The well-to-do aren’t feeling all that well.
After sharply reducing their outlays for luxury fashion products during the fourth quarter of 2012, affluent consumers began the year with lower expectations for their own finances, the country’s economic prospects and their own plans for spending in the year ahead, according to Unity Marketing’s quarterly Luxury Tracking Study.
While the total spent on all luxury goods, including automobiles, rose 7.2 percent during the fourth quarter, to $18,940 from $17,662 in the comparable 2011 period, it dropped 18.1 percent from last year’s fourth quarter, when it rose to $23,116. Taking cars out of the equation, the average spend on luxury goods dropped 1.1 percent to $13,472 from $13,617 in the fourth quarter of 2011 and was down a sharper 12.8 percent from the $15,452 registered in last year’s third quarter.
The drop-offs in fashion products were far more marked. The average spend on luxury apparel was $2,018, 25.4 percent below the $2,705 spent in the fourth quarter of 2011 and 24.9 percent below the $2,686 laid out during last year’s third quarter. Fashion accessories spending was down 39.3 percent year-on-year, to $1,715, and off 24.8 percent sequentially. Jewelry spend was $4,128, a 12.2 percent year-on-year decline that was 3.6 percent below third-quarter levels. Watches drew $3,791, down 15.2 percent year-on-year and 11.9 percent from the previous quarter.
“Affluent consumers are starting 2013 with a dismal view of the overall economy and their personal financial situations,” said Pam Danziger, president of Unity Marketing. “This is bound to have a dampening effect on results for marketers that target luxury consumers specifically and the consumer economy in general.”
If there was a somewhat bright spot in the world of fashion, it was in the beauty sector. Fragrance and beauty purchases averaged $1,217 during last year’s final quarter which, while 18.5 percent lower than in the third quarter, was 0.8 percent above the fourth quarter of 2011. Also, in the category of “experiential luxury,” Unity found that spending on salons, spas, massages and beauty treatments rose 45.2 percent to $2,208 from $1,521 in the final quarter of 2011, 26.5 percent higher than in the third quarter of 2011.
The data came from interviews with 1,369 respondents, 61 percent of them female, with average income of $268,700 and median net wealth of $832,000.
Unity explores both recent purchases and the more forward-looking consumer sentiment among the affluent and in this study, conducted during the second week of January, added a question about “recent changes in the tax code, such as increases in payroll tax and tax increases for high earners.” Although 40 percent said they didn’t expect any change in their spending because of tax changes, nearly as many — 39 percent — said they expected to cut their spending from previous levels, while the remaining 21 percent either didn’t know or weren’t sure how they’d react.
Responses to other questions included in the Unity study indicated a deteriorating view of both personal and national finances. The percentage who said they’d spend less on luxury merchandise during 2013 than they did last year rose to 28 percent from 18 percent during the third quarter, and 9 percent of the overall sample indicated they would spend “much less” than in 2012.
The percentage who felt that the country was worse off than it was just three months ago spiked to 36 percent from 24 percent at the end of the third quarter, with 12 percent saying the country was much worse off. The overall percentage who felt the country was better off fell to 29 percent from 37 percent in the last study.
“While the [29 percent] figure is somewhat higher than seen throughout 2011, when it averaged 25 percent, the affluents aren’t particularly confident that the nation’s leadership is up to the challenge of this slow-growth economy facing a rising tide of debt,” Danziger said.
To counteract rising negativity, according to Tom Bodenberg, Unity’s chief consumer economist, marketers need to emphasize the intrinsic value of their products and “reposition luxury goods as a value proposition.”
“The current cultural climate can’t support showy displays of luxury,” he continued. “People with means want to make smart buying decisions and playing up the quality and value of a brand while downplaying the pure ‘luxury’ of it is key for today.”