Nation's Richest Continue to Cut Back on Luxury Indulgences

Affluent consumers continue to moderate their spending on luxury as they feel the effects of the recession building. Once considered immune to the economic woes that plague middle-and-lower income consumers, the affluents are taking a direct hit in this recession and so are changing their lifestyles to conserve cash, according to Unity Marketing's latest survey of 1,166 affluent consumers (average income $199.2k; age 45.6 years; 61 percent female and 39 percent male) fielded January 6-12, 2009.

In the fourth quarter 2008 affluent consumers spent 6.4 percent less on luxuries than they did in 3Q2008. The segments of the luxury market experiencing the steepest declines in consumer spending were luxury fashion accessories, kitchenware, electronics and upscale home furnishings.

'Unity Marketing's latest survey of luxury consumer purchasing continues to measure weakness in affluent consumer confidence that is causing even the richest Americans to hold off on discretionary purchases,' says Pam Danziger, president of Unity Marketing, a consumer insights firm that specializes in the luxury consumer mindset. 'Specific changes they are making to their lifestyle according to our latest survey are reducing the times they dine out and shopping less frequently. Affluent shoppers are showing a new frugality that may well become a habit once this recession ends.'

Poor Prospects for Recovery in the Luxury Market in 2009

The Luxury Consumption Index (LCI), Unity Marketing's exclusive measure of affluent consumer confidence, stands at 41.7 points in the beginning of 2009, which isn't substantially changed from its historic low of 40.3 points reached at the close of third quarter 2008.

Danziger explains, '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. 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.'

'On the other hand while affluents feel slightly more confident about the economy at large and their personal financial situation, they continue to decline in their expectations of future luxury spending. Further, the affluent also expect to save/invest more in the coming 12 months, so that extra cash that they once would have spent, they are more likely to save in the coming 12 months. 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 explains.

Commenting on what the latest survey means in terms of luxury marketers' prospects for 2009, Thomas Bodenberg, Unity Marketing's chief consumer economist, says, ' 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.

'Further, consumers, even high-income consumers, are allocating spending to 'essentials' like housing, food and healthcare, while cutting discretionary spending. The wide spread promotions offered by retailers has not resulted in significant jumps in retail volume, resulting in continued contraction of the retail sector. Especially impacting affluent consumer prospects through the fourth quarter 2008 and first quarter of 2009 is the rampant restructuring in the financial sector with huge losses of high-paying jobs. Christmas bonuses, which are the heart of discretionary purchasing for luxury goods and services, were reduced or entirely eliminated this past season -- the real bonus employers offered was job retention,' Bodenberg explains.

Danziger to share latest trends in luxury consumer attitudes and spending scheduled for Thursday, February 12 at 12 p.m. est.

To give luxury marketers insights on the effects of the current crisis on the luxury consumers, Pam Danziger will host a webinar to share the results of Unity's latest survey of luxury consumers and what the findings mean for 2009 and beyond. The webinar will be held Thursday February 12 at 12 pm and will last about 45 minutes.

To register for this important update on the luxury market, click this link to the Unity Marketing home page where you can register for the webcast.

Commenting on the upcoming webcast, Danziger says, 'What you will hear in this webcast is a story of change in the luxury market. It is marked by three major trends that are going to result in lasting changes in the luxury market. These trends are affecting:

Psychographics or their attitudes and feelings
Not one of these factors alone could fundamentally change the trajectory of the luxury market in the future. But taken together, we have reached a tipping point where the luxury market that went into this period of economic instability is going to be very different from the luxury market that comes out of this time.'

Register now to get this important update on what is going on in the luxury market today and what is going to happen in the future.

About Unity Marketing's Luxury Consumer Tracking Study

These findings are based upon Unity Marketing's quarterly luxury tracking study which surveyed 1,166 luxury consumers (average income $199,200).

Every quarter Unity Marketing conducts a Luxury Consumer Tracking Study among 1,000+ luxury consumers. Year end statistics from four tracking studies will be compiled in Unity Marketing's Luxury Report 2009 - Who Buys Luxury, What They Buy, Why They Buy.