Sarah Mahoney, Nov 19, 2009 10:57 AM
Overall consumer confidence may still be in the cellar, but there’s growing evidence that for the affluent, economic recovery appears to be right around the corner.
Thanks to recent gains in the stock market, “the wealthy are feeling wealthier than they have,” Milton F. Pedraza, founder and CEO of the Luxury Institute, tells Marketing Daily. “Real estate has probably stabilized, and for the affluent, there’s a real sense of optimism — it’s tempered, of course, but it’s a solid confidence.”
Luxury marketers are seeing signs of it, too. Saks, for example, just reported third-quarter results that were stronger than expected, and while same store-sales fell 10.1% in the quarter, the declines are lessening. “Several merchandise categories, such as women’s designer sportswear and ‘gold range’ apparel, outerwear, jewelry, and soft accessories, began to show relative strength,” the company says in its release. And at its New York City flagship, it saw “a meaningful improvement from earlier this year.”
Nordstrom also reported improving trends in its quarterly results, and Richemont, the Swiss company that owns such brands as Cartier watches, says that while sales fell 15% in its first half, it is cautiously optimistic about sales during the holiday period. Late last month, Bain & Co. issued a report that thanks to strength in mainland China and online, it now expects global luxury sales for the year to decline just 8% — not 10% as it predicted back in the spring.
Pedraza thinks that clothing, accessories, and travel will be among the first categories to bounce back. “People don’t want to miss out on their vacations,” he says, while he expects purchases of jewelry, watches and housing-related splurges, such as new appliances and furniture, to lag.
Not only are the well-to-do feeling optimistic, he says, but they’re also happier as a result of the recession. A recent Luxury Institute survey, which included those with an average income of $310,000 a year and average net worth of $5.3 million, “shows a rethinking,” he says. “Yes, they lost money, but they’re still wealthy. Even those who worried about losing a lot of wealth at once seem to have realized, ‘I am better off than most people.’ There seems to be a level of gratitude and recognition that as bad as things have been, they have much to be happy about.”
When asked to rate their overall happiness on a 0-10 scale, 70% say their happiness rates as an 8 or above. Just 3% could be considered unhappy. Friends and family generate the most happiness, followed by home and physical environment, personal growth and development, romantic relationships and health.
He says the growing sense that recovery is near will also ease some of the guilt and sensitivity the wealthy have felt about making splashy purchases when so many people are struggling. “There will be a few more red Ferraris out there,” he says. He’s also expecting an increase in charitable giving. “It’s one of the greatest personal brand-builders, and now that people feel they can afford to give again, they will.”