The closely watched Survey of Affluence and Wealth in America, presented by American Express Publishing and the Harrison Group, reveals that the basic psychology and spending habits of the affluent have undergone a dramatic change in this economic downturn. They are now proud of not spending and even boast of buying jewelry at Costco.
But that's not necessarily bad news for travel. Affluent consumers' appetite for travel is as strong as ever; it's just that they want to spend less and take shorter trips.
The researchers divided affluent consumers into four segments, based on discretionary income:
$ Upper middle class: $100,000 to $124,000;
$$ Affluent: $125,000 to $249,000;
$$$ Super-affluent: $250,000 to $499,000;
$$$$ Wealthy:$500,000-plus.
Collectively, those four groups represent just 10% of the U.S. population. Yet, they account for half of all retail sales, 70% of all profit margins and 80% of all nonretirement account assets.
In the last year, however, the number of households in the group contracted almost 10%, while average income declined 12%.
Following are highlights of the study, as presented by Jim Taylor, vice chairman of the Harrison Group, and Cara David, senior vice president for corporate marketing and integrated media at American Express Publishing.
• More than half (53%) worry they could run out of money.
• Almost three-quarters believe the recession will last longer than a year. Even worse, a significant percentage expect a depression.
• Optimism continues to track lower. Fewer than 46% say they are optimistic about their own future. Paradoxically, 66% say they are "very happy," the clearest upturn since this research started two years ago.
• More than three-quarters take pride in prudent new shopping habits. Beginning last Christmas season, Taylor said, "Shoppers, especially women, began to take pleasure in saying 'no' to unexamined consumption. They began to take pride in their ability to resist the urge to buy and started to examine why they needed a new dress, a new fixture -- anything, really."
Added David: "This new resourcefulness means that as the recession ebbs, merchants cannot expect a return to the sort of 'retail gluttony' that has characterized the last 10 years. Instead, consumers will continue to apply their newfound skills in ... and values-based shopping.
"Brands will have to get in line with the spirit of this 'rational exuberance': the tendency to take pleasure in saying 'no.' "
• Among the affluent, 80% say they now wait for an item to go on sale before buying; 65% shop with coupons "fairly regularly."
• The majority (77%) are buying fewer big-ticket items compared with a year ago, an increase of 15 percentage points since last December. The same group is carefully reviewing every spending category to see where they can economize.
• More than half of the respondents (57%) say that "a few luxuries are important in tough times," while 54% feel guilty about buying premium-priced goods in the recession. The study also found that categories that had seen significant spending reductions, such as weekend getaways, vacations, dining out and fashion accessories, have now begun to show signs of renewal.
• Ego has gone out of the purchase equation, with words and phrases like "successful" and "being a leader" now absent from reasons for buying luxury items.
• Brands are more important than ever, as are quality, craftsmanship and service.
• The intent to take weekend getaways is back to where it was before the downturn, and people's intention to spend less on vacations is moderating. However, restaurants remain in a trough when it comes to intent to spend.
• The affluent might splurge in the fourth quarter as a reward for having saved the rest of the year; if they do, that might particularly benefit travel.
• Affluent consumers who do take luxury vacations travel to places where they are not easily seen, so as not to stand out. Taylor called this "enclaving."
• People are looking for less risk in choosing a vacation, which often means returning to a favored place. "This is a nonexperimental economy," Taylor said.
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