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U.S. Affluent Shoppers Cut Luxury Good Spending by 27%

Mar 25, 2015 1:59 PM   By Jeff Miller
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RAPAPORT... Unity Marketing revealed that affluent U.S. consumers  spent 26.5 percent less on luxury goods in the first quarter of 2015 compared with the fourth quarter of 2014. However, in the group's recent Luxury Consumption Index, which measured the spending habits of those with an average income of  $266,900, economic confidence improved.

"This is the 'luxury drought,'" said Pam Danziger, the president of Unity Marketing, who authored the new report.  "People with high incomes have changed their shopping habits, focusing on brands that represent a good value, rather than high-status brands."

Danziger told luxury goods marketers that it is no longer safe to assume simply that if  wealthier consumers feel great about their personal outlook that they will in turn spend money on luxury brands.  "In the current economy, with so many uncertainties and the memory of the effects of the recession and the damage it did to affluents' investments and home values, the affluent are holding back on their spending despite the fact that their wealth is increasing," Danziger said.

She advised brands to understand how best to appeal to affluent consumers in the face of this cultural change. "Further, luxury has gotten a negative connotation, with public opinion turning against income inequality. Being rich and enjoying the privileges of wealth simply isn't something that the wealthy feel comfortable showing," Danziger said. 

Marketers must convince affluent shoppers that a product is "worth the price," since premium logos no longer interest consumers and high-quality merchandise is readily available to everyone online.  

"Technology is leveling the playing field for competitors.  It is the ultimate democratic force for consumers. It equalizes all through the power of information," Danziger said.  "By contrast the whole concept of luxury brands is based upon a plutocratic idea, or power and influence based upon wealth and prestige.  With the idea of luxury brands the ultimate 'smoke and mirrors' of marketing, techno-powered consumers can now pull back the curtain and uncover the myths behind these brands."

Unity Marketing reminded brands that U.S. affluent consumers  are choosing function and performance over ostentatious style, giving emerging luxury brands a foothold that almost didn't seem possible a decade ago.  Affluent consumers are also valuing a personal connection with the artists and designers of those products they buy, driving growth for such brands as jeweler Alex and Ani and platforms such as Etsy.

Furthermore, a cultural desire for "responsible consumerism" is creating opportunity for fair trade products. "The Internet will continue to change luxury brand marketing because of this new transparency," she said. "Luxury brands need to tell new stories to their target customers that reflect a responsible face of luxury focused on values and substance, rather than simply ostentatious style." 

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Tags: affluent, alex and ani, brands, Consumers, Jeff Miller, Jewelry, Luxury Consumption Index, Unity Marketing
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