Market volatility has begun to affect the luxury spending habits of wealthy consumers, according to a recent poll. However, those categorized in the survey as the “Super Rich” will continue to spend as usual.
Consumers with a Net Worth of more than $25 million are likely to continue spending on luxury products and services (including jewelry and watches) as usual through the end of the year, with only 4.5 percent expressing “extreme concern” over the impact of the market on their finances, according to the Elite Traveler/Prince & Associates poll. Those with a Net Worth of $10-25 million indicate that while they are likely to continue to spend in many categories, their “extreme concern” about market volatility rose to 19.2 percent.
However, this concern increased dramatically for those with a net worth below $10 million: up to 52.4 percent of $5-10M net worth and 90.8 percent of $500,000-$1 million net worth, according to the pulse poll. An overall average of 62.2 percent of participants were “extremely concerned” of market conditions.
The same basic pattern applied to those who had already cut back on discretionary spending: 2.3 percent of those with a net worth of more than $25 million; 3.8 percent of between $10 million and $25 million; 18.5 percent of those between $5 million and $10 million in net worth; 48.6% of those with $1 million to $5 million in net worth; and 67.6 percent of those with a net worth of $500,000 to $1 million in net worth. On average, 38.9 percent of survey respondents cut back on discretionary spending.
“This survey is the latest sign that luxury spending by merely affluent consumers is grinding to a halt. Increasingly, the super rich are the most valuable consumers when it comes to high-end goods—and the ones luxury marketers should keep their sights firmly focused on,” said Doug Gollan, editor-in-chief of Elite Traveler, the luxury magazine of the private jet lifestyle.
“We noted some interesting break points in spending behavior,” Gollan added. “Households with a Net Worth of $10 million or more are much less likely to be cutting back and continue to spend on high fashion, watches, jewelry, travel, and other luxury products and services. According to the research, respondents with $5-10 million net worth are anxious and making cutbacks in discretionary spending. Those households with a net worth of $5 million or less are actively ‘trading down’ to a less expensive lifestyle.”
According to the poll, 67.7 percent of respondents said they would need to make “major lifestyle changes” if the market continues to deteriorate.
Broken down, 9.1 percent of those with a net worth of $25 million said they would reassess their lifestyle if the market worsens. This figure increases to 24 percent among those with $10 million to $25 million in net worth; 67.3 percent for those with $5 to $10 million; 77.9 percent of those with $1 million to $5 million; and 94 percent of those with $500,000 to $1 million in net worth.
Break points in spending patterns appeared at $10 million. For those whose net worth is greater spending is projected to remain strong throughout the end of the year. With all the buzz about the housing market, it was those at a break point of $10 million of net worth that answered they are still likely to purchase a non-primary residence by the end of the year: 13.6 percent of $25M+ Net Worth, and 7.7% of $10-25M Net Worth. Below $10M, responses fell below 1%.
The sweet spot for luxury marketers was clearly confirmed at consumers with a net worth of more than $25 million:
* 98.9 percent of respondents said they will spend at least $10,000 on fine jewelry before the end of the year;
* 100 percent said they will spend at least $30,000 on leisure travel;
* 100 percent said they would spend at least $10,000 on fashion and accessories;
* 43.2 percent said they would spend at least $10,000 on home electronics; and
* 38.6 percent said they would spend at least $10,000 on watches.
The poll, conducted Sept. 5-7, looked at the responses of participants in five ranges of net worth ($500K-$1M; $1-5M; $5-10M; $10-25M; $25M+) to 11 questions on how market volatility is impacting their lifestyle and spending habits in 2007.
Pulse Poll results and key findings are at www.elitetraveler.com.