The worldwide economic crisis is having a profound and widespread impact on the luxury market, according to a recent survey of affluent consumers.
“Few luxury brands are going to weather this global economic crisis with impunity,” says Pam Danziger (pictured), president of Unity Marketing research firm.
The Stevens, Pa.-based firm, which specializes in the luxury market, conducted its first survey of the luxury consumer mindset since the bailout and historic stock market decline on Oct. 3. The survey of 1,200 affluent consumers at the top 20 percent of U.S. households (average income $209,500) was field Oct. 3-8.
Danziger said the results show that “The majority of affluents are changing their shopping behavior in response to the current economic climate. In particular they are shopping less often and shopping more strategically by making lists, comparison shopping and doing their research before venturing into the stores. These new shopping patterns are going to put additional pressure on struggling retailers who traditionally have looked to the upper-income shoppers to bolster their revenues.”
The average amount consumers spent on luxury remained flat from the second to third quarter, according to the results of Unity Marketing’s Luxury Tracking Study for the third quarter of 2008. However, in 15 out of 21 product and service categories studied, luxury consumers spent more on average in the third quarter as compared to the previous quarter.
“The fact that total spending remained flat but luxury consumers spent more on average in 15 different categories indicates that affluents are buying luxuries more selectively and more carefully,” Danziger said. “They are still spending—and spending quite generously—on those choice luxury items they decided to splurge on, but they are splurging on fewer items overall.”
Danziger added, “Because affluent shoppers are staying out of stores to resist temptation, retailers must offer shoppers new in-store experiences they simply can’t ignore, like the cash-back gift card sale going on now at Bergdorf Goodman.
She says luxury brands need to look strategically at their product lines and price ranges, since these wealthy customers are saving money by choosing to buy fewer premium brands.
“So a luxury brand that offers more accessibly priced alternatives, like Vera Wang Lavender Label or the Akris Punto brand, can keep their customers from trading-down to another company’s brand,” she said.
Danziger also noted that brand managers also need to boost the “value messaging” in their marketing efforts to help these consumers justify the expense of paying a premium for their brands.
“For today’s resistant affluent shopper, luxury brands that focus their marketing messages on quality and value, rather than on image or status, will attract careful shoppers. In other words, luxury brands need to sell the ‘steak’ once again, not just the sizzle.”