Stevens, PA May 5, 2010 – Unity Marketing's exclusive Luxury Consumption Index dropped back from 86.9 points, the highest level reached since September 2007, to 77.6 points. Commenting on the backward slide the LCI, Pam Danziger, president of Unity Marketing said, "The rise in the index back in January was a result of new year optimism. Even though the index dropped 9.3 points in April, it is still higher than it was in October 2009. Thus there is every indication that the recovery as measured by luxury consumer confidence is slowly but surely on track. Yet the decline does predict a slowdown in luxury expenditures."
The LCI is calculated from the results of Unity Marketing's quarterly Luxury Tracking Survey, conducted April 6-10, 2010 among 1,245 affluent luxury consumers (avg. income $331,500; age 45.6 years; 42 percent male/58 percent female).
Split occurring in luxury market along income lines
The results of the survey highlight important structural changes taking place in the luxury consumer market. Danziger explains, "Affluent consumer confidence is splitting according to income. Those with incomes of $250,000 or more and called ultra-affluents (which represent the top 2 percent of U.S. households or about 2.5 million households) increased their spending on luxury by 22.6 percent, while the lower income 'aspirational' affluents with incomes between $100,000-$249,999 increased their spending by only 1.9 percent from fourth quarter 2009 to first quarter 2010."
"The aspirational affluents which make up some 21 million households are going back to acting like middle-class rather than luxury class consumers. This shift will have significant impact on luxury marketers and retailers revenues over the next six to nine months," Danziger warns.
"The latest luxury tracking survey shows that the ultra-affluents are spending at pre-recession levels, while the aspirational consumers are holding back. But even with their exuberant amounts of spending, the ultra-affluents can't sustain recovery in the luxury market alone. In order to generate real growth in the luxury market, marketers and retailers are going to have to entice the aspirationals back to spending. So far aspirationals are holding back."
Commenting of the latest survey results, Tom Bodenberg, Unity Marketing's chief consumer economist, said, "Right now the luxury market is at a pivotal point. On the positive side is the recent good performance of the stock market which reflects an underlying optimism of the future prospects of the economy. On the other hand luxury consumers are more committed than ever to saving over the next 12 months. Some 46 percent of luxury consumers say they will save more, as compared with only 29 percent who expect to spend more on luxury in the next 12 months. Unless affluent's incomes rise, more saving will mean less money to spend on luxury goods and services."
Danziger concludes, "While there is reason for optimism in the current luxury consumer survey, we advise marketers to remain cautious about prospects for the next quarter or two. After all only 22 percent of the affluents surveyed believe the recession is over, so affluents are still exerting discipline over their spending."
For more information about the Luxury Consumption Index and the results of Unity Marketing's latest survey of affluent consumer spending. Get more information here.