Luxury Consumption Index Stalls, Responding to Mixed Market Signals

Unity Marketing's Luxury Consumption Index stalled at 78.3 points in July 2010 as affluent consumers display uncertainty about prospects for the economy in the next three months. The survey’s founder says this apparent lull in the luxury economy “is reason for concern.”

Significantly more luxury consumers (36 percent) say the country as a whole is worse off now as compared with three months ago—a 5 percent rise, according to the survey of 1,349 luxury consumers was conducted July 3-8, 2010 (Average income $306,700 and net worth $15.2 million; 44.8 years; 45 percent male and 55 percent female).

Value positioning is key for luxury success through third and fourth quarters 2010, says Pam Danziger, president of Unity Marketing, a marketing consulting firm.

“Without a doubt the luxury consumer market is in a much better place today than it was a year or so ago, but the latest survey warns marketers not to ease up or be over-confident that the recession's effect on the luxury market are over,” Danziger said. “Nearly three out of four luxury consumers surveyed believe that the recession continues, which in turn impacts spending on luxury goods and services. Marketers are advised to continue to position luxury as a value proposition, by keeping luxury connotations and image up front in advertising, packaging and service, but communicating in a very subtle, almost one-on-one way, affordable pricing.”

Survey findings in the quarterly survey, include:

* Spending on luxury rose a modest 7.7 percent quarter-to-quarter. Luxury consumer spending, however, rose dramatically year-over-year, up nearly 60 percent from $19,952 on average to $31,665. Unity expects the same trends toward modest quarter-to-quarter spending increases to continue throughout 2010.

* Categories that attracted higher levels of spending among luxury consumers in the second quarter included luxury beauty and cosmetics, high-end cooking tools, men’s luxury clothing and apparel, men’s luxury fashion accessories, home electronics and travel.

* Aspirational affluents (incomes $100,000-$249,999) started to trade up once again to luxury, according to the survey. They increased luxury spending by nearly 30 percent in the quarter, their highest levels of spending seen throughout 2009. High-end clothing, fashion accessories, personal electronics, wine and spirits, and beauty products were the most popular items.

The pace of growth in luxury consumer spending will remain modest over the next two quarters, according to Tom Bodenberg, Unity Marketing's chief consumer economist.

“Affluents still have a lot of uncertainty about the economy which dictates caution when it comes to spending on luxuries,” he said. “We don't expect to see moderation on this cautious attitude until the beginning of 2011.”