October, 2011 – This Justluxe.com article features AARC research about affluent people’s assessment of current business conditions declined 36 points from the Spring 2011 survey to the Fall 2011 survey (http://www.justluxe.com/luxe-insider/trends/feature-1665183.php).

By Susan Kime

Negative Perspectives With Pockets Of Hope

I have written before about the American Affluence Research Center’s Spring 2011 numbers for JustLuxe, and prior to that, two articles on the Fall 2010 Survey for Luxist.

This research organization is a private group dedicated to providing information about the values, lifestyles, attitudes, investments, and purchasing behavior of the most affluent segments of the U.S. The Affluence Center’s survey is one of the very few worldwide that presents research data and trends on the wealthiest 10% of U.S. households, which accounts for almost half of all U.S. consumer spending. In addition, the Fall and Spring surveys have been in existence for two decades, providing significant longitudinal validity and reliability to these measures.

Since I last wrote about the Spring 2011 survey, there have been substantial changes in the affluent mood, their outlook for the economy, their personal wealth, and their spending plans. This is the result of the disappointing news about current economic conditions and the stock market volatility.

Following the optimistic numbers in the economic outlook and spending plans of the affluent in the Spring 2011 survey, the Fall 2011 Survey shows that the affluent have returned to a “strongly negative perspective” (the Survey’s terminology) on current business conditions and future (12 month) outlook for business conditions, the stock market, and personal household income and net worth. The assessment of current business conditions declined 36 points from the Spring 2011 survey. This is the second worst historical negative rating, the worst being in Spring 2009.

These results are consistent with the general Consumer Confidence Index, reported by The Conference Board this August and September, which have also fallen to low levels, also last seen in April 2009. The negative mood of the general public and the affluent appears to reflect a number of factors which, for the affluent, include stock market volatility, a poor outlook for their personal household income and net worth, and the expectation that it will be several years before unemployment and the stock market return to pre-recession levels.

Indeed, about 60% of the affluent expect to take four or more years for an economic recovery to take employment back to pre-recession levels. There are no substantial differences of opinion among various levels of the affluent. Similarly, numbers wise, about 60% of the affluent believe that the stock market will recover in no more than three years.

The good news is that there is a sizeable segment of the wealthiest 10% of U.S. households that plan to continue spending for certain products and services, and among the wealthiest one percentile, in the spending plans for December holiday gifts. On average, the affluent households will spend over four times as much for holiday gifts as that estimated for all households in an October survey by BIG research for the National Retail Federation. Affluent households average $2,270 in gift purchases versus $518 for all families in National Retail Federation survey. Also, the Internet is a favorite source of holiday gift purchases, as it was named by 60% of affluents for 2011 gift purchases versus 39% in 2006.

For the affluent also, the changes in the stock market could be a positive factor if there is progress in the European financial crisis and in the U.S. Congress on debt reduction and economic stimulus. Given there are 11.4 million households represented by this survey, it can be estimated that the affluent represent potential purchases of 2.1 million autos, 1.5 million remodeling projects, 2.1 million cruises (total of 4.2 million cruisers), 752,000 primary homes, and 285,000 vacation homes. So, the possibility exists that even with a negative perspective, the affluent will continue to spend.

The Fall 2011 survey is the 20th in a continuing series of twice-yearly surveys that focus on the 11.4 million households that represent the wealthiest 10% of all U.S. households, as determined by The Federal Reserve Board, based on net worth. The net worth categories used on the questionnaire and in this report were selected to conform to the categories used by the Federal Reserve Board to define the wealthiest 10%, 5%, and 1% of U.S. households. The wealthiest 10% have a minimum net worth of approximately $800,000. The wealthiest 5% have a minimum net worth of approximately $1.5 million. The wealthiest 1% have a minimum net worth of approximately $6 million.

Posted in Affluence Research, Holiday Spending | No Comments »

October, 2011 – This Diamond News Broadcast article features AARC research about the affluents’ view on current business conditions and their plans for holiday gift spending this year (http://www.diamonds.net/news/NewsItem.aspx?ArticleID=37579&ArticleTitle=Diamond+News+Broadcast).

By Rapaport News

Global luxury goods sales have continued 2010’s double-digit growth trajectory and will see an increase of 10 percent, to €191 billion in 2011, according to Bain & Company in the 10th Edition of its industry bellwether “Luxury Goods Worldwide Market Study,” which was unveiled at a conference today hosted by Fondazione Altagamma (the Italian luxury goods industry trade association).

The study points to a consumer whose return to luxury spending is not simply a rebound, but instead a sustained renewal of spending on luxury apparel, accessories, leather goods, shoes, jewelry, watches, perfume and cosmetics. As luxury revenues have surged out of the trough and continued their momentum to record-breaking sales levels, the study shows, luxury distribution has undergone a significant shift, with 14 percent growth for direct-owned stores, more than 50 percent higher than the growth rate of wholesale and department stores. Direct-owned retail now accounts for nearly 30 percent of luxury sales worldwide.

“Top brands are now master retailers as well,” said Claudia D’Arpizio, a Bain partner in Milan and lead author of the study. “Product still matters, but retailing strength has let luxury brands take control of their growth more than ever before.”

The post-crisis world of luxury goods has also proven that luxury’s mature markets are still relevant, both in absolute terms and in impressive growth rates. Bain expects 10 percent growth in Europe and 12 percent growth in the Americas for 2011 at constant exchange rates, although the weakening Euro eats into these growth rates by 3 to 4 percent. Japan yields the biggest surprise in terms of growth. It remains luxury’s second market. Declines, which stabilized to result in a flat 2010, have now reversed to five percent growth at constant exchange rates for 2011. The over 230 brands reporting 2011 revenue for the study report a much lower impact to luxury goods sales from Japan’s March earthquake; the effects on luxury sales lasted only one quarter before this year’s growth cycle restarted. Developing market growth (China, 35 percent; Brazil, 20 percent; Middle East, 12 percent) is still notable and remains a priority for brands. When factoring in spending in Mainland China and spending by Chinese tourists abroad, luxury consumption by Chinese people is now just over 20 percent of the global market.

The 10th Edition of Bain’s Luxury Goods Worldwide Market Study also finds that the luxury sector’s growth is robust, by looking at organic growth versus new openings. Comparable growth will exceed growth from new stores by 2 percent in 2011, indicating that luxury growth is not exclusively driven by store openings. Eighty percent of brands saw growth in 2011, with 20 percent of brands seeing more than 20 percent growth.

Finally, the study shows growth across all major luxury categories. Apparel will experience eight percent growth in 2011, driven by both menswear (9 percent) and womenswear (7 percent). Perfumes and cosmetics consumption will grow by 3 percent globally, with much of that growth found in emerging markets such as China and Brazil. As with 2010, however, accessories and hard luxury (jewelry and watches) are the strongest growth stories. Accessories (including shoes and leather goods) will grow by 13 percent in 2011, as consumers often rely on these products as an entry to luxury consumption. Hard luxury is delivering the strongest growth for 2011, however, with 18 percent estimated for 2011. Increasingly, consumers are shifting their hard luxury purchasing from unbranded to branded items, and purchasing these branded products in direct-owned stores.

”Despite the headwinds of global events and economic uncertainty, luxury is experiencing a sort of ‘anti-crisis,” concluded D’Arpizio. “We expect to see the sector continue to outperform other categories, if brands stay as nimble as they have been in their approach to recovery.”

The American Affluence Research Center produced the 20th in a continuing series of the original and only twice-yearly tracking studies of the mood and spending plans of the wealthiest 10 percent of U.S. households, which account for almost half of all consumer spending, this survey was designed to provide information critical to understanding today’s affluent and luxury consumers.

1 – Affluent to Spend $23.6 billion, 2.3 percent over 2010, on Christmas gifts, with a greater number of households buying gifts to offset plans to reduce gift expenditures by 3.7 percent per household.

2 – Affluent households to spend over four times the average family on Christmas gifts at an average $2,270 in gift purchases versus $518 for all families in National Retail Federation survey.

3 – Affluent men and women name the top two items on their Christmas gift list as currency and clothing.

4 – Over 40 percent of affluent families plan to reduce or defer expenditures due to economic conditions.

5 – Only 3 percent of affluent are “under water” with their mortgage, compared with 25 percent of all home mortgages; affluent have average equity in home equal to 72 percent of its market value.

6 – Internet is favorite source for Christmas gift purchases.

7 – Affluent turn very negative in their view of current business conditions and 12-month outlook for the U.S. economy, stock market, and personal income.

8 – Spending plans of affluent fall less than expected given their negative outlook.

9 – Pockets of strength exist in spending plans of the affluent.

Posted in Affluence Research, Apparel, Fine Jewelry & Watches, Holiday Spending, Luxury Market & Goods | No Comments »

October, 2011 – This Luxury Daily article features AARC research on the increase in 2011 holiday spending plans of the affluent (http://www.luxurydaily.com/10pc-wealthiest-us-consumer-holiday-spend-up-2pc-american-affluence-research-center/).

By Rachel Lamb

Although affluent consumers’ confidence fell sharply from the spring, there has not been a drop in intention to spend during the holiday season, according to findings from a recent study by the American Affluence Research Center.

Consumers are most likely to be spending in-store — in regular department stores and in specialty boutiques – and online, which has been steadily gaining share. The rich may still be spending because they still have a positive image of their own personal worth, as opposed to those less well-off.

“We are seeing some pockets of strength, particularly in the wealthiest of the consumers who are really the prime prospects for luxury goods,” said Ron Kurtz, principal of American Affluence Research Center, Atlanta. There are three factors that could be contributing to this phenomenon, according to him.

“The first is that during the recession, there was a large amount of uncertainty about personal compensation that has dissipated for the affluent and they’re feeling more comfortable about their personal situations lately,” Mr. Kurtz said. “People are also at the point of wanting to do nice things for themselves and for others to offset the gloomy environment.

“The third is that brands and retailers are doing whatever they can to coax the affluent and the enhancement of products and services and improved value to get them to spend,” he said.

Participants in this survey consisted of 499 individuals who make up the top 10 percent of wealthiest U.S. consumers.

They have an average household income of $282,000, an average primary residence value of $1.1 million, an average net worth of $3.1 million and average investment-worthy assets of $1.7 million.

Spending frenzy
Affluent consumers are becoming more comfortable with their spending habits and, in fact, intend to spend more this year than last, according to the research.

For instance, 3 percent of the U.S.’s wealthiest individuals plan to spend more on holiday gifts than last year. Sixty-nine percent expect to spend the same amount and 28 percent intend to spend less.

Approximately 10 percent of consumers that will spend $4,000 or more on gifts plan to spend more than last year. In addition, 51 percent will spend the same amount and 40 percent will spend less.

For both men and women, the top item that they wished to receive for the holidays is some sort of currency, such as a gift card, money or check.

Apparel and accessories are the second choice for both women and men at 33 percent and 42 percent, respectively.

The third choice for women is fine jewelry at 26 percent and books, CDs and DVDs at 23 percent for men.

Another big item this year is tablets.

“These people are realistic about how long it’s going to be before stock market and unemployment returns to prerecession levels,” Mr. Kurtz said. “They’re basically looking at three years or more until we get a real turnaround in those factors.

“Given the negative news that was going on in July and August in the stock markets when the survey was being conducted, the affluent are still relatively positive about spending,” he said. “And, in contrast to what kind of news that was going on in the market and in the environment, it’s somewhat encouraging to see that they still plan to spend.”

Channeling holiday spirit
Consumers will be spending on a variety of channels this year.

The Internet has seen the most share of total dollar value in holiday gift purchasing by the affluent.

The channel is named by half or more of all demographic segments except the highest net worth and older-than-60 groups, both of which are over 40 percent, according to the study. All groups indicate intentions to maintain or increase the share of business given to the Internet in 2011.

Based on total dollar value of holiday gifts purchased, traditional department stores have been losing share to other sources among the total group of affluent households, according to the study. However, they have remained a strong spending outlet for consumers in the highest net-worth group.

Additionally, specialty retail stores have been losing share to other sources among the total group of affluent households, according to the study.

“The thing is, this is a segment of the population which is fairly constant over time,” Mr. Kurtz said. “I know that some would like to say that there are new trends emerging over the years, but that’s over-blowing what those people are like.

“There has been a consistency for 30-40 years about being careful spenders, good savers and are focused on enduring style and fashion and quality,” he said. “They are not ones to jump on any kind of gimmick or new fads in the business.”

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October 2011 – This Wall Street Journal article features AARC research about how affluent people spend on holiday gifts (http://blogs.wsj.com/runway/2011/10/20/happy-holidays-to-the-rich).

By Christina Binkley

It will come as no surprise to Occupy Wall Street that the wealthiest 10% of U.S. households are responsible for half of all consumer spending here. That’s why researchers spend so much time analyzing their flush little psyches, to see how the prosperous feel about the future of the universe and all that.

One of those people is Ron Kurtz at the American Affluence Research Center. Twice a year, the center polls the mood and spending plans on the highest net-worth households in the U.S. Here are some tidbits they discovered in the latest round:

* Merry Christmas: The rich will spend $23.5 billion—an increase of 2.3% over last year—on holiday gifts.

* Now you know why there is a Neiman Marcus fantasy gifts catalog: They will spend four-times the average family’s outlay on holiday gifts: $2,270 in gifts versus $518 for everyone else.

* It’s not the thought that counts:

For the holidays, rich men and women say their most-wanted present is cash or a gift certificate, thank you very much.

* Party-on while Rome is burning:

Despite all that, the affluent have a record-low outlook for current business conditions and the 12-month outlook for the economy.

I asked Mr. Kurtz to share his thoughts on the underlying reasons for this predicted behavior. He proposed that “the wealthy are perhaps trying to brighten their lives by buying nice things to offset the gloomy environment. This is not an unusual psychological reaction.”

He also noted that the wealthy cut back on their spending in 2008 through 2010, when they feared their own job compensation and net worth was under threat. “Most of these concerns have now dissipated for the truly wealthy,” he said.

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October, 2011 – This Luxury Daily article discusses the importance of product catalogs in the luxury world (http://www.luxurydaily.com/barneys-emphasizes-malleable-new-york-personalities-through-catalog).

By Rachel Lamb

Department store chain Barneys New York is using real New York residents to promote its newest Co-Op inventory through a “New York Stories” catalog.

The two-part catalog uses up-and-coming design students, models, actors and musicians from New York to showcase the line’s urban, edgy spirit. The first part consists of the new crop of New Yorkers modeling collections while the second part is purely products.

“The importance of catalogs in the luxury world varies according to the product,” said Ron Kurtz, president of American Affluence Research Center, Atlanta. “The tactile quality of a catalog, based on page size and paper quality, can contribute to an image of luxury, as does the type font and use of color and photography.

“The color and size of the product image can enhance the perception of luxury,” he said. “Some products may require extended text, best provided in hard copy, to explain or describe important features of the product.”

Mr. Kurtz is not affiliated with Barneys, but agreed to comment as an industry expert.

Killer looks
The first part of the Barneys catalog features apparel and footwear for men and women.

Each model has a small blurb under his or her name and age. Some photographs are shot against an urban background such as a wall covered with graffiti or the outside of a building.

Many of the models have artistic backgrounds and are studying art, music or literature in New York educational institutions such as New York University, Hunter College or Parsons School of Design.

Others moved to New York to make a name for themselves as artists, while some were born and raised there.

Under each blurb is the name and price of whatever the model is wearing.

Brands such as Theory, Helmut Lang, Barneys New York, Opening Ceremony and Marc by Marc Jacobs are represented.

In the second half of the catalog, there are accessories and footwear from brands such as Alexander Wang, Iosselliani, Helmut Lang and Isabel Marant.

Barneys includes a Web call-to-action by placing its Web address at http://www.barneys.com on the side of every page.

The retailer also included a list of store locations and their numbers on the back of the catalog.

Mail bondage
In the face of an increasingly digital world, luxury retailers strive to stand out from rivals through traditional media such as catalogs, print and out-of-home ads.

Luxury marketers tend to differentiate their direct mail pieces from competitors, as well.

For instance, the Barneys catalog is made with thicker stock paper and is bound. Its unique fold-out mechanism is also helpful to differentiate the catalog from other retailers.

A thicker paper stock and a clean catalog layout look more elegant, which affluent consumers appreciate.

In addition, many luxury marketers tend to add multichannel touch points, similar to Barneys’ Web call-to-action.

For example, department store Bergdorf Goodman coaxed consumers to its blog, mobile site, store and Web site using touch points in its Fall collections catalog (see story).

In addition, Bloomingdale’s and Neiman Marcus are using QR codes in newspaper and magazine ads and mail to engage consumers and drive in-store or mobile traffic (see story).

“Catalogs can be designed to incorporate other media by using QR codes and directing people to video where sound and motion are important to the use or understanding of the product,” Mr. Kurtz said. “They can also be the carrier of a CD that provides additional information.

“Direct mail, especially catalogs, can help the consumer to have a better understanding of colors, textures and scale than what is normally achieved in broadcast or digital advertising, especially if being viewed on a small screen or mobile device,” he said.

Posted in Affluence Research, Apparel, Luxury Market & Goods | No Comments »

October, 2011 – This 4Hoteliers article features information about the use of direct mail marketing campaigns with the affluent (http://www.4hoteliers.com/4hots_fshw.php?mwi=6370).

By Pam Danziger

Conventional wisdom in marketing circles is that nobody does direct mail marketing anymore, direct mail is too expensive, direct doesn’t work today.

The conventional wisdom says: Shift your marketing investment to email, social media and the new darling, mobile media.

“Direct mail is probably the most cost-efficient method for reaching the truly affluent, i.e. the wealthiest U.S. households — These are the households with a net worth of $800,000 or more and incomes of $200,000 plus.” – Ron Kurtz, AARC

With my contrarian bent, that is all the reason that I need to recommend old-fashioned direct mail to my clients. If nobody is using direct mail anymore, then the marketer that swims against the tide will get noticed.

When I open my mail box each day, I see proof positive that marketers haven’t yet abandoned direct mail. But I do think those marketers that are getting results through direct mail want their competitors to believe the conventional wisdom in order to keep the secret that direct mail can be a powerful tool in the 21st century luxury marketer’s arsenal.

The fact is direct mail is still an important vehicle to deliver sales directly, but also it works with other marketing platforms synergistically to connect with customers. For example, I shop catalogs quite frequently but never order by phone or mail – rather, I always go online to make my purchases. Statistics from the Direct Marketing Association confirms the synergies between direct mail and other multichannel strategies:

Fifteen percent of customers receiving a catalog and 12 percent receiving a letter, postcard or flyer from a company made a purchase on the company’s website.

It all comes down to the best way to get in the customer’s door and capture their attention. Direct mail continues to deliver on that score, particularly among the affluent luxury consumers.

Ron Kurtz, of the American Affluence Research Center (AARC), says that “Contrary to conventional wisdom, direct mail is probably the most cost-efficient method for reaching the truly affluent, i.e. the wealthiest U.S. households — These are the households with a net worth of $800,000 or more and incomes of $200,000 or more.”

Ron Kurtz knows where the wealthy live – and he can help you find them too.

Ron’s company offers marketers direct mail lists based upon detailed customer specifications, such as of wealth (defined by net worth and/or income), age of householder, gender, various life style and recreation interests, and geography (state, county, metro area, or zip code). And these mailing lists are not just for big businesses with huge marketing budgets, either. Just think about the power it gives local businesses to target the richest folks in their neighborhoods with customized marketing communications that talk to their special needs and interests?

Ron has written a white paper that explains more about the power of direct marketing to reach the affluent luxury consumers, entitled Direct Mail: Becoming Extinct or More Effective for Luxury Marketers?, which you can download by clicking the link: http://bit.ly/nJqsXI

Take Action>>

Direct mail is still a viable marketing vehicle and should be part of a luxury brand’s multichannel strategy.

Luxury marketers still get results through direct mail. It both supports other marketing efforts, as well as producing results immediately and directly. Luxury marketers, in particular, need to be mindful of how the touch and feel of their mail packages reflects on the brand.

Ron reminds us, “Direct mail is a tactile medium that can communicate the quality and imagery of your luxury brand.” Because of this, the quality of the product imagery can be far superior in print than online. That is why direct mail so powerfully drives shoppers to websites to buy or to the store to try on.

Yet some luxury marketers can’t track orders to the mailed piece directly unless orders come via phone or mail. So these marketers can’t directly measure the effectiveness of their mailed campaigns as inspiration for shopping via other channels.

Specialty Retailers: Are you using direct mail to attract new shoppers to your store?

For retailers looking to attract shoppers in their local communities, direct mail is too frequently ignored in favor of less effective and less profitable options.

Rather than go after a very broad audience with a space ad in the local newspaper which often promotes a sale, retailers that hanker after a more affluent customer would be better served to buy a local list and create a special mail package for these high-value customers emphasizing products and services tailored to their discerning tastes or special needs.

For example, the Christmas shopping season is rapidly approaching and husbands notoriously hate shopping for gifts for their wives. Why not send a special V.I.P. invitation to affluent married men in your area, offering special evening men’s-mostly shopping hours or private by-appointment hours with trained personal shoppers to pick the right gift? (If any of my local jewelers are reading this blog, be sure to add my husband Greg to that list).

Of course, you’d offer the same services to your current customers (assuming you have a list of them and shame on you, if you don’t), but with the help of an outside list like Ron’s group can provide, you can to reach out into your community and invite the right kind of new customers into your store.

It all comes down to whether you are using your marketing and advertising budgets to make sales (e.g. running a newspaper ad) or to create customer relationships. Specialty retailers need to be focused on building those relationships. A carefully crafted and executed direct mail program tailored explicitly for the needs of the customer will take you far in creating such a relationship, which is money in the bank for your business’ future.

For more ideas on ways to market your specialty retail business, get a copy of my book, Shopping: Why We Love It and How to Create the Ultimate Customer Experience – http://amzn.to/iFCSlW

For those marketers targeting the luxury consumers, my new book, Putting the Luxe Back in Luxury, is written specifically for you.

Posted in Affluence Research, Luxury Market & Goods | No Comments »

October, 2011 – This article from The Fiscal Times features data about the growth for the wider luxury industry (http://www.thefiscaltimes.com/Articles/2011/10/07/9-Must-Have-Status-Symbols-that-Say-Im-Rich.aspx#page1).

By Drew Gannon

Take walk down Fifth Avenue, Michigan Avenue or Rodeo Drive, and you might think Louis Vuitton had finally had a sale. Block by block, the signature brown bags fill the streets. Never mind that the bags in the Spring 2011 collection start at $2,930 for a small clutch, and go up to a whopping $35,500.

With sales up 23 percent from last year to $23.4 billion, Louis Vuitton is setting the tone of growth for the wider luxury industry. In 2011, spending on premium items and services is expected to rise 8 percent over last year to $359 billion, according to an annual survey by American Express Publishing and Harrison Group.

But the big players are not just the barons of Wall Street, sports, and entertainment.

“America’s top one percent – a little over one million households with a net worth of six million plus – are spending on luxuries,” says Ron Kurtz, president of the American Affluence Research Center. “But the bigger growth has come from the BRIC markets – Brazil, Russia, India and particularly China.”

China, the deus ex machina of the luxury market, is expected to account for 20 percent (roughly $27 billion) of global luxury sales by 2015, according to research by McKinsey, as the Chinese shift their consumption preferences from generic goods and materials to the status of internationally well-known brands. China’s unprecedented wealth has bolstered consumer confidence throughout the country; the fifth annual China Luxury Summit in December 2010 was aptly titled “China Luxury Market: An Oasis of Hope and Possibility.”

In the U.S., despite the belt-tightening across most of the country, wealthy Americans are starting to enjoy the good life once again, buying high-status items and services they had cut out of their 2009 and 2010 budgets. Indeed, rich Americans’ expenditures on luxury are set to rise $26.6 billion this year.

Whether such optimism will trickle down to the middle class is to be seen. Overall spending is still at a standstill, with consumer confidence declining sharply in August. Online shopping and social media may be the key to bringing up luxury sales in the United States as well as abroad. A recent study by Italian luxury foundation Altagamma found online sales (now only 2.6 percent of the market) growing at a rate of 20 percent a year as luxury brands multiply their friends on Facebook and activity on other social media sites.
Here are nine popular purchases helping wealthy consumers live high. Some people just can’t live without their Louboutins.

1. Swanky Strollers
Think a stroller is just a way to transport your kids? Think again. The mommy wars are being played out on the playground, with parents sizing up each others’ wheels. High-end strollers like those by the Bugaboo brand are flying off the shelves, and run anywhere from $500 to $2,000. One Bugaboo model that converts from a single stroller into a side-by-side double has a $1,659 price tag, and a waiting list to buy one. Another stroller by Kid Kustoms has a vinyl leather seat and optional iPod speakers, for a mere $3,500. Celebrities like Naomi Watts and Gwen Stefani have been spotted pushing around expensive Bugaboo prams, and their popularity has spread to suburban streets across the country.

2.Specialty Bikes
Biking became more popular in the last year, with bike sales rising 15 percent between 2009 and 2010, according to the Bicycle Manufacturing Association. But the bikes that are gaining the most popularity? Pricy, custom-built bikes. Specialty bike retailers command only 14 percent of the market, but 44 percent of the dollars, according to the National Bicycle Dealers Association. For example, custom bicycle company KGS Bikes does an elaborate three-hour fitting session, and has sold bikes for as much as $32,000. “I’ve seen growing demand,” says KGS Bikes’ owner Kevin Saunders. “My customers want a bike that is perfect for them.”

3. Designer Fashion
Last year, Carolina Herrera reported that, to her pleasant surprise, her $7,990 gray sequined ball gowns were “selling like hotcakes.” Other top designers have also reported stellar earnings, including Louis Vuitton (up 23 percent from 2010 to $24.3 billion), Hermes (up 41 percent to $11.9 billion), and Chanel (up 23 percent to $6.8 billion). The king of American style, Ralph Lauren, has seen his $13 billion-valued company’s stock grow 150 percent in the two years since June 2009. Sales for Ralph Lauren’s heritage Rugby brand jumped 34 percent last year after an online-only fashion show where online shoppers could purchase items in real time. High-end department stores and online designer sale sites have snagged some of the profits as well. Saks reported quarterly earnings up 50 percent and sales up nine percent ($726.7 million) in May this year, thanks in part to a boost in full-price sales.

4. Fine Wines
Forget two-buck chuck. Nielson Co. reporting a 4.1 percent rise in total U.S. wine sales to $9.32 billion this year, but wine priced $20 plus saw an even larger increase in sales (11 percent), demonstrating that pricier wines are becoming more popular. In its 22nd Annual Restaurant poll, Wine & Spirits magazine found the average price for the most popular wines in restaurants was $62. One of the magazines’ most popular restaurant brands, Duckhorn Vineyards, boasts an array of reds, including a 2007 estate-grown Rector Creek Vineyard Cabernet Sauvignon, which goes for $95 per bottle.

5. The Fur Effect
Fur is in, according to America’s top fashion magazines. Many September issues– including long-time fashion bible Vogue – featured fur and faux fur as the next big thing for the coming cold. According to them, fur goes with and on anything, from apparel like vests and coats, to accessories like purses and even shoes. Global retail sales for fur were up 5.4 percent to $14 billion in 2010, according to the International Fur Trade Federation. Alexander Wang’s fur sandals sell for $895 a pop. And while just this month West Hollywood becomes the first U.S. city to ban all fur sales, fur’s popularity continues to rise as the temperature falls.

6. …to Furry Friends
American pets are living the good life – sometimes even better than their owners. In 2010, Americans spent a record $55 billion on their pets, according to research firm Packaged Facts, more than the gross domestic product of many countries. Gourmet pet food tasty enough for humans to eat (think duck and quinoa) and premier pet care facilities like the Barkley Hotel and Day Spa, are popping up everywhere. Packaged Facts estimates that pet insurance sales, which rose 27 percent from 2008 to 2009 to $303 million, will reach $881 million by 2014. By the end of 2010, one in five Fortune 500 companies offered pet insurance by Veterinary Pet Insurance (VPI), the industry’s largest provider. Expensive designer dogs, like “teacup” dogs as well as hybrids between two breeds are growing more and more popular, and can cost thousands of dollars. Celebrities buying into the designer dog trend include Mischa Barton with her Shih Pom (cross between a Shih Tzu and Pomeranian) and Jessica Simpson with her Maltipoo (cross between a Maltese and Toy Poodle). But pure breeds have also kept their place on the upper crust. An 11-month old red Tibetan mastiff named Big Splash became the world’s most expensive dog after being sold to a Chinese millionaire for 10 million yuan, or $1.5 million.

7. Fast Cars
Despite the doom and gloom in Detroit, the luxury car sector is revving its engine. In July, Mercedes-Benz reported its highest monthly sales growth (16.7 percent) since 2006, with 21,065 cars sold. Still, BMW outsold its competitor that same month by over 5,000 vehicles, an 11.7 percent increase from sales on year prior. BMW’s SAV, a midsize SUV starting at $37,000, led the pack, with sales up 56 percent in 2011. And the high-end Z4 Roadster was BMW’s third highest selling vehicle, up 92.4 percent in July from the previous month. U.S. News & World report named the Z4 one of the best luxury cars of 2011, describing it as a car suited for drivers more interested in luxury than performance. The Z4 sells for between $47,450 and $62,500.

8. Cruising Through Life
An estimated 73.7 million Americans will travel outside the United States in 2011, estimates Business Monitor International in last month’s United States Tourism report. And while air travel sales remains on a perpetual roller coaster of ebbs and flows, cruises have grown more popular for wealthier Americans this year. Business Monitor International reports that in 2011, 9.6 million will have traveled outside of the United States by cruise. The Cruise Line International Association plans to welcome 22 new ships to its 25 lines, including the 3,690-passenger Carnival Cruise Lines’ Carnival Magic, launched in May 2011. A 12-night stay in the Mediterranean on luxury cruise liner Celebrity Solstice costs $9,299 per person.

9. The Bling
Rolex, recovering from a 14 percent decline in brand value last year, is making a comeback. Sales are up 11 percent to $5.3 billion this year, making it the sixth most powerful luxury brand according to consulting firm Millward Brown. The Rolex Presidential Day-Date watch has long been considered a quintessential luxury item, worn by celebrities and several U.S. Presidents from Roosevelt to Reagan, and costing upwards of $35,000 depending on its materials and dealer. Rolex’s signature men’s watch has now opened its doors to women, with InStyle featuring Jennifer Aniston and Courtney Cox among others wearing the brand. Other jewelers have also seen strides in the last year. Milward Brown ranks French jeweler and watchmaker Cartier fifth on its luxury list, up 34 percent to $5.3 billion net worth. Tiffany & Co.’s American sales rose 22 percent in the first half of 2011.

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October, 2011 – This Justluxe.com article features information about the economic mood/confidence of the affluent (http://www.justluxe.com/luxe-insider/trends/feature-1652235.php).

By Susan Kime

Taking a meta-view, we don’t need to be told again that the economic mood of the country does not look hopeful right now. Below are some statistics from some unusual sources not generally associated with the luxury segment, but could be benchmarks for future concern.

• MedHelp, the world’s largest health social network and leading provider of consumer health applications, today (September 26, 2011) announced that the average mood across the United States is the worst it has been in the last year. Using data points from MedHelp’s online and mobile health applications, MedHelp recently saw a significant drop in the average mood across the country, from average to bad.

• According to a recent CBS/New York Times Poll, 72% of those questioned by the Roper Public Opinion Polls said the country was going in the wrong direction.

• And recently a Goldman Sachs report of September, 2011, said the world economy was moving toward not great depression, or recession, but a great stagnation.

The idea of stasis, combined with inflation or, as many economists now say, stagflation, is an interesting one, as are inferred in the stats mentioned above. But this prognosis is for the general population. The question, then, remains: How does this socio-economic attitude relating to mostly European and American economics, affect those who buy and sell HNW and UHNW products? Is there is a correlation between the mood of the country and the mood of the luxury bandwidth?

Ron Kurtz, founder and CEO of the Affluence Research Group, understands this complicated picture, and has recently said in personal communication, “Most times there is some correlation between the general consumer confidence index of The Conference Board and the mood/confidence of the affluent, as measured in our twice-yearly tracking studies of the wealthiest 10% of U.S. households. They both tend to move in the same direction, especially in terms of describing current business conditions. The mood of the affluent seems to be more influenced by what is happening in the stock market rather than actual economic or business conditions. The wealthiest 1% (1.1 million households with a minimum $6 million net worth, based on research by the Federal Reserve Board) are usually more confident and optimistic about the future than the general public. Among the wealthiest 10%, there are often some differences between groups defined by age, gender, income, or net worth.”

Dr. Kurtz’s last two sentences dealing with the wealthiest 1%, the UHNWs (Ultra High Net Worths) and the wealthiest 10%, the HNWs (High Net Worths), sheds light on the division between mood and spending as seen in some recent numbers.

On one side of the luxury argument, and most likely where the HNW 10% lies, there may indeed be some recession-based anxiety, as this is probably the first time in many years this group has heard that no investment is safe in these capricious times, given the cooling of the world economy, how badly in debt the U.S. is, and how Europe is handling its credit/debt crisis.

Adding fuel to this anxiety are articles on new spending patterns for all economic levels, including the most wealthy: The Dollar Store Economy (August 21, 2011) is taking hold says The New York Times, and the Wall Street Journal’s cover piece, The Frontier Of Frugality (October 4, 2011).

On the more optimistic 1% UHNW side, are the sales stats of classic luxury products. Tiffany’s net sales rose 30% in 2011 over the prior year, and according to Bloomberg News, the highest end luxury car manufacturers had much to say at the September 2011 Frankfurt Car Show, with many attitudes counter to the prevailing economic climate.

• “If you go to the Ferrari stand, there aren’t any customers worried about the recession,” Fiat Chief Executive Officer Sergio Marchionne said. Ferrari expects to deliver 7,000 cars in 2011 on demand for its first family car, the $356,000 four-seat FF that came to market this year.

• Maserati aims to boost deliveries nearly eightfold to 45,000 cars in 2014 as it increases dealers by 150 percent worldwide. Lamborghini SpA’s new Aventador model is sold out for 18 months.

• Rolls-Royce Cars recently announced a 10 million-pound ($15.8 million) expansion at its Goodwood, England plant.

• Sales of the main high-end European luxury brands – Maserati, Lamborghini, Ferrari, Bentley, Rolls-Royce and Aston Martin – will rise between 19% and 30% percent this year and gain another 13 percent in 2012, according to a forecast from industry analyst IHS Automotive.

And in addition, according to Reuters (October 2, 2011) French luxury goods maker Hermes sees no sign yet of affluent buyers tightening their purse strings in spite of a somber global economic outlook, the head of the brand said on Sunday at Paris Fashion Week.

So, what is happening? What is the relationship between a somber economic outlook and the open purse? It may depend on who is buying, how seriously they believe they are an actual part of the global economic whole, and what the results will be when developing economies are experiencing strong growth while advanced economies are in a sluggish mode — this experience being in opposition to what has been customary in past years.

The highest end, which now comprises many newly minted BRIC (Brazil, Russia, India and China) young millionaires, or as Reuters says, “the strong appetite in emerging markets,” have allowed the luxury goods industry to grow at a solid pace. But what about tomorrow? That is the question.

“For the moment, there is no impact on our sales,” Hermes Chief Executive Patrick Thomas told Reuters at the brand’s fashion show in Paris, recently. “But the fact that we see nothing today, does not mean that we will not see anything tomorrow. When there are moments of macroeconomic concern, they always tend to affect our markets.” …Stay tuned.

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