The up and down trajectory of the LCI measures continued uncertainty among affluent consumers who make up the heavy lifters in the U.S. economy.
Stvens, PA (PRWEB) August 14, 2012
In the third quarter 2012 luxury consumers are increasingly nervous about their financial status, causing Unity Marketing's exclusive Luxury Consumption Index (LCI) to plummet. The LCI measures affluent consumer confidence and has proven a reliable leading economic indicator not just to the luxury consumer market, but the overall U.S. economy.
Along with the drop in the LCI, luxury consumers cut back their level of luxury spending during the second quarter (April-June) by 8.2 percent from first quarter. The decline in spending was even more pronounced comparing year-over-year, down 26.9 percent.
Take Action>> Unity Marketing will host a 30-minute webinar at noon on August 21 to review the latest results of Unity Marketing's Luxury Tracking Survey, including the latest Luxury Consumption Index and what it predicts for the next six months. Register here.
"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 U.S. economy," says Pam Danziger, president of Unity Marketing and author of the book Putting the Luxe Back in Luxury: How new consumer values are redefining the way we market luxury. "Looking back at the past three years, we find that the luxury consumers, particularly the ultra-affluents, unleashed pent up demand for luxury indulgences during 2010, but since then affluent confidence, and their willingness to spend on luxury, has been constrained."
"For example, this past quarter spending by ultra-affluents, those at the top 2 percent of U.S. households, dropped to the lowest level seen since 2008. 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 warns.
Danziger continues, "As for the next six months, Unity Marketing continues to expect challenges for luxury brands to encourage the affluent to trade up to their super-premium goods, especially the lower-income HENRYs (High Earners Not Rich Yet with HHI $100k-$249.9k), 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.
Coach Overestimated their Customers Willingness to Spend--
Don't Let the Same Mistake Happen to You
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 mistep 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. Our latest survey reveals that the affluent consumers believe things are only going to get worse, before they get better," Danziger cautions.
In analysis of the latest downward slide in the LCI, Thomas Bodenberg, Unity Marketing's chief consumer economist, explains, "Several months back, market pundits told us that the 2007-2009 recession had run its course, and that it was only a matter of time before this event would have diffused into the consumer economy. However, this is NOT the case, borne out by consumer sentiment. Two factors are dominant: first is the interconnectedness of our global economy, as economic turmoil in Europe readily translates into uncertainty here. The second looming factor is the upcoming election, whose results will either drive or inhibit consumer sentiment and willingness to purchase."
Unity Marketing has been calculating the LCI since first quarter 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. This quarter's luxury tracking survey, conducted from July 6- 13 2012, took the measure of 1,271 luxury consumers (average income $274.8k; avg. age 44.8 years; median net worth $817k.)
>>Of Special Interest to Political Watchers:
This quarter the measure of the LCI that dropped the most was luxury consumer confidence in the direction of the country overall. Nearly one-third of the affluents surveyed believe the country is worse off now than it was three months ago.
Visit this link to learn more about the upcoming webinar and to register to attend to get the latest news about the luxury consumer, what they are buying and how much they are spending. Plus hear what the forward-looking LCI predicts for the rest of 2012 and into 2013.
About Pam Danziger & Unity Marketing
Pamela N. Danziger is an internationally recognized expert specializing in consumer insights for marketers targeting the affluent consumer. She is president of Unity Marketing, a marketing consulting firm she founded in 1992. Pam received the Global Luxury Award for top luxury industry achievers presented at the Global Luxury Forum in 2007 by Harper's Bazaar.
Pam gives luxury marketers "All Access" to the mind of the luxury consumer. She uses qualitative and quantitative market research to learn about their brand preferences, shopping habits, and attitudes about their luxury lifestyles, then turns these insights into actionable strategies for marketers to use to reach these high spending consumers. Unity Marketing is the voice of the luxury consumer for such clients as PPR, Diageo, Starwood, Tempur-Pedic, Google, Swarovski, Constellation Wines, Luxottica, Orient-Express Hotels, Italian Trade Commission, Marie Claire magazine, The World Gold Council, and The Conference Board.
>>Follow Pam on Twitter @ http://www.twitter.com/PamDanziger
Pam's latest book is Putting the Luxe Back in Luxury: How new consumer values are redefining the way we market luxury (Paramount Market Publishing, 2011). Her other books include Shopping: Why We Love It and How Retailers Can Create the Ultimate Customer Experience, published by Kaplan Publishing in October 2006; Let Them Eat Cake: Marketing Luxury to the Masses-as well as the Classes, (Dearborn Trade Publishing, 2005) and Why People Buy Things They Don't Need: Understanding and Predicting Consumer Behavior (Chicago: Dearborn Trade Publishing, 2004).