America’s most affluent and wealthy consumers live predominately on Main Street, not on Wall Street. They see themselves as being severely impacted by the current real estate and banking crisis. While not totally eliminating luxury purchases, many are becoming more discriminating in what they buy and one of the places they will be cutting back is on jewelry, according to a survey released Thursday.
These wealthy consumers, who account for 10 percent of the population and 50 percent of consumer spending in the U.S., expressed extreme pessimism when it comes to the state of the economy, according to the research by American Express Publishing and Harrison Group, which surveyed 614 wealthy and affluent consumers (those with at least $100,000 of discretionary spending) between Sept. 19 and 23. For example:
* More than 71 percent of respondents said the economic crisis has affected their sense of financial security and the value of their assets.
* Nearly 60 percent said they are now worried about running out of money, including 48 percent of America’s wealthiest families (up from 35 percent in April).
* 75 percent believe the U.S. is in an economic recession. The remaining 25 percent are just waiting for it to be officially determined.
* 55 percent of these respondents said they are optimistic about their future, down from 93 percent in 2005.
* 25 percent are upbeat about the future of America. Down from 60 percent in 2005.
The current survey supplements findings from The Annual Survey of Affluence and Wealth in America (a survey of 1,800 individuals conducted last December by American Express Publishing and Harrison Group), and from similar surveys of over 600 households in April and July 2008. The median income of the sample was $325,000.
“The economic difficulties of the past year have begun to significantly change the way America’s most financially successful families view their future,” said Jim Taylor, vice chairman of the Harrison Group, a Waterbury, Conn.-based marketing and research consulting firm. “The affluent and wealthy … are becoming more thoughtful, getting on top of their spending and worrying more about the future of their children. Nearly half of our respondents are owners of or senior officers in American businesses, so we expect the growing caution to spill over into capital and human resources decisions.”
He added, “What makes the survey a source of concern is that this top 10 percent represents over 50 percent of all retail spending. It is affluent consumers who have kept the consumer economy afloat and whose purchasing is critical to the coming holiday season.”
Categories that are seeing significant reductions in intended spending include jewelry, fashion, accessories and other personal items. At the same time, spending for the family—automobiles, travel, children’s clothing, and home décor—are trending up, even over June numbers.
“We think we are shifting from a value-oriented economy—things we value—to a values-oriented economy—investing time spent with families,” Taylor said Thursday. “The upside of this downside is that people may be thinking more carefully about what it means to be human.”
Cara David, co-director of the study and senior vice-president, Strategic Insights, Marketing and Sales, American Express Publishing, added, “It is also interesting that 20 percent of American families are reducing gift giving so that they can donate to charity this holiday season. These charitable gifts are targeted for families in need, religious institutions and charities focused on health issues.”
Today’s affluent and wealthy are shopping with a new perspective. For the first time this year, there is a decline in enthusiasm for luxury purchases overall. Acording to the survey, half of all respondents now agree that “a few luxuries are important in tough times” (down from 61 percent in April and June 2008).
More than 70 percent of respondents said they are now looking carefully at their spending in luxury categories to see where money can be saved. Eighty-three percent are waiting for something to go on sale before they buy it. Yet respondents are not abandoning luxury. Instead, they are cutting spending within their favorite categories. Only 2 percent of our respondents report eliminating luxury all together. Even in categories experiencing reductions, most respondents are trimming spending by substantially less than 50 percent.
“It is a mixed story,” David said. “People are cutting luxury, but they are not eliminating luxury. Instead of buying the same number of designer dresses or handbags or bracelets, they will buy gifts of greater meaning, but fewer in each category. This will have an effect at the cash register, but it is an effect mitigated by an increasing desire to live a good life, where the good life includes a healthy mix of values-based shopping and giving.”
Survey respondents were asked what they really wanted this year for Christmas. Topping their list is a gift certificate. Second was a book or video. Third was electronic entertainment equipment for the family. Fourth were tickets to an event. Gifts that people expect to buy for others include electronics, apparel, an evening on the town or charity donation, followed by traditional gift items of accessories and jewelry.
“This may be a services holiday where people are thinking about the whole family, with traditional gift giving still reserved for children, or fine piece of jewelry that has sentimental value,” David said.