury executives during the American Express Publishing Luxury Summit in Las Vegas.
As JCK Online says, the survey showed that wealthy consumers’ luxury spending may reach $28 billion in 2010.
94 percent of affluent households ($125,000-$249,000 annual discretionary income) believe we're still in a recession.
60 percent of those believe the recession will last at least another year.
70 percent of survey participants are still concerned about financial security.
26 percent still believe they could lose their job.
20 percent believe their company won't survive or is in jeopardy.
38 percent worry they could run out of money.
Other findings include:
Wealthy families (minimum annual discretionary income of $500,000) are not shopping because it makes them happy but because they're happy. Shopping is an expression of this happiness. "This is a revolutionary reversal," said Cara David, a senior vice president at American Express Publishing, who presented the findings with Taylor.
Only 27 percent of wealthy baby boomers say they've achieved their dreams. Nearly 40 percent say their careers have stalled.
Market categories such as travel, fashion, and finance have become highly segmented. Affluent and wealthy Americans spend most of their disposable income in one category, David said.
Taylor said luxury sales fell by 10 percent in 2009 because of the following:
About $1.1 million affluent households were lost. About half (500,000) have returned. "It's important to realize people didn't stop buying luxuries because they didn't like luxuries," Taylor said. "It's because a million people lost their jobs."
About 12 to 18 percent of households surveyed became "extreme savers."
Joining the affluent in job loss and insecurity are upper middle class households (discretionary income of $100,000-$125,000).
“As we start to see the end of this recession – and I know not everyone believes it is over – there is a lot of speculation about whether there is a “new normal” for consumers,” Rob Bates of JCK Online writes. According to him, the Gallup organization, for example, believes so …
[We see] a fundamental shift in the way people spend and save. Even in an improving economy, we may discover that many consumers have permanently altered their shopping habits.
There are two schools of thought on this: The first is that consumers are so shell-shocked after the last two years that their shopping habits have indeed changed. And if consumer credit stays tight, they may have no choice.
The second view is that this shift is just part of the normal economic cycle: During recessions, consumers cut back on luxury purchases, for obvious reasons. But eventually things will return to “normal” once the economy improves. Our culture has not changed significantly over the past few years to make a change in how Americans view consumption.
I lean towards the latter view, says Bates, and the better than expected retail sales in March seem to back that up. That said, there are some fundamental ways consumers are different now, and will be different in the future. These changes are not completely related to the recession, but it has perhaps given them additional steam:
- More informed, choosy, comparison-shopping consumers. (This has been talked about for at least as long as I’ve been doing this. But it’s more prevalent than ever.)
- More cyber-shopping.
- More socially aware consumers.
- A trend towards items that hold meaning for the wearer, rather than are just symbols of status. (Not that status symbols will go away. Just “meaning” will be more important.)
- More knowledge about companies and brands. For example, I can not only buy Apple products, but can read long dissertations on its business model, learn the life story of the CEO, and even see updates about his health. It took me about a minute to find information on their mark-up. This puts even more pressure on companies to behave in an exemplary way.
Just 10.3% of Americans are more willing to buy luxury items such as jewelry, watches, handbags, perfume or cologne than a year ago, according to the latest American Pulse survey of 5,079 Americans, as reported by www.israelidiamond.co.il.
When asked the question, “Given the current economic situation, what does ‘luxury’ mean to you?’, some 36.2% of respondents chose ‘being able to pay my bills on time’, while 29.6% opted for ‘making a purchase at a high-end retailer rather than a department store’.
The survey found that 74.1% of Americans say they are living a simpler life – spending less, being more frugal, not trying to keep up with the Joneses – as a result of the recession.
