November, 2011 – This Luxury Daily article discusses the affluent community’s attraction to the Breitling American Tribute Watch promotion to honor U.S. troops (http://www.luxurydaily.com/breitling-honors-veterans-with-limited-edition-watch/).

By Rachel Lamb

Swiss watchmaker Breitling is celebrating the United States’ armed forces with a limited-edition American Tribute Watch, of which only 50 will be produced.

The brand will be donating all proceeds from the American Tribute Watch to the Fisher House, a military-oriented charity. The watch will be sold only in New York and Florida.

“Breitling wanted to pay special tribute to U.S. troops this Veterans Day, so the brand created the limited-edition American Tribute Watch,” said Thierry Prissert, president of Breitling USA, Wilton, CT.

Fisher House is an organization that builds homes to provide free, temporary housing to families to service members needing medical care across the country.

About face
The American Tribute Watch is based on the Breitling Chronomat 44 watch. It features Caliber 01, the watchmaker’s movement.

Each of the 50 pieces are individually numbered and have an etching on the back of the watchface that reads, “Breitling for America. United We Stand.”

The watch will retail for $8,960 and is available only in Breitling’s New York and Aventura, FL boutiques.

“This promotion will stimulate positive media exposure for Breitling at a time leading into the holiday gift season, which is an important time for selling watches,” said Ron Kurtz, president of American Affluence Research Center, Atlanta.

“[Also], it will strengthen Breitling’s image as being a patriotic supporter of veterans,” he said. “The exclusivity of limited-edition products contributes to a perception of luxury.”

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

Breitling has been closely linked with the armed services, specially aviation. This has enabled Breitling to count on this professional advice in designing products to military standards of functional excellence and reliability, according to Breitling’s Mr. Prissert said.

However, this timepiece is to celebrate all veterans, not just the United States Air Force, according to Breitling.

CSR for CRM
Breitling’s veteran-inspired watch makes sense since the company is intertwined with aviation for some time now and prides itself on designing products made to withstand extreme air, water, wind and atmospheric pressure.

Many Breitling customers are extreme athletes whose hobbies or professions include aviation and deep-sea diving. Actor John Travolta, himself a passionate aviator, also models for Breitling.

That said, it is entirely possible that a chunk of Breitling’s customer base have, or have family members who have, been part of the armed forces.

Breitling is committing to its customer base by engaging them in an area that it believes will target the greatest number of people.

“Segments of the affluent community will be attracted by this promotion,” Affluent Research’s Mr. Kurtz said. “Retired military officers, affluent people who have served in the military and affluent people who are very patriotic will be among those favorably disposed by this promotion.

“[Additionally], some in the affluent market will want to wear and proudly display such a watch as a conversation piece,” he said.

Posted in Affluence Research, Fine Jewelry & Watches, Luxury Market & Goods | 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 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.

Posted in Affluence Research, Apparel, Automobiles, Cruises, Entertainment & Recreation, Fine Jewelry & Watches, Luxury Market & Goods, Travel, Vacations | No Comments »

September, 2011 – This article from The Centurion (E-Newsletter & Info Hub for Prestuge Jewelers) features AARC research about the differences between the affluent market and the luxury market—and who jewelers actually are serving (http://news.centurionjewelry.com/articles/view/who-are-americas-highest-ticket-jewelry-stores).

By Hedda Schupak

New study finds the average ticket among top 15 most expensive luxury jewelry stores is $5,559. But typical guild jewelers’ average receipt is only $1,100. Why is there such a difference?

New York—What jeweler is writing the highest tickets in America?

Not surprisingly, it’s Harry Winston (left). According to a report released Tuesday by bundle.com, the tony jeweler averages $8,388 per ticket sale. Trabert & Hoeffer in Chicago is second, with an average sale of $6,627. By contrast, the typical guild jewelry store’s average ticket is around $1,100, says industry analyst Ken Gassman. (This figure is adjusted and does not include watch batteries, repairs, or bead sales, he told The Centurion.)

Bundle.com’s report is based on data provided by Citi for average receipt amounts based on millions of transactions in jewelry stores across the United States from July 2010 to June 2011. The study includes only Mastercard and Visa transactions; it does not include cash transactions or those made with American Express, Diners Club, Discover, or private store accounts, says Mike Dang, the article’s author.

“We were surprised at how many stores that made the list were names that most consumers [outside the retailer’s trading area] probably never heard of,” Dang told The Centurion. “We also were surprised to see that three stores on our list are in Dallas. It’s the first time that Texas made it on a list,” he said, referring to a number of lists the site tracks. William Noble Rare Jewelry with an average ticket of $5,839 took the number-four spot, Sue Gragg Precious Jewels came in fifth with an average receipt of $5,605, and Eiseman Jewels is in 11th place with an average of $5,028.

The three Dallas stores and Trabert & Hoeffer were among nine independent stores on the list of 15 jewelers. The others were Betteridge’s Vail, CO store (average ticket, $5,391, number nine on the list), Fourtane in Carmel, CA ($5,937, number three), Hyde Park Jewelers, Las Vegas, NV ($5,423, number seven), Belluso, a watch store also in Las Vegas, ($4,753, number 13), and Westime, a watch store in Los Angeles, CA ($4,591, number 15).

Also on the list were De Beers, New York City ($4,625, number 14), the Rolex boutique in South Coast Plaza, Costa Mesa, CA ($4,861, number 12), Chopard, New York City ($5,305, number 10), Wynn & Co. Jewelry, Las Vegas ($5,412, number eight), and Van Cleef & Arpels’ store at South Coast Plaza ($5,599, number six.)

Read bundle.com’s entire jewelry article here.

The consumer finance website also recently released its list of the top 25 most expensive apparel stores. According to its research from Citi, the top store is Oscar De La Renta. The designer’s eponymous dress shop on Madison Avenue in New York City had an average sale of $3,217. The lowest of the bundle.com apparel list is Prada, with an average ticket of $1,429—still higher than the $1,100 average guild-level fine jewelry store ticket.

The average ticket for chain jewelers is, not surprisingly, even lower than for guild stores. It’s about $400 at Zale, $350 at Kay, and $800 at Sterling’s higher-end Jared division, according to Gassman’s research. Tiffany, incidentally, did not make Bundle.com’s list of priciest jewelers either, presumably because its wide selection of affordable sterling silver jewelry brings down the calculation of the average ticket.

“I bought a sterling silver necklace for my girlfriend, so I’m probably one of those people who brings their average down,” laughed Bundle.com’s Mike Dang.

But why is the sales figure for a typical guild store tracking below even the apparel leaders?

Part of the reason could be that the jewelry industry is highly fragmented, with few brands big enough to spend with the kind of dollar clout that global luxury brands have, says Huw Daniel, president of Platinum Guild International. Now that De Beers has shifted marketing to its own Forevermark brand and away from generic diamond advertising, there’s no entity pushing jewelry into consumers’ lives with the same impact as luxury brands.

“The global luxury brands have made themselves relevant for today’s woman’s lifestyle, and their objects—bags, shoes—are a highly telegraphic marker of one’s status and personal style,” says Daniel. “That being said, however, adornment will always be a human need, so jewelry has a big role to play and the brands that can seize this can make a very nice profit.”

“Jewelers spend 4-6% of sales on advertising, while true luxury retailers or brands spend up to 20% or more of sales on advertising,” says Gassman. Plus, he says, don’t discount the fact that Mother’s Day and Valentine’s Day—even at guild stores—tend to be fairly low ticket sales, which brings the overall average down.

But that doesn’t explain why some jewelers are hitting the mid $4,000’s and $5,000’s for an average ticket.

What might, however, is identifying the differences between the affluent market and the luxury market—and who those jewelers actually are serving.

According to the American Affluence Research Center, those differences are both distinct and important. The AARC defines the affluent market as the wealthiest 10% of U.S. households as determined by the Federal Reserve Board, based on net worth. But only 10% of the affluent market—or 1% of U.S. consumers, approximately 1.1 million—have the means to acquire and are familiar with the brands and price points of products or services generally considered to be true luxury, says Ron Kurtz, AARC president.

AARC identifies true luxury consumers, who are the most likely to be viewed as conspicuous consumers, with the following profile:

• Average annual income of $982,000
• Minimum net worth of $6 million; average net worth is $15.3 million, or 33% of total net worth of all U.S. households.
• They earn about 14% of the total income earned by all American households.

The affluent market, by contrast, has this profile:

• Average annual income of $256,000
• Average net worth of $3.1 million; and comprise 70% of the total net worth of all U.S. households.
• They earn 36% of the total income earned by all American households and account for almost half of all consumer spending. This represents about a third of total GDP (gross domestic product).
• Additionally, these 11.4 million households hold 89% of the value of all publicly traded stock and stock mutual funds in the United States.
• Only a small segment of this demographic are conspicuous consumers; most are careful spenders and aggressive savers.

According to Forbes.com, the most affluent towns in the United States are Westlake, TX—a suburb of Dallas—and the Village of Kenilworth, IL, a suburb of Chicago. No surprise, then, that four of the 15 stores on the Bundle.com list are nearby. Several more of Forbes’ most affluent towns are New York City suburbs, while Orange County, CA, where South Coast Plaza is located (Rolex and Van Cleef & Arpels’ boutiques from the list) also has a number of very tony zip codes. Cities like Vail and Las Vegas, meanwhile, may not make the list for permanent residents, but they’re favorite affluent vacation spots.

The definition of “luxury” is ambiguous, not quantifiable, says the AARC. In fall of 2008, the organization polled well-heeled consumers asking, “what’s the most you could imagine spending” for 37 different categories of products and brands.

“The numbers were much lower than we expected,” Kurtz told The Centurion. Consumers offered up a very wide spread of price points they considered luxury—but the medians (the point at which half of the responses were above and half below) were surprisingly low.

Kurtz shared the jewelry and watch results—three of the 37 categories—with The Centurion. When asked “what’s the most you could imagine spending for a watch for a dressy occasion,” the median value among respondents was $1,000. 36% of men and 26% of women responding indicated they would spend $2,000 or more. Among the top 1% of respondents—those with net worth over $6 million—the median figure rose to $3,000, and the top value cited was $30,000. Not surprisingly, the most popular brand named was Rolex.

For an everyday watch, the median was a shockingly low $130. 29% of men and 27% of women said they’d spend $500 or more on an everyday watch, and the top value cited for this category was over $20,000. Only about half of the respondents naming a maximum price for this question named a brand; however, among those, the brand most often cited (22%) was Timex.

For diamond stud earrings, only women were polled. The median response was $1,000, with a point spread ranging from less than $100 to more than $10,000. 20% of women said they could imagine spending $2,000 or more for a pair of diamond studs. Only about 15% of women naming a maximum price also named a brand, says Kurtz, and the brand cited most often was Tiffany.

In recent years, says AARC, much of the growth of the luxury market has come from people who have the income ($100,000 to $250,000) to purchase some luxurious products, but not the wealth (or credit) to sustain such purchases, especially if portfolio values dip or the breadwinner loses a bonus or job.

That said, however, AARC’s conclusion from its research is that in the long run, marketers of luxury goods and services will find it far more productive, accurate, and practical to focus on the larger affluent market than the very ambiguous and often elusive luxury market.

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

This is an article from JustLuxe Affluent Lifestyle Guide by Susan Kime (http://www.justluxe.com/luxe-insider/trends/feature-1583284.php). The article references our Spring 2011 survey.

May 16, 2011
By Susan Kime

Last year I wrote two articles about the Fall 2010 Survey research results and interpretation provided by the American Affluence Research Center, Ron Kurtz, President. The results of the Fall 2010 survey seemed to indicate some hope for the economic future, and for future affluent spending patterns.

Now, the results of the Spring 2011 American Affluence Research Center Survey appear even more hopeful. This report is based on the responses from 405 men and women who promptly responded and met the minimum net worth requirement of $800,000. Their households have an average annual income of $333,000, an average net worth of $3.1 million, average investable assets of $1.8 million, and an average primary residence value of $1.1 million.

The survey respondents represented 28 states and the District of Columbia. Eighty-eight percent are married. The average age is 57. Fifty-six percent are males and forty-four percent are females. This research survey is the 19th in a continuing series of twice-yearly surveys that focus on the 11.4 million households that represent the wealthiest 10 percent of all U.S. households, as determined by The Federal Reserve Board, based on net worth.

These households account for about half of all consumer spending and a third of gross domestic product.
These surveys measure and track how luxury and affluent consumers assess current business conditions and their 12-month outlook for the economy, the stock market and their personal household earnings. The surveys also monitor the anticipated changes in spending for a variety of different products and services, changes in expected rates of saving, and primary investment objectives. In addition, each survey contains special questions exploring new topics.

The survey results are based on self-administered questionnaires mailed to 4,500 households that, based on their income and ownership of certain assets, were expected to meet the minimum net worth requirement of $800,000. The maximum margin of error of this survey, at 95 percent confidence, is five percentage points. Index values shown in the report can range from 0 (negative) to 200 (positive), with an index of 100 being a neutral point and where little or no change is expected.

Here are the major findings:
In contrast to Fall 2010, the affluent, who account for about half of all consumer spending, report a better outlook for the economy and their personal spending plans. Spending plans for all 17 products and services tracked by these surveys are much stronger than in the Fall 2010 survey. There is also improvement in the plans to make major expenditures such as for a new auto, a cruise and a vacation home.

Discounts by prestigious brands during the past two or three years of a weak economy have apparently been accepted by affluent and luxury consumers without diluting the stature of the brands. About 60 percent of the affluent in the Spring 2011 survey say the discounts did not affect their opinion of the brands, while a quarter said the discounts motivated them to make purchases they may not have otherwise made. Only 5 percent said the discounts lowered the image/prestige of the brand.

This data suggests that the affluent recognize there are certain situations where discounting by luxury brands is reasonable and understandable, if not part of an ongoing practice. Less than 20 percent said the discounts raised potentially negative questions about whether quality had been lowered to offset the discounts and whether prior prices and profit margins were fair.

Similar responses were elicited when asked about their opinion of discounts that prestigious brands communicate via the Internet or mobile devices only to past customers or to “members” of special “flash sale” sites. While 65 percent of the affluent own a smart phone or a tablet (or both), the remainder have regular access to a computer. Half of the affluent say they do not participate in any type of social media.

Among those that do participate in social media, only a quarter say they use it to receive regular communication about product and related information from a manufacturer or retailer. In other words, only 12.5 percent of the affluent say they are using social media to receive regular product information from a manufacturer or retailer.

This relatively low number (12.5 percent of the affluent) may be surprising given all the amazing statistics being circulated by various research and traffic tracking companies about the volume and growth of e-commerce, the ubiquitous mobile devices, and the urgent emphasis to invest time and money into various forms of mobile apps and promotional activities online through proprietary sites and social media.

It is important to understand who will actually be reached through mobile devices and social media (and whether the ROI is reasonable), what technology is needed to be compatible with the various different mobile and other receiving devices, and who might be missed if communications are limited exclusively to these channels.

Based on a different business model and with 12 years in business, Zappos has established a much stronger position among affluent and luxury consumers than any of the 11 “flash sale” sites listed in the survey. Among the flash sale sites, Gilt and RueLaLa have established leading positions.

Over half of affluent and luxury consumers are aware of Zappos while none of the 11 listed “flash sale” sites have more than 10 percent awareness. A third of the affluent have visited Zappos in the past 90 days while 5 percent or less have visited any of the “flash sale” sites during that time. A third of the affluent and luxury consumers have ever made a purchase at Zappos while less than 4 percent have ever made a purchase at any of the individual flash sale sites.

These results are not totally surprising as the affluent are typically careful spenders whose favorite stores include Target, Costco and Home Depot. Also not surprising, the results vary substantially within age, gender and wealth categories. What may be surprising is the fact that over 40 percent of affluent and luxury consumers are not aware of Zappos or any of the flash sale sites.

About 10 percent of the affluent say they will seriously consider acquiring access to a vacation home during the next 12 months. Plans to make an acquisition increase as age declines, income increases, and net worth increases. About 2.9 percent are considering two types of vacation home acquisition. Wholly-owned homes are the most favored type of vacation home access. Wholly-owned homes used primarily on a seasonal basis are more popular than those used frequently throughout the year.

In a recent interview with Ron Kurtz, President of the American Affluence Research Group, he said, “The affluent market, as defined by the top 10 percent of U.S. households, still spend carefully. Their favorite stores are still CostCo, Target and Home Depot. They are not conspicuous or ostentatious spenders. The recession may not have fiscally affected them, but in some deeper sense, they have been affected. But, there is reason to be hopeful.”

Mr. Kurtz recently presented his findings at the GNEX Shared Ownership Conference on May 11, where he was a keynote speaker. “The spending attitudes of the affluent seem to be improving,” he said.

“What we see is a continued conservatism, but tinged with optimism now. Unlike in other years, and taken as a whole, our research shows the affluent majority are not taking action to reduce or defer major expenditures now. They are interested in purchasing vacation homes and are again interested in travel. Things are looking better.”

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In contrast to the March general Consumer Confidence Index of The Conference Board, which fell over 10% to the low levels last seen in Fall 2010, the affluent, who account for about half of all consumer spending, report a better outlook for the economy and their personal spending plans in a new Spring 2011 survey by the American Affluence Research Center.

Spending plans for all 17 products and services tracked by these twice-yearly surveys of the wealthiest 10% of US households are much stronger than in the Fall 2010 survey. There is also improvement in the plans to make major expenditures such as for a new auto, a cruise, and a vacation home. These results are consistent with reported sales during the first quarter of 2011.

Given the 11.4 million households represented by this survey, it can be estimated that the market segment represents potential purchases during the next 12 months of 2.4 million autos, 1.5 million home remodeling projects, 1.7 million cruise buyers (total of 3.4 million cruisers), 422,000 vacation homes, and 536,000 primary residences.

Men, those with a $6M+ net worth, and those under age 50 are the most likely to plan the acquisition of one or more of the 8 major expenditures listed. Most of the items have relatively large variations within age, income, and net worth segments. Reflecting a substantial amount of possible additional purchases, the “undecideds” or “don’t know” respondents are relatively numerous for autos (10%), cruises (8%), remodeling (5%), acquisition of a primary residence (4.1%), and acquisition of a vacation home (5.4%).

With the exception of the dining in casual/family restaurants index, which was unchanged, the index for all of the categories rose from the Fall 2010 survey, typically by 7 to 9 points.

The improvement has come primarily from increases in the “same” category and declines in the “less” category rather than increases in the “more” category.

In 16 of the 17 categories, two-thirds or more plan to spend the same or more during the next 12 months. There were 12 such categories in the Fall 2010 survey.

Domestic vacation travel continues to be the strongest category. Most of the categories are now higher than the Spring 2010 survey, when evidence of “frugal fatigue” first appeared in the surveys, and back to the levels of Spring and Fall 2008. The overall average is the highest it has been since 2008.

In 16 of the 17 categories, the segment with the strongest spending indexes is the under age 50 group. The differences within the gender, income, and net worth groups are generally minimal.

In general, the categories of services (vacation and leisure activities) appear to have somewhat better prospects than the other categories of tangible products. All three group spending indexes (home durables, leisure, and vacation travel) increased from the Fall 2010 levels, with the vacation travel category showing the most improvement and the other two groups up slightly less. All three groups are essentially back to 2008 levels.

Participants in the American Affluence Research Center survey have an average annual household income of $333,000, an average primary residence value of $1.2 million, an average net worth of $3.1 million, and average investable assets of $1.8 million.

A description of the Spring 2011 survey methodology and other detailed highlights of the survey can be viewed at:
http://affluenceresearch.org/most-recent-tracking-study/highlights-of-most-recent-survey/

Posted in Cruises, Entertainment & Recreation, Fine Jewelry & Watches, Home Entertainment Equipment, Home Furniture & Furnishings, Home Purchases & Remodeling, Luxury Market & Goods, Restaurants & Dining, Travel, Vacation Homes, Vacations | No Comments »

A record low level of spending by wealthy consumers for fine jewelry and watches is suggested by the most recent survey in a series of studies that began in Spring 2002.

Negative attitudes about the current economy and the economic outlook for the next 12 months are contributing to plans for reducing expenditures for fine jewelry and watches by affluent consumers during the next year, according to the Affluent Market Tracking Study #15 conducted by the American Affluence Research Center.

In the Spring 2009 survey of the wealthiest 10% of all U.S. households, spending plans for fine jewelry and watches during the next 12 months, in comparison to their spending for such items during the past 12 months, are to be increased by only 1% of the affluent consumers and to be reduced by 57% of the affluent consumers. The remainder (42%) expects to spend the same for fine jewelry and watches during the next year as in the past year.

The survey respondents indicated a negative 12 month outlook for business conditions and personal household income. They also reported declines in their net worth, as a result of substantial declines in the value of their home and their investments/savings during the past two years. Together, these factors have contributed to a general attitude toward reducing or deferring expenditures in all areas.

The intentions to reduce spending for fine jewelry and watches are consistent with the overall mood of the affluent market. Over 80% of the survey respondents reported that they had made a general effort to reduce or defer expenditures during the past 12 months, would make a conscious effort to do so during the next 12 months, or had both done so in the past and would continue to do so in the future.

The survey is representative of the population of the most affluent 11.2 million households in the U.S. that account for almost 40% of total personal income and two-thirds of the personal wealth of all Americans.

The 640 men and women included in the national survey have an average annual household income of $290,000, an average primary residence value of $1.2 million, an average net worth of $3.1 million, and average investable assets of $1.4 million. This survey of the affluent market has a maximum margin of error of five percentage points at the 95% confidence level.

These surveys track how affluent consumers assess current business conditions and their 12-month outlook for the economy, the stock market, personal household income, and their spending plans for different products and services that include major appliances, home computers, furniture/furnishings, home entertainment equipment, casual and upscale dining out, entertainment, recreation, domestic and international travel, designer and non-designer apparel, collectibles, fine jewelry, and political and charitable contributions.

* * *

Ron Kurtz is President of the American Affluence Research Center, which provides marketing research and mailing lists of affluent consumers to prominent companies targeting the affluent market.

AARC is an independent, private research organization dedicated to providing reliable marketing information about the values, lifestyles, attitudes, investments, and purchasing behavior of the most affluent segments of the U.S. population through both custom and multi-client surveys.

Ron’s experience includes over 20 years in senior management positions in the airline, hotel, and tour business. As the founding President of Sea Goddess Cruises, he created the product category of small deluxe ships for the very affluent. He also served as the chief marketing officer of four cruise lines, including Norwegian Cruise Line and Windstar Cruises.

Ron has been a key contributor to 6 start ups and 11 turnarounds of substantial businesses. He earned his MBA at Harvard Business School.

The American Affluence Research Center CONTACT: Ron Kurtz at 770-740-2200 or info@affluenceresearch.org. Website: http://www.affluenceresearch.org

Tags: Affluence Research, affluence surveys, affluent market, destination clubs, fine jewelry spending, jewelry watches spending, luxury market
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