High-net-worth consumers plan to spend more on travel, dining and wine, and less on jewelry and handbags, in the second half of 2013, according to a new Luxury Institute survey.
The 2013 State of the Luxury Industry report surveyed 504 consumers with net worth of at least $5 million and minimum annual household income of $200,000 to learn about current preferences and future spending of luxury goods and services for the remainder of the year.
Apparently, rebounding home values and the surging stock market are not spreading to the jewelry and handbag sectors. Jewelry sales may be under some pressure, with 25 percent of the ultrawealthy saying they will spend “less” or “much less” through the remainder of 2013. Twenty percent of those surveyed said they would cut back on handbags.
On the other hand, one-third of respondents plan to increase spending on leisure travel in the second half, making hotels, airlines and cruise operators big beneficiaries of additional spending by the country’s wealthiest shoppers. Restaurants are also poised for a boost, with 20 percent of ultrawealthy consumers planning to spend “more” or “much more” on dining out in the second half, and 19 percent spending more on wine. Additional categories seeing upticks are health and fitness (17 percent) and vacation real estate (17 percent).
Other key findings are that only 20 percent agreed that selling online diminishes their perception of a luxury brand, but over 40 percent felt that brands selling mass-market products, distributing to outlets and engaging in discounting are not true luxury brands. Some 63 percent of ultrawealthy customers agreed that the prices of luxury brands have gotten too high relative to the product value. More than 50 percent also agreed that they are turned off by products with visible and prominent brand logos.
More than 80 percent of respondents said luxury goods are less important in the current economic environment, and 73 percent said luxury goods and services are an extravagance.
About half of those surveyed believe too many luxury brands are manufactured in countries known for producing low-quality products, not treating workers fairly and polluting the environment.
Among the study’s conclusions are that most ultrarich consumers buy luxury goods not to show off, but because they feel they hold value and are a reward for personal success. The ultrawealthy expect value-added benefits such as service guarantees and complimentary alterations. Discounts and value-added benefits appeal to consumers with incomes less than $500,000, the study found. Consumers with a net worth of more than $10 million are most likely to believe that luxury products are becoming a commodity and that the luxury market is oversaturated.
“Even among the wealthiest consumers, luxury goods and services are considered less important in today’s economy,” said Milton Pedraza, chief executive officer of Luxury Institute. “Luxury brands can capture these increasingly discerning ultrawealthy consumers by providing unrivaled quality, craftsmanship and service.”