According to the findings of a new research study conducted by Unity Marketing and presented by Pam Danziger, the company's founder, at the recent Luxury Interactive conference held in New York City, the paradigm has shifted for the luxury market.
"Thanks to the recession, affluent consumers are taking time out from their profligate, overspending ways to reassess, reevaluate and reprioritize their lives," says Danziger. "This will be bad news for luxury marketers, some of whom maintain the illusion that the current recession is only a temporary downturn in an otherwise rising luxury market. Unity Marketing's research shows that affluent shoppers are starting to ask questions about the luxury brands they once patronized, and those brands often come up short with compelling and meaningful answers as to why they should buy. The new normal in the luxury market is going to be all about delivering new values to the luxury shoppers who control the purse strings, and the fortunes, of every luxury brand today."
Results of Research
Unity Marketing recently conducted a series of focus groups among highly affluent and highly engaged luxury shoppers in Beverly Hills. This location was chosen because it is ground zero for the conspicuous consumption lifestyle, according to the company. The qualitative research was followed by a quantitative survey in April 2009 among 1,041 affluent consumers (average income $204,900).
"Unfortunately, the future will be very ugly indeed for luxury brands that fail to listen closely to the opinions of what once were their best customers, but many of whom today are disenfranchised and looking for new alternatives to their conspicuous consumption lifestyle," Danziger warns.
Among the key findings from the research:
- The current recession has dramatically and sharply curtailed affluent consumers' willingness to spend. This recession is unprecedented in its negative impact on luxury marketers and retailers who have catered primarily to the wealthier segment of the population. This research shows that a majority of affluent shoppers are changing their purchasing patterns in light of the current economy.
"I am thoughtful when I shop: I am thinking more about whether I really need an item or just want to buy it on impulse." 80% agree with the statement.
- Affluents are widely responding to the current economic crisis by simply sitting back and taking time off from spending haphazardly or impulsively. A majority of affluents are taking concrete steps to change their shopping and spending behavior in light of the recession. Shopping less frequently and reducing the number dining excursions are among the most popular money-saving strategies.
These changes in spending patterns are widespread. Further, the longer the recession lasts, the more likely that affluents will learn new habits of shopping that will carry over into the time after the recession. This woman shopper explains how she is changing, "I am more thoughtful. I love to shop. Now, I still love to shop, but I am trying to think more about whether I really want and need this at this particular time, as opposed to just getting things and having them sit in the closet and not wearing them."
- Once the recession is over, the luxury market is never going to be the same as it was. A cultural shift is taking place in which people are changing their priorities away from more and more consumption In the focus groups, many people expressed the idea that the culture is shifting and the times are changing. This woman sees a return to more traditional values: "I am thinking that I should [make changes], there are lessons to learn in this time and where our values are. So it is making me think about that and priorities. And I think that it is a good shift in consciousness that we are seeing in our own values."
"Even after the economy improves, people aren't going to go back to buying luxury like they used to." 50% of those surveyed agree.
- Half of all luxury consumers surveyed—irrespective of gender, age or income—agreed that people won't go back to buying luxury like they used to. Given the potential impact of a dramatic shift in affluent consumer consciousness away from conspicuous consumption toward a more thoughtful, reserved careful way of shopping and buying, the essential question for luxury brands, luxury marketers and luxury retailers is "How do we make the most of these changes in the mind-set of our target customer? How do we survive in a time of dramatic cultural shifts away from luxury indulgence toward a more conscious, careful consumer mind-set?"
Advice for Luxury Marketers About the Market After the Recession
"The new normal for luxury marketers is simple: Once the recession is over, the luxury consumer market is not going to go back to its spend-thrift ways," Danziger advises. "Affluent consumers are redefining, reassessing and reevaluating their lives and their lifestyles. This is happening across the culture, not just among a small segment of the affluent market, and it will mean major shifts in the way luxury brands can market their goods in the new economy. Discounts and sales won't be enough. They will need to realign their brands with the new values that more thoughtful, careful and selective affluent shoppers hold."
A white paper, providing highlights of the presentation made at the recent Luxury Interactive conference, is available here.
