Consumer spending on luxury items rises in third quarter

The data is in and the news is generally positive: Affluent consumers spent more in the third quarter 2009 than they did in the second quarter. However, marketers’ optimism should be tempered with realism, as a deeper look at the data discloses a dramatic difference in attitude toward luxury between ultra-affluent consumers with the highest household incomes and affluents with a less robust income level. The findings are further confirmation that the coming post-recession luxury market will be far different from the one that came before, according to a recent report from Unity Marketing.

Changes in consumer behavior follow changes in attitude, according to most psychologists that study consumer behavior. In the third quarter of 2009 that proved true among luxury consumers.  Last quarter affluent consumers showed the largest historic increase in consumer confidence as measured in Unity Marketing's Luxury Consumption Index (LCI). In this quarter they followed suit by increasing their spending on luxury at near historic levels. 

Overall spending on luxury goods and services rose 29.4 percent from second quarter to third quarter 2009.  In all but three of the 22 product and service categories included in Unity Marketing's latest Luxury Tracking survey of 1,067 affluent consumers (avg. income $228,800), they spent more from quarter to quarter.

Good news:  Affluents spent more in all but three of 22 product and service categories tracked. But Pam Danziger, president of Unity Marketing and lead researcher in the luxury tracking study, warns luxury marketers that this quarter's uptick might simply be a sign that consumers were releasing pent-up demand and that such strong spending on luxury may not carry over to subsequent quarters.  "No question that this quarter's increase in spending on luxury is good news for luxury marketers. Many affluent consumers released pent-up demand in the third quarter, particularly in the area of home luxury goods and experiential luxuries, like travel and dining," Danziger said.