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Luxury Consumption Index (LCI) in Free Fall

Unity Marketing's measure of affluent consumer confidence stands at 40.3 points, a historic low, and luxury consumers are changing their behavior accordingly

Stevens, PA October 20, 2008 -- Luxury consumer confidence as measured by Unity Marketing's Luxury Consumption Index (LCI) continued its downward trajectory in the third quarter 2008. The LCI dropped 10.7 points to reach an historic low of 40.3 points, the lowest level ever since Unity started measuring affluent consumer confidence at the end of 2003.

"Unity Marketing's most recent survey of luxury consumers, conducted October 3-8 following the bailout and during the recent stock market upheaval, shows that affluent consumers' negative feelings about their economic situation are translating into changes in their shopping behavior," says Pam Danziger, president of Unity Marketing, a consumer insights firm that specializes in the luxury consumer mindset.

"Since the middle of 2007, the LCI has been in free fall, dropping more than half of its value to reach an all time low of 40.3 points at the end of third quarter 2008. But what is of more importance to luxury marketers than the decline in the LCI is that luxury consumers are taking action in response to the current economic crisis."

Luxury consumers are not just expressing an intention to save money -- they are taking action

Among the most important findings in this survey among 1,161 affluent consumers (average income $210,700; age 43 years; 34 percent male and 66 percent female):

Some 56 percent are spending less on luxury now as compared with twelve months ago.
Fifty-four percent expect to spending less on luxury in the next twelve months.

Danziger says, "Among the changes in their shopping behavior, luxury consumers are shopping more strategically by looking for sales. They are trading down to less premium brands. In fine dining, they are choosing less premium restaurants and dining out less often. And they are simply staying out of the stores to resist temptation. The latest survey shows affluent shoppers are being prudent and careful with their money. They are still indulging in luxuries, but they are being more selective in what they choose to indulge."

LCI predicts a challenging 4Q2008 for luxury marketers and retailers

Commenting on what the latest survey means in terms of holiday spending in the fourth quarter, Thomas Bodenberg, Unity Marketing's chief consumer economist, says, "In taking the pulse of the luxury consumer's mindset, we don't yet see a turnaround emerging shortly. Their confidence continues to slide, especially among the over 40-year-old affluents who make up the largest segment of the luxury consumer market. For this holiday season, we see affluent shoppers turning more frequently to mass-market retailers with a high-quality, value-driven image, like Target, as well as to outlet shopping where luxury brands can be had for less. The Internet is going to be a vital tool for affluent shoppers this season, as it supports comparison shopping across the widest range of retailers in the most efficient manner possible."

Advising luxury marketers on ways to see their way through the current economic crisis, Bodenberg says, "Due to the decline in the value of the dollar, now is a good time for luxury goods marketers to target international consumer segments, especially EU residents and Canadians.

"With affluent consumers watching their pennies, this is also the time for luxury brands to better understand and use pricing strategies in order to maximize both profits and sales potential. And they should study their potential target markets to micro-target discreet customer and prospect segments to further enhance profitability," Bodenberg advises.

For more information on what the latest Unity Marketing Luxury Tracking survey found for the third quarter and what it predicts for the vital fourth quarter holiday season, call Pam Danziger at 717-336-1600 or click this link

About Unity Marketing's Luxury Consumer Tracking Study

These findings are based upon Unity Marketing's quarterly luxury tracking study which surveyed 1,161 luxury consumers (average income $210,700). Every quarter Unity Marketing conducts a Luxury Consumer Tracking Study among 1,000+ luxury consumers. Year end statistics from four tracking studies are compiled in Unity Marketing's Luxury Report 2008 - Who Buys Luxury, What They Buy, Why They Buy.

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