The future of luxury purchasing and selling looks bright, according to the recently concluded AMEX Luxury Summit, 2011. This Summit, dedicated since 1999 to the fine art of realistic prognostication, based on experiential and statistical research, concluded this week giving the delegates a 30,000-foot view on how and why certain methodologies have worked, haven't worked, and what both positive and challenging views mean for the luxury space in the future.
The Summit also provided insight into important research considerations regarding the changing landscape of luxury consumption, based on current research produced by American Express Publishing and by Dr. Jim Taylor, Vice Chairman of the Harrison Group, who produces the 2011 Survey Of Affluence And Wealth In America.
The research showed the percentage of consumers who expected to reduce their luxury consumption in 2011, dropped by nearly 50 percent in the last year and over 300 percent since 2008. At the same time, the percentage of households planning to increase their spending is up 87.5 percent over 2008, with over 45 percent of America's wealthiest families ($500,000 minimum discretionary income) intending to increase premium goods and service outlays. Within the luxury shopper categories, researchers estimate that spending will increase by $26.6 billion. They also estimate an 11 percent increase in luxury travel.
"It is a relief," said Dr. Taylor, "to finally be able to see a significant return of affluent consumers to the luxury marketplace. But they do remain skittish: 70 percent believe the recession still exists; yet their anxiety is significantly reduced. Job loss anxiety is down 50 percent over last year and concern over the potential failure of their company has declined from 28 percent to 11 percent.
The growing strength is personal and family economies are igniting the luxury marketplace; motives include purchasing homes delayed by the recession, also cars, home decorating, second home retreats and even personal aircraft. For the first time in four years we are seeing a modest return to capital markets from money funds.
"However," Dr. Taylor continues, "This does not mean that consumers will abandon the resourceful, needs-based purchasing model that has been a hard-won benefit of the Recession years. Luxury consumers will seek out extraordinary quality, service and craftsmanship. They will exercise discretion. They will engage in the art of the deal and the discount, with relish. And, they will operate as families in NEED, not WANT. This is not a return to 2005!"
Co-Study Director, Cara David, Senior Vice President at American Express Publishing, also discussed trends that may characterize luxury consumer spending in 2011. "There are three major drivers," she said, "that will make 2011 a year of opportunity for marketers: Present Tense Reality, an increase in the Radius Of Personalization and Purchase Profiteering."
First, Present Tense Reality: this driver reflects a lower level of optimism about long-term future issues. Purchasers are now more resourceful, looking for products and services that add joy and value to their lives in real time or, as Dr. Taylor says, "The consumer looks for immediate benefit in their value equation."
Second, The Radius Of Personalization: this refers to the idea that need will be the filter through which many consumers will justify their purchases. This relates to the Recession - an event which 79 percent of affluent and wealthy families believe is still a hazardous factor in the economy. "Need," explains Ms. David, "is the critical purchase criterion in the post-Recession environment. The recession, as well as advance in technology, personal networks and the reach of advertising encourage affluent families to research their purchases more diligently than ever. Now those families are expanding their radius of need: this expansion particularly relates to delayed home improvements, automobiles, and delayed travel."
Third, Purchase Profiteering: this refers to the pleasure that 81 percent of the research respondents mentioned regarding navigating discounts of the branded merchandise they intend to purchase. Interest in coupons and published discounts is up 22 percent and the search for value occupies the interest of 92 percent of these consumers.
"The affluent and wealthy market," Ms. David concludes, "will insist on extraordinary quality, service and craftsmanship at a discounted price. The new luxury integrates experience with the extraordinary - to reach the level of the sublime. This will be a good year for the sensitive merchant who deploys the reach of digital technologies, advertises details of distinction and experiences, and projects a warm welcome through sales and service personnel."