Blog: Luxuries, just less of them
Leonie Barrie | 17 October 2008
Luxury goods have always been seen to be pretty much impervious to economic ups and downs, but here’s a worrying headline that challenges this conventional wisdom: “In the current economy, the highest-income affluents have cut their spending the most.”
What’s probably the most up-to-date consumer survey to reflect the impact of the stock market implosion earlier this month shows wealthier customers are changing their lifestyles and shopping behaviour to such an extent that they can’t be relied upon to shore up business through the current economic crisis.
The survey by Unity Marketing was carried out from 3-8 October while the US stock market was in free fall. It found that ultra-affluents with incomes of $250,000 and above – the top 2% of US households – have cut their spending on luxuries by nearly 20%.
This compares with a 10% cut in spending by luxury consumers with incomes from $100,000 to $249,999 in the first three quarters of 2008.
So why is the impact of this downturn different? Well this time the ultra-affluents are being hit in the source of their wealth: the value of their homes and their stock portfolios.
Instead they’re saving money by shopping more strategically, shopping less frequently, and cutting their fashion spending by visiting sales, outlets, and opting for less premium brands.
But of course it’s not all doom-and-gloom. They are still indulging in their favourite luxury brands, albeit buying more selectively. Instead of splurging on a whole new outfit they will buy the handbag, the shoes, or the dress, just not all at the same time.
New accessories and handbags will continue to sell, even if customers plan to wear them with last year’s little black dress.
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