Luxury spending set to rebound in US

26 July 2010

NEW YORK: The luxury category should return to growth in the US this year, although brand owners will face the challenge of meeting the new priorities of their core target audience.

American Express, the financial services provider, partnered with The Harris Group, the research firm, to survey 1,910 affluent adults boasting discretionary incomes of at least $100k (€78k; £66K).

Despite the impact of the downturn, the two companies said that the number of high-earning households rose by 400,000 in 2009, with the richest consumers also enjoying an increase to their overall wealth.

While 94% of the panel suggested America was still in a recession, a majority were confident about their personal prospects to a degree not seen since 2008.

Moreover, it appears that the era of "luxury shame" has come to an end, as 43% of those polled agreed that they like to be perceived as affluent, up from just 20% in a similar study in 2009.

Similarly, only 45% of respondents experienced feelings of guilt when buying expensive goods, compared with 54% recorded last year.

As such, it was anticipated that sales of premium goods would rise by between 6% and 8% in 2010, worth around $28bn, with automotive and travel among the sectors seeing demand strengthen.

"Interest in luxury is trending up, but this interest is qualitatively different from the unbridled enthusiasm that characterized ... the mid-2000s," said Jim Taylor, vice chairman of the Harrison Group.

However, Taylor argued there has been a substantial shift in emphasis away from matters related to status, and towards quality and craftsmanship.

"Things have not changed a little bit since the recession began. They've changed fundamentally," he said.

This can be seen in the research: 77% of participants thought they were now more resourceful and 73% described themselves as smarter shoppers.

The fact that 89% of contributors believed they had successfully contained their spending during the credit crunch has endowed this demographic with a greater sense of security, Taylor added.

"They didn't know they could survive something this bad," he said. "They have got competent, they have gotten close to their family, they have self-esteem from their ability to handle a crisis."

With regard to media habits, 44% of the sample said they had established a presence on a social networking site, of which 90% had joined Facebook.

Only 4% said that material available on this platform had exerted an influence on their purchase decisions to date.

A further 80% regularly read magazines, and 69% asserted that ads featured in these titles attracted attention more effectively than the online equivalent.

It was estimated that the cohort taking part in the study represented 10% of the US population, a market segment that was responsible for 50% of total retail sales.

Data sourced from Reuters/National Jeweler Network; additional content by Warc staff