"We noted some interesting break points in spending behavior. Households with a Net Worth of $10 million or more are much less likely to be cutting back and continue to spend on high fashion, watches, jewelry, travel and other luxury products and services. According to the research, respondents with $5-10 million Net Worth are anxious and making cutbacks in discretionary spending. Those households with a Net Worth of $5 million or less are actively 'trading down' to a less expensive lifestyle."
Gollan continued, "This survey is the latest sign that luxury spending by merely affluent consumers is grinding to a halt. Increasingly, the super rich are the most valuable consumers when it comes to high-end goods – and the ones luxury marketers should keep their sights firmly focused on."
"Extreme Concern" About Market Volatility
Findings indicate that those with a Net Worth of $25M+ are likely to continue to spend on luxury products and services as usual through the end of the year, with only 4.5% expressing "extreme concern" over the impact of the market on their finances. Those with a Net Worth of $10-25M indicated that while they are likely to continue to spend in many categories, their
"extreme concern" about market volatility rose to 19.2%. This concern increased dramatically for those with a Net Worth below $10M: up to 52.4% of $5-10M Net Worth and 90.8% of $500K-$1M Net Worth. An overall average of 62.2% of participants were "extremely concerned."
Cutbacks in Discretionary Spending
The same basic pattern applied to those who had already cut back on discretionary spending: 2.3% of $25M+ Net Worth; 3.8% of $10-25M Net Worth; 18.5% of $5-10M Net Worth; 48.6% of $1-5M Net Worth, and 67.6% of $500K-1M Net Worth. On average, 38.9% of survey respondents cut back on discretionary spending.
Making Major Lifestyle Changes
While only 9.1% of the $25M+ Net Worth group stated they would need to make "major lifestyle changes" if the market deteriorates, the percentages rose to 24% of $10-25M Net Worth; 67.3% of $5-10M Net Worth; 77.9% of $1-5M Net Worth; and 94% of $500K-$1M Net Worth. The overall average indicated 67.7% would need to make major changes, casting a large shadow on how luxury marketers need to assess their customer segments.
New Break Point: Net Worth of $10M and Up Still Spending Big
Break points in spending patterns appeared at $10M+ Net Worth, where spending is projected to remain strong throughout the end of the year. With all the buzz about the housing market, it was those at a break point of $10M Net Worth that answered they are still likely to purchase a
non-primary residence by the end of the year: 13.6% of $25M+ Net Worth, and 7.7% of $10-25M Net Worth. Below $10M, responses fell below 1%.
The sweet spot for luxury marketers was clearly confirmed at consumers with a $25 million + Net Worth:
- 98.9% of respondents said they will spend at least $10,000 on fine jewelry before the end of the year;
- 100% said they will spend at least $30,000 on leisure travel;
- 100% said they would spend at least $10,000 on fashion and accessories;
- 43.2% said they would spend at least $10,000 on home electronics; and
- 38.6% said they would spend at least $10,000 on watches.
Throughout, those with a Net Worth above $10M were more comfortable that their lifestyle would continue, while those with a Net Worth below $10M were already tightening their belts and expecting to tighten them even further.
