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| Pam Danziger |
Luxury consumers in the U.S. cut back their level of luxury spending during the second quarter of 2012 by 8.2 percent from first quarter, according to a recent survey. The decline in spending was even more pronounced when comparing year-over-year, down 26.9 percent.
The Luxury Consumption Index for the April to June period shows that “luxury consumers got nervous about their financial status,” said Pam Danziger, president of Unity Marketing, which runs the quarterly survey of affluent Americans.
“The up and down trajectory of the LCI that we've seen over the past year measures continued uncertainty among affluent consumers who make up the heavy lifters in the overall consumer economy,” Danziger, said. “Looking back at over the past three years, we find that the luxury consumers, particularly the ‘ultra-affluents’ (the top 2 percent of U.S. households), unleashed pent up demand for luxury indulgences during 2010, but since then affluent confidence, and their willingness to spend on luxury, has been constrained.”
Danziger said that spending among ultra-affluents dropped to the lowest level seen since 2008. In addition, nearly one-third of the affluents surveyed believe the country is worse off now than it was three months ago.
“If this key consumer segment for the super-premium luxury brands continues apace, many luxury marketers will have a hard time meeting high comparable sales goals this year,” Danziger said. For the next six months, Unity Marketing continues to expect challenges for luxury brands to encourage the affluent to trade up to their high-end brands, especially the lower-income HENRYs (High Earners Not Rich Yet with HHI $100,000-$249,900), who have taken a hit to their wealth and earning potential as a result of the recession and ongoing weakness in the U.S. economy.”
Danziger points to the recent quarterly release by leather goods maker Coach Inc as an example of a brand that seriously overestimated HENRY customers' willingness to spend. Coach tried to eliminate coupon promotions tied directly to its discount outlets, which are the company's biggest source of revenue, and which attract HENRY customers looking to stretch their dollars. This misstep, she said, led to Coach reporting weak same store sales growth in the quarter ending June 30, which then caused its stock to have its worst day on Wall Street since the 9/11 attacks.
“The number of people willing and able to pay a premium for luxury brands, like Coach, is getting smaller as this weak economy continues,” she said.
Unity Marketing has been calculating the LCI since 2004 based upon five key measures of luxury consumer confidence including their expectations for future spending on luxury, their personal financial conditions and their overall assessment of the economy as a whole, in surveys conducted every three months among over 1,200 affluent luxury consumers.
The Luxury Consumption Index for the April to June period shows that “luxury consumers got nervous about their financial status,” said Pam Danziger, president of Unity Marketing, which runs the quarterly survey of affluent Americans.
“The up and down trajectory of the LCI that we've seen over the past year measures continued uncertainty among affluent consumers who make up the heavy lifters in the overall consumer economy,” Danziger, said. “Looking back at over the past three years, we find that the luxury consumers, particularly the ‘ultra-affluents’ (the top 2 percent of U.S. households), unleashed pent up demand for luxury indulgences during 2010, but since then affluent confidence, and their willingness to spend on luxury, has been constrained.”
Danziger said that spending among ultra-affluents dropped to the lowest level seen since 2008. In addition, nearly one-third of the affluents surveyed believe the country is worse off now than it was three months ago.
“If this key consumer segment for the super-premium luxury brands continues apace, many luxury marketers will have a hard time meeting high comparable sales goals this year,” Danziger said. For the next six months, Unity Marketing continues to expect challenges for luxury brands to encourage the affluent to trade up to their high-end brands, especially the lower-income HENRYs (High Earners Not Rich Yet with HHI $100,000-$249,900), who have taken a hit to their wealth and earning potential as a result of the recession and ongoing weakness in the U.S. economy.”
Danziger points to the recent quarterly release by leather goods maker Coach Inc as an example of a brand that seriously overestimated HENRY customers' willingness to spend. Coach tried to eliminate coupon promotions tied directly to its discount outlets, which are the company's biggest source of revenue, and which attract HENRY customers looking to stretch their dollars. This misstep, she said, led to Coach reporting weak same store sales growth in the quarter ending June 30, which then caused its stock to have its worst day on Wall Street since the 9/11 attacks.
“The number of people willing and able to pay a premium for luxury brands, like Coach, is getting smaller as this weak economy continues,” she said.
Unity Marketing has been calculating the LCI since 2004 based upon five key measures of luxury consumer confidence including their expectations for future spending on luxury, their personal financial conditions and their overall assessment of the economy as a whole, in surveys conducted every three months among over 1,200 affluent luxury consumers.
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