A significant number of wealthy consumers said they will cut back on buying luxury items this year, according to a survey released Tuesday by the Luxury Institute.
A total of 36 percent of respondents said they plan to decrease overall spending on luxury goods and services through yearend, according to the semiannual “State of the Luxury Industry” WealthSurvey. Just 6 percent said they will spend more.
Among the areas that should see above-average increases in spending include leisure travel, dining, fitness and technology, according to the semiannual survey. Meanwhile, categories vulnerable to further retrenchment are led by jewelry, followed by home furnishings, gifts, watches, handbags, shoes and cars.
The Luxury Institute surveyed U.S. consumers earning at least $150,000 per year—$286,000 average household income—and with an average net worth of $2.7 million.
About 20 percent of wealthy shoppers say that they plan to spend more on “discounted” luxury goods and services for the remainder of the year; 25 percent have already been spending more on discounted luxury in the first eight months of 2010 than they were in 2009.
The most frequently cited qualities that define luxury—superior quality (76 percent), craftsmanship (65 percent), and customer service (57 percent)—are the areas where wealthy consumers are finding the greatest dissatisfaction. About 56 percent say that craftsmanship of luxury products is on the wane; 51 percent say that quality is decreasing; 50 percent notice a slippage in customer service quality; and 48 percent say that luxury products are losing their design value.
“The greatest danger for a luxury firm is to lose its status as a differentiated, premium brand, but wealthy consumer perceptions suggest that luxury overall may be in danger of losing its cachet,” said Milton Pedraza, Luxury Institute CEO. “This calls for a renewal of efforts to be unique and exclusive and to execute well on customer service.”
The Luxury Institute, New York, is a ratings, research and Luxury CRM consulting organization that it says “is the global voice of the high net-worth consumer.”
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