Downward shift in luxury consumer attitudes at the start of 2012 signals shift toward 'inconspicuous' consumption that minimizes ostentation.

In recent weeks some of the leading beacons of luxury indulgence, notably Richemont, Hermes and LVMH, announced remarkable revenue and profit growth for their brands.  Later this week PPR is expected to report similar results for the Gucci brand.   These headlines are leading many industry watchers to loudly proclaim the return of the luxury market.  Yet the latest results of Unity Marketing's exclusive survey of U.S. luxury consumer confidence and spending challenges this conclusion.

"Luxury consumer confidence as measured in the Luxury Consumption Index (LCI) took a deep dive to levels not seen since the recessionary period of 2008 and 2009," said Pam Danziger, president of Unity Marketing and author of the new book Putting the Luxe Back in Luxury. 

Corresponding with the sharp fall in luxury consumer confidence was a decline of nearly 15 percent in the average amount spent on luxury in the fourth quarter of 2011, according to the latest Luxury Tracking survey conducted January 7-18, 2012 among 1,333 affluent luxury consumers (average income $286.3k).

"The LCI has been on a topsy-turvy course since 2010, one quarter it goes up, the next down. But looking over the course of the last two years, the LCI lost more than it gained.  At the start of 2012 the percentage of luxury consumers expressing a definite willingness to spend more on luxury (one of the major components of the index) was down,"  Danziger said.  

On the bleak outlook from the luxury consumers, Tom Bodenberg, Unity Marketing's consumer economist asks, "Does this mean that these luxury consumers will NOT buy?  No -- it's a matter that they are non-committal. Why are they non-committal?  Here appears to be a trend of non-conspicuous consumption-- perhaps as fallout from the 'Occupy' movement, among North American luxury consumers."

On the future of the luxury market, Bodenberg predicts, "The buying behavior will shift to an almost 'hidden' form of consumption of luxury goods-- where ostentation is minimized.  The actionable demand for luxury goods and services, on the whole, is flat and still substantially below the levels of two to three years ago. What is interesting is that this apparently 'recession-proof' segment of the marketplace has also been greatly affected by the downturn. Media reports of a 'renaissance' in the luxury market appears to be limited to an extreme top tier of consumers, a small number compared with the bulk of the luxury marketplace potential."

What do these results mean for luxury marketers? 

Translating the findings from Unity Marketing's latest survey into steps luxury marketers can take to encourage consumers to commit to their brands, Danziger says, "Our survey, focused on the top 20 percent of U.S. households, finds there is a wide swath of customers for luxury goods and service brands who used to indulge in luxury purchases before the recession and still have cash in hand, but now shy away from these extravagences."  

"This new affluent customer is keen on finding value when they shop so they look to maximize their investment in spending.  They expect the goods and services they buy to deliver the maximum return on their 'luxe' investment.  Luxury marketers must make sure their brands give these customers a high yield when they buy. Marketers need to recognize these customers are thinking more like investors when shopping for high-end goods than consumers. If your brand doesn't deliver a suitable return on investment, they'll turn to competitive brands that will give them high quality without such an extravagant investment,"  Danziger explains.

"Take Coach, for example, ranked this quarter as the top fashion boutique destination among luxury consumers, as well as the number one fashion accessories brand.  Coach offers its customers high quality, long lasting and still luxurious handbags but with an average price around $300, making the bags expensive for the masses, but affordable for the 'classes,'" Danziger concludes.

To learn more about the results of the  latest Unity Marketing Luxury Tracking Study and the predictive power of the LCI, call Pam Danziger at 717.336.1600 or register to receive a summary report of the 1Q2012 luxury tracking results and a recorded webinar of Pam discussing the findings.

Do you have questions about the luxury consumers? Unity Marketing has answers.

Unity Marketing's latest luxury tracking survey gives luxury marketers insights into the shopping behavior, spending patterns and brand preferences in 22 different categories of luxury goods and services.

www.unitymarketingonline.com

About Pam Danziger and 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.