According to various retail consultants quoted in recent media publications, the current recession has average American consumers entering into a “new normal” that will be characterized by less household debt, higher personal savings, and less consumption. This behavior is being projected for the affluent market also, thus suggesting an extended decline in sales in the luxury category. Interestingly enough, the concepts of saving more and spending less are nothing new to the affluent market.

The affluent market has always leaned towards careful spending and aggressive saving, as clearly demonstrated in the 20 plus years of research by Thomas Stanley, author of the best seller “The Millionaire Next Door.”.  The affluent typically live within their means and generally do not overextend themselves financially.

In a recent survey of the wealthiest 10% of US households, 80% of the affluent reported they plan to return to pre-recession spending levels. Most plan to return to these spending levels when they see clear and certain recovery of the economy and the recent losses in their net worth. As a factor for returning to pre-recession spending, certainty of job security and compensation are more important to the younger and lower net worth affluent groups than others.

Given the short memories and proclivity to shop among Americans, the numbers returning to pre-recession spending could be much higher than 80% . It makes sense that this group of careful spenders would return to previous spending patterns since those habits were not inflated in the first place.  Apparently the “new normal” may not be that new for the true affluent.

The national survey included 684 affluent men and women with an average of $300,000 household income, $3.1 million average household net worth, and $1.2 million average value of their primary home.

Tags: affluent market, luxury, recession, Spending
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In November 2008, Newsweek published an article stating that the American affluent population was “experiencing an unfamiliar emotion:  luxury shame”.  The article, as well as several others that have appeared in various media since then, explained that across America, the affluent population was straying from conspicuous consumption, and engaging in “stealth wealth” because conspicuous consumption just didn’t feel right in these difficult economic times even though the affluent could still afford the finer things in life.

According to a recent tracking study of the wealthiest 10% of US households, the American Affluence Research Center found that in fact a mere 7% of survey respondents indicated any signs of luxury shame or stealth wealth.  For those who did reduce spending because of their self-consciousness, they did so an average of only 4.5 times during the year.  Vacations, new cars, and dining out were the three biggest categories where this small share of the affluent consumer market reduced its spending due to luxury shame.

Despite the fact that 41% of survey respondents acknowledged feeling self-conscious about being in a better financial situation than those around them, we see that not many felt badly enough to change their spending habits because of appearances.  Rather, respondents were more likely to have indicated a change in spending habits due to uncertainty when the economy will recover, decline in value of investments/savings, and a desire to spend less and save more.

It seems the media has it wrong.  Although luxury retailers have seen declines of 10-25% during this recession, those declines are most attributable to “aspirational” consumers who were living beyond their means but can no longer afford to do so.  The change in spending habits of aspirational consumers has given the biggest blow to luxury retailers.  The true affluent have reduced only some spending due to declining net worth, but the truth for the affluent market seems to be that old habits die hard.  Especially spending habits.

The national survey included 684 affluent men and women with an average of $300,000 household income, $3.1 million average household net worth, and $1.2 million average value of their primary home.

Tags: Affluence Research, affluence surveys, affluent market, luxury, luxury research, luxury travel, survey of the affluent, survey of the wealthy
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Contrary to popular perception, affluent Americans do not spend lavishly on luxury hotel suites on Park Avenue.

In ground breaking research on the definition of luxury and the spending habits of the wealthiest 10% of US households, respondents to a survey by the American Affluence Research Center were asked to specify the most they could imagine spending for 37 various products, including a hotel room for one vacation night in New York City.

For both men and women across various high net worth levels, the overall median amount survey respondents could imagine spending for one night of leisure in a NYC hotel is $300. Marriott and Hilton were the top two brands named by those responding with a brand preference.

Surprised that the wealthiest Americans aren’t staying at the Peninsula or the Four Seasons when vacationing in the Big Apple?  Ron Kurtz, President of the American Affluence Research Center, is not.

According to Kurtz, the people most likely to be savoring the finer things in life are the ones with a net worth of $6 million or more and an income of $500,000 or more.  These are the “conspicuous consumers” who, according to Kurtz’s study, indicated a median of $400 when imagining the most they would pay for a night in The City that Never Sleeps.

So what does all of this mean?  According to Kurtz,” about 90% of the affluent are not conspicuous or ostentatious consumers. They spend conservatively and save carefully.”  They choose not to stay at The Plaza or The Pierre, even though they have the funds for suites in these luxury destinations.  Kurtz believes it is these affluent consumers that represent “an opportunity to substantially increase the market for high end luxury products if the affluent can be educated about why they should consider buying them and the brands that offer them.”

Someone please tell The Donald he needs to sell his friends on the value of style, service and exclusivity if he wants to fill those suites at The Trump International.

The national survey included 552 affluent men and women with an average of $304,000 household income, $3.1 million average household net worth, and $1.2 million average value of their primary home.

Tags: Affluence Research, affluent market, Big Apple, Fifth Avenue, high net worth, Hilton, luxury, Luxury hotels, luxury market, luxury research, luxury suites, Main Street, Marriott, millionaires, multi-millionaire, New York City, Peninsula Hotel, Serenity Bed, splurge, The Donald, The Pierre, The Plaza, Trump
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Contrary to popular media hype, wealthy Americans do not spend wildly on luxury cars, opulent hotel rooms, or 4000 thread count sheets.

In ground breaking research on the definition of luxury and the spending habits of the wealthiest 10% of US households, respondents to a survey by the American Affluence Research Center were asked to specify the most they could imagine spending for 37 various products, including a new car.

Over 75% of those surveyed said the most they would spend is $50,000 for a new automobile. Toyota ranked #2 as the most popular brand to buy, ranking just behind Lexus and ahead of BMW and Mercedes Benz.

Surprised that the wealthiest Americans only want to spend less than $50,000 on a new car?  Thought they were driving Ferraris and Maseratis?  Clearly this isn’t Lifestyles of the Rich and Famous.

According to Ron Kurtz, President of the American Affluence Research Center, the people most likely to be living the really good life are the ones with a net worth of $6 million or more and an income of $500,000 or more.  These are the “conspicuous consumers” who, according to Kurtz’s study, are most likely to spend more than $50,000 for a luxury automobile; the kind of car that you wouldn’t find in the Toyota showroom.

So what does all of this mean?  According to Kurtz,” about 90% of the affluent are not conspicuous or ostentatious consumers. They spend conservatively and save carefully.”  They choose not to spend more than $50,000 on a car, even though they have the funds.  Kurtz believes it is these affluent consumers that represent “an opportunity to substantially increase the market for high end luxury products if the affluent can be educated about why they should consider buying them and the brands that offer them.”

Luxury brands take note.  There’s market share to win if you can convince the average multi-millionaire that your product, brand, make, or model is worth the splurge.

The national survey included 552 affluent men and women with an average of $304,000 household income, $3.1 million average household net worth, and $1.2 million average value of their primary home.

Tags: Affluence Research, affluent market, BMW, Ferrari, high net worth, Lexus, Lifestyles of the Rich and Famous, luxury, luxury automobiles, luxury cars, luxury market, luxury motor vehicles, luxury research, Maserati, Mercedes, millionares, multi-millionaire, splurge, Toyota
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