Luxury Tracking Webinar Trend Update: February 26, 2014 & Executive Summary ($500)
Nation's Affluent Consumers Will Forestall Spending in Favor of Savings in 2014
The "heavy-lifting" top 20 percent express improvement in their personal financial situation yet signal caution about present and future luxury spending
Stevens, PA February 6, 2014 -- Retailers and marketers are going to have to be on the top of their sales game this year, advises Pam Danziger of Unity Marketing. While affluent consumer confidence as measured by Unity Marketing's exclusive Luxury Consumption Index (LCI) rose slightly in early January 2014, the latest survey forecasting spending and purchases among the affluent shoppers shows they are more likely to save and invest any financial gains they accumulate over the next twelve months, rather than pick up the pace of spending on luxury or high-end goods and services.
"In early January the affluents see their personal financial situation improved over the past three months and they foresee continued improvement for the rest of the year. However, only 22 percent of the over 1,300 luxury consumers surveyed expect to spend more on luxury or high-end goods and services in 2014," says Pam Danziger, president of Unity Marketing and lead researcher for the firm's Affluent Consumer Tracking Study (ACTS). "This compares with 28 percent who expected to spend more at the beginning of 2011 and 26 percent at the beginning of 2012. The coming year is going to be challenging for companies and brands that target the affluent heavy-lifting shoppers, who make up only 20 percent of U.S. households, but account for more than 40 percent of total consumer spending. Marketers need to understand the consumers' cautions and position their brands as a value proposition that is an investment in their lifestyle that will deliver greater comfort, beauty and quality." The latest survey was conducted among n=1,335 affluent consumers, with average income of $260,000 and average age of 47.5 years, who purchased one or more luxury or high-end goods and services during the fourth quarter 2013.
Unity Marketing's quarterly ACTS survey measures two tiers of affluents: the ultra-affluents (HHI $250,000 and above) who are the 'darlings' of luxury marketers and the HENRYs (High Earners Not Rich Yet) who are the mass affluent, but rarely if ever 'get any respect' in luxury circles. Commenting on the latest survey, Tom Bodenberg, Unity Marketing's chief consumer economist, explained, "One big takeaway - the market for luxury goods and services consists much more of the upper-middle class (i.e. the HENRYs) rather than the true upper class (the ultras and top 1%). While the purchases of the upper class (mansions, yachts, jets, etc.) may garner far more media attention, their small population translates into a smaller market for luxury. However, there is a much larger market merely one notch down - who have deep aspirations toward emulating a wealthy lifestyle, even if it means some sacrifices will be required in household consumption. But, this market appears to be the one most troubled by current events."
While HENRYs spent less than half as much as did ultra-affluents on luxury and high end purchases during the fourth quarter ($6,547 as compared with $14,994), their significantly greater numbers (21.6 million households) mean that the total value of the HENRY market is about four times that of the ultra-affluent market (2.5 million households at the top 2%). "Marketers have historically felt that ultra-affluents were their ideal consumer, but there simply aren't enough ultra-affluents to keep high-end luxury brands afloat," says Danziger. "Instead, luxury brands need to broaden their reach to include the HENRYs. This creates a unique challenge, as they are now competing with mass market brands that would also like to reach up tap into HENRY spending."
What HENRYs are buying this quarter and what they will buy next
In many key categories of the luxury and high-end market, HENRYs are statistically on an even keel with ultra-affluents when it comes to making purchases (i.e. the percentage share of affluent households that made a high-end purchase). For example, last quarter HENRY demand for high-end home and personal electronics, major home appliances, household linens and soft goods, beauty products, jewelry and automobiles matched that of ultra-affluents, even while their spending levels in these categories tended to be somewhat lower than that of ultras.
Over the next three months, HENRYs are on par with ultra-affluents for planned purchases in such categories as high-end wine and spirits, clothing and apparel, personal electronics, jewelry, as well as salon/spa and physician-provided beauty and cosmetic experiences, again with lower overall spending expectations, yet equal levels of participation in purchases.
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Success marketing to HENRYs combines both luxury and mass marketing strategies
HENRYs are vigilant shoppers, looking for bargains, comparing prices and making strategic decisions about which brands maximize the return on their investment. At the same time, they have experience with higher-end brands and look for markers of high quality and superb workmanship. They favor brands and retailers that give them access to premium price points, rather than exclusive luxury or low-end mass market. So for example, Coach is a favorite accessories brand with the average price point of a handbag under $400 and Nordstrom is a favorite shopping destination with a wide selection of high-quality premium brands, as well as 'luxe' offerings.
"The new normal in the affluent consumer market is to be careful about spending and not to buy into the idea that the products and brands one owns confer status. Affluents believe good quality can be found without paying for an over-the-top exclusive luxury brand. Even ultra-affluents are catching on to the fact that luxury doesn't have to be the most expensive or exclusive brand. That means luxury heritage brands will need to position around their unique values and experiences they deliver, while brands that hit the premium 'sweet spot,' between high-end luxury and mass, can build market share by appealing to affluents that want to be smart about their purchases," Danziger says.
Learn more about Marketing to Affluents in 2014
Pam Danziger will conduct a webinar scheduled Wednesday February 26 to review the LCI and the results from the Affluent Consumer Tracking Survey (ACTS)
Unity Marketing will host a 45 minute webinar at noon Wednesday February 26 e.s.t. to review the results of the latest Affluent Luxury Consumer Tracking Survey (ACTS) and what the recent changes and shifts in affluent consumer confidence and attitudes signals for marketers targeting the top 20 percent of U.S. households. In addition to reviewing Unity Marketing's latest ACTS results, Pam Danziger, president of Unity Marketing and author of Putting the Luxe Back in Luxury will announce:
- The latest LCI and what it predicts for 2014?
- What sectors in the luxury market are trending up? What sectors are facing a headwind that may depress sales?
- How the two key segments in the affluent consumer market -- HENRYs and ultras -- view luxury and ways to build brand stories around their unique perspectives
- What marketers must do to create effective and motivating marketing messages in the current economic climate
The webinar will about 45 minutes and is recorded for your convenience. Subscription fee for the webinar is $500 and covers an unlimited number of attendees at your site. Subscribers will also receive a copy of the detail slides used in the presentation. The recorded webinar will be stored through March 26, so you can hear the talk again. Finally, your subscription fee can be applied as credit toward a subscription to the Affluent Consumer Tracking Study.