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For Luxury Marketers, Retailers, Manufacturers, Advertising Agencies, Investors and the Press…

Luxury Recession? Spending Trends Among Affluent Consumers Indicate Bright Spots Amidst the Gloom

Luxury Consumers Will Invest in Houses and Their Own Homes

With housing prices on the decline and foreclosure rates on the rise, more luxury consumers with ready cash will turn to buying investment properties. They will buy low with the expectation that in a year or two they can turn around and sell high, or at least higher.

Likewise they are likely to take capital and invest it in strategic improvements to their own homes, especially in rooms and areas where there is an expectation of a good payback when they ultimately sell their home. That means more remodeling in kitchens and bathrooms, improvements to household systems, like heating, cooling, redecorating projects and pick-me-ups to the highly-visible outdoor areas. Luxury consumers will be making big-ticket home investments in order to enjoy a more pleasant living environment in the short term, as well as helping to maintain or increase the value of their home in a challenging housing market over the long term.

Realtors, contractors and marketers that sell to the luxury consumers and their home improvement needs should fare well in 2008 if they recognize they are selling to a more cautious and conservative and less extravagantly-indulgent type of customer. These consumers will be looking for real value, not necessarily 'bling.'

'Trading Up' Luxury Consumers Will 'Trade Down' from the Luxury Market in 2008

The less affluent luxury consumers, those with incomes under $150,000, will be considerably less active 'trading up' for the more expensive luxury goods and services in 2008. Many luxury and near-luxury brands have seen much of their growth in the past five years generated by 'trade up' spending among less-affluent consumers. These will be the brands that take the biggest hit in 2008. On the other hand, luxury brands that have built their business on the super-affluent market (HHI $150,000 and above) will likely not experience a down turn on their balance sheets.

But while the 'trading up' consumers will stop buying the premium luxury brands, they have developed and nurtured a taste for luxury in their life that they are not going to give up easily. That means they will turn to the pleasures they derive from 'little luxuries,' rather than indulging in big-ticket luxury spending. So for example, instead of buying a new Gucci handbag, they will get their Gucci thrill from the latest perfume. They will shop sales and discount ranks more aggressively, frequent designer outlet malls and turn to the Internet to find websites that offer luxury fashions for less.

The rapidly expanding market for 'cheap chic' will also prosper this year selling to the 'trading down' consumer who craves fashion for less. Vera Wang in Kohl's, Nicole Miller in J.C. Penney's, Proenza Schouler at Target, H&M, Zara and the rest will draw newly budget-conscious affluent shoppers looking for a fashion pick-me-up.

In the experiential realm, they will opt for drinks and appetizers at the latest 'in' restaurant, rather than ordering a full meal and they will take short-break domestic luxury vacations, instead of a week long stay.

Unity Marketing has prepared a white paper about the Luxury Consumption Index and predictions for the luxury market in 2008

Unity Marketing, the historic lead in helping marketers understand and target the luxury consumers, is poised to assist marketers prepare for the new economic realities of luxury. Pam Danziger has prepared a white paper about Unity Marketing's Luxury Consumption Index and predictions for the luxury market in 2008. Click this link to download a copy.

For media: Charts, tables and graphs are available on request.

Coming Soon:

• New About the happiness of luxury consumers -- New research on happiness and the luxury market: Money really does buy happiness, but not by much
  
• More trends and key findings in the giftware and home decorative accents market
  
• First quarter 2008 Luxury Consumption Index and spending trends

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