Global economic woes to have "profound and widespread" impact on luxury market says survey

Global economic woes to have "profound and widespread" impact on luxury market says survey
WGSN 14.10.08




The global banking bail out and the historic stock market declines of the last 10 days will have a profound and widespread impact on the luxury market, according to research firm Unity Marketing in its first survey of the luxury consumer mindset since October 3.
"Few luxury brands are going to weather this global economic crisis with impunity," said Pam Danziger, president of Unity Marketing. "Our latest survey of 1,200 affluent consumers at the top 20% of US households (average income $209,500 and fielded October 3-8) shows that the majority of affluents are changing their shopping behaviour in response to the current economic climate.
"In particular they are shopping less often and shopping more strategically by making lists, comparison shopping and doing their research before venturing into the stores. These new shopping patterns are going to put additional pressure on struggling retailers who traditionally have looked to the upper-income shoppers to bolster their revenues."
Unity Marketing's Luxury Tracking Study for 3Q shows that the average amount consumers spent on luxury remained flat from the second to third quarter. However, in 15 out of 21 product and service categories studied, luxury consumers spent more on average in Q3 as compared to the previous quarter.
Danziger explains: "The fact that total spending remained flat but luxury consumers spent more on average in 15 different categories indicates that affluents are buying luxuries more selectively and more carefully. They are still spending - and spending quite generously - on those choice luxury items they decided to splurge on, but they are splurging on fewer items overall."
For the coming Q4, Danziger advises that because affluent shoppers are staying out of stores to resist temptation, "retailers must offer shoppers new in-store experiences they simply can't ignore, like the cash-back gift card sale going on now at Bergdorf Goodman."
She noted: "Further, luxury brands need to look strategically at their product assortments and price ranges, since affluents are widely choosing to buy less premium brands in order to save money. So a luxury brand that offers more accessibly priced alternatives, like Vera Wang Lavender Label or the Akris Punto brand, can keep their customers from trading-down to another company's brand."
She also believes brand managers need to boost the value messaging in their marketing efforts to help justify the expense of paying a premium for their brands. "For today's resistant affluent shopper, luxury brands that focus their marketing messages on quality and value, rather than on image or status, will attract careful shoppers. In other words, luxury brands need to sell the 'steak' once again, not just the sizzle."

(Katya Hochleitner)