Retailers are likely to see Christmas and Hanukah gift spending by affluent consumers at or below the levels of 2009 expenditures according to a new survey of the wealthiest 10% of US households by the American Affluence Research Center (AARC).

In the AARC Fall 2010 Affluent Market Tracking Study #18, which is representative of the 11.4 million households that account for about half of all consumer spending, about 12% of affluent consumers said they will not buy any gifts for this holiday season.  According to numbers from a National Retail Federation survey of the general public, the overall average of consumers who do not plan to buy holiday gifts is 8%.  It would appear the affluent consumers are once again proving to be careful spenders.

Among affluent consumers planning to buy holiday gifts, about 3% said they will spend an average of 7.7% more than they spent in 2009. This is in line with numbers from an NPD Group market research survey showing that 9% of the general public (not specific to the affluent market) plan to spend more this holiday season.  According to a study by American Express Publishing/Harrison Group, only 5% of consumers with a household discretionary income of $100,000K or more plan to increase their holiday spending this year.

About 28% of the affluent market respondents in the AARC survey said they plan to spend an average of 14.9% less for holiday gifts than they did in 2009. This number is also consistent with NPD data on the general population showing about 30% planning to spend less in 2010 than they did in 2009.  The American Express number for reducing holiday expenditures is 21%.

The remaining 69% of affluent consumers in the AARC survey plan to spend the same as they did in 2009. Total holiday gift purchases by the affluent consumers is likely to average $2,305 in 2010, an overall average 3.9% decline from the average of $2,399 that affluent consumers say they spent in 2009. The American Express Publishing/Harrison Group study estimated the consumers represented by their survey will spend about $2,093 on gifts this year.  53% of this group is looking to reduce the number of gifts they buy.  The National Retail Federation predicts an average spend of $518 per adulton gifts by the general population represented by their October poll. 

Given that consumers often spend a bit more than they planned, especially during the holiday gift season, the American Affluence Research Center believes total spending by the affluent could be the same or perhaps slightly better than what it was in 2009.  This is also consistent with Deloitte’s prediction of a 2% rise in holiday spending and Nielsen’s prediction of a flat holiday season relative to 2009. On the bright side, while it may not be a banner year for retailers, it may not be worse than last year. The American Affluence Research Center’s national survey included 439 affluent men and women with an average of $290,000 household income, $3.1 million average household net worth, and $1.1 million average value of their primary home.

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This is a post from brandweek.com (http://www.brandweek.com/bw/content_display/news-and-features/direct/e3i5094e406e415c280d0da248c34faffdc) referencing AARC’s latest research about the affluent market.

November 3, 2010

It wasn’t very long ago that marketers were assured that most consumers were still willing to trade up. You remember, don’t you? Average Joes and Soccer Moms splurging for that extra “little” something—be it a $6 latte or a $300 Coach handbag—just because they worked so hard and deserved some of life’s finer things. A good many starry-eyed marketers predicted that, even in a recession, this be-good-to-yourself dynamic would somehow hold true.

It hasn’t. While no headlines have announced the official passing, it’s become clear that the “aspirational” consumer—that cherished demo of marketers everywhere—is dead.

According to a just-released study by the American Affluence Research Center, the spending habits of the utmost tier of earners remains robust, but everyone below has cut back and plans to stay there. “If you look at the 10-15% [sales volume] declines for upscale retailers and brands, it was [due to] people spending beyond their means and not being able to sustain it,” said AARC president Ron Kurtz. Even within the sphere most would consider well-off ($250,000 average annual household earnings), 41 percent reported they’re making a conscious effort to reduce expenditures for the next 12 months.

Isolated data? Hardly. Consumer Edge Research recently found that skipping top-shelf brands in favor of lower-end ones is most common in households with incomes of $100,000 or higher. A study conducted by PriceWaterhouseCoopers/Kantar Retail earlier this year revealed that 93 percent of shoppers say they’ve changed their shopping behavior—with 17 percent opting for cheaper brands. “Although we’re starting to see signs of shoppers getting tired of trading down, they remain cognizant of today’s economic realities,” said a Kantar official in a statement. These findings are in line with last year’s McKinsey study, which revealed 41 percent of consumers think that premium brands are “not worth the money.”

So much for life’s little indulgences. In fact, the whole affordable luxury pitch has lately been the target of various poison arrows, such as one recent posting on Families.com: “Aspirational marketing is a technique in which the goal is to sell items to people who can’t afford it.” Ouch.

“Marketers have long known that we have an aspirational society, and they’ve gone heavily after those consumers,” observed Claire Ratushny, a brand-positioning consultant based in Eastford, Conn. “Now, ‘aspirational’ is a dirty word.”

It was nice while it lasted.

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