Survey: Top 2% Have Cut Spending the Most

“Ultra-affluents,” who represent the top 2 percent of U.S. households, are changing their lifestyles and shopping behavior, according to a recent study taken after the stock market implosion.

On a year-to-date basis, the ultra-affluent consumers (incomes $250,000 and above) have cut their spending on luxuries by nearly 20 percent, according to Unity Marketing’s Luxury Consumer Tracking Study.

By comparison, luxury consumers with incomes from $100,000 to $249,999 cut their spending by some 10 percent in the first three quarters of 2008 vs. the same period in 2007, according to the survey of 1,161 luxury consumers taken Oct. 3-8 by Unity Marketing, a consumer insights firm that specializes in the luxury consumer mindset.

On Sept. 29, the Standard & Poor’s 500-stock index, plunged almost 9 percent, its third-biggest decline since World War II; while the Dow Jones industrial average fell nearly 778 points, or 6.98 percent, to 10,365.45.

“The results of the most recent luxury tracking survey challenge the conventional wisdom that the most affluent are immune to economic ups-and-downs,” says Pam Danziger (pictured), president of the Stevens, Pa.-based firm. “This time the ultra-affluents are being hit in the source of their wealth:  the value of their homes and their stock portfolios. In a sign of their pain, some 44 percent of ultra-affluents said that the value of their investments have decreased by 25 percent or more and 31 percent said the value of their homes have dropped by 25 percent or more. Nearly half said that their financial situation is worse now than it was three months ago.

Danziger added, “In a dramatic reversal of the ‘wealth effect,’ half of the ultra-affluents said they are spending less on luxury now as compared with twelve months ago and 55 percent expect to spend less on luxury in the next twelve months.”

About half of the ultra-affluents surveyed said they are saving money by:

* Shopping more strategically, such as preparing lists, researching purchases and comparison shopping.

* Going shopping less frequently.

* Reducing the number of times they dine out.

* Cutting their spending on personal fashion purchases, such as shopping sales, visiting outlets, and opting for less premium brands.

“It is not all doom-and-gloom for luxury marketers,” Danziger said. “The latest research shows that the luxury consumers are still indulging in their favorite luxury brands. What is changing is that they are being more selective in the luxuries that they buy. For example, instead of splurging on a whole new outfit including a dress, handbag, shoes and piece of jewelry, the newly frugal ultra-affluent shopper will treat herself instead to just one item, be it the handbag, a new pair of shoes, or the dress — which ever one really grabs her fancy. 

She also said the latest survey emphasizes how luxury brands need to stay connected with their customers and understand the dramatic changes in attitude and mindset that are taking hold among the ultra-affluents.

“By understanding their customers better than their competitors, luxury brands will be able to weather the current economic storm,” she said.