In the final installment in our series about what economic trends may bring for the U.S. in 2009 and beyond, Pam Danziger, president of Unity Marketing, explains how the luxury markets are faring during this recession. She explains how this recession is different from past bumps in the road, and what jewelers should be doing to weather the current downturn.
(Watch our previous installments: Michael Niemira, the chief economist for the International Council of Shopping Centers (ICSC), discusses changes in the retail landscape and consumer spending, and the timeframe for recovery in the U.S. Gerald Celente, founder of the Trends Research Institute, in two parts: Part 1 and Part 2.)
Unity Marketing's latest survey of affluent consumers finds some reason for optimism. For the first time in nearly two years, there is evidence that the recession may be moderating among the affluent. But luxury goods marketers should not celebrate yet; the evidence also shows that affluent consumers are changing their patterns of consumption, and these changes may outlast any economic downturn.
Unity Marketing's exclusive Luxury Consumption Index (LCI) continues to drag after hitting an historic low in the third quarter of 2008. In the latest survey of 1,034 affluent consumers, whose average income is $207,000, the LCI showed a very slight improvement of 1.5 points. The in-depth survey was conducted April 3 to 8, 2009 and included questions about the consumers' financial situation and luxury lifestyle, as well their as luxury purchases and spending in the past three months.
Danziger said, "We see positive signs in the latest reading of affluent consumers' financial prospects. Specifically, affluents are beginning to feel somewhat better — or more correctly, less badly — about their personal financial situation now as compared with three months ago. Likewise, they feel the country as a whole is moving in a more positive direction than they did three months ago.
"Affluents are beginning to feel somewhat more optimistic about their future financial situation in the coming twelve months. This more positive long-term perspective is especially important since one-fourth of the affluents said their personal financial situation had declined significantly, while 39 percent said their financial situation had declined somewhat in the current economic recession."
Danziger continued, "But despite these positive indications, over 40 percent of all the affluents surveyed said they plan to cut their spending on luxuries in the next twelve months. So we are seeing a long, slow crawl to higher levels of affluent consumer confidence. At the same time, there continues to be trouble ahead for luxury marketers, as the affluents are holding back on their expectations about spending more on luxuries for the remainder of the year."
Commenting on the results of the latest survey, Tom Bodenberg, Unity Marketing's chief economist, said, "We remain cautious about the luxury market's prospects after the recession. It is likely that there will be an uptick in luxury consumer spending once the recession has [run] its course, as some affluents will relieve pent-up demand for luxury goods as a vehicle of lifestyle aspiration and expression. At the same time, the media's focus on 'recession chic' — personal expression that deliberately excludes luxury goods — may leave a lingering distaste for conspicuous consumption and parading luxury labels."
About Pam Danziger and Unity Marketing
Pamela N. Danziger is an internationally recognized expert specializing in consumer insights, especially for marketers and retailers that sell luxury goods and experiences to the masses as well as the "classes." She is president of Unity Marketing, a marketing consulting firm she founded in 1992.
Advising such clients as PPR, Diageo, Google, Waterford-Wedgwood, Lenox, Swarovski, GM, Orient-Express Hotels, Italian Trade Commission, Marie Claire magazine, The World Gold Council and The Conference Board, Pam taps consumer psychology to help clients navigate the changing consumer marketplace. Her latest book, Shopping: Why We Love It and How Retailers Can Create the Ultimate Customer Experience (Kaplan, $27), is in the bookstores now.
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