The Invulnerable Luxury Consumer: Findings from The 2014 Survey Of Affluence And Wealth In America

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The Invulnerable Luxury Consumer: Findings from The 2014 Survey Of Affluence And Wealth In America

Now in its ninth year, the annual Survey of Affluence and Wealth, produced by Time Inc. Affluent Media Group and YouGov, one of the world’s largest research and consulting organizations, focuses on the attitudes and aptitudes of the world’s elite consumers. The dual foci of this 2014 Survey includes over 1,700 U.S. individuals with a minimum of $100,000 in discretionary household income. These respondents are demographically representative of the 12.1 million households at the top 10% of the U.S. economy.

Second, and also for the first time this year, the global sample of the Survey of Affluence & Wealth adds in 2,500 non-U.S. consumers at the upper end of their individual country’s economy from the United Kingdom, Europe (France, Germany, Italy, Spain), Asia (China, Indonesia, Japan, South Korea, Singapore) and the United Arab Emirates. The Global sample represents the top 10% of households in each respective country. Data collected from these countries addresses lifestyle goals, shopping, economic trends, brands and category participation.

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Sampling error in the study is estimated to be +/- 3%, and is higher among subgroups. Multiple panels and starting points were employed to assure proper demographic and psychographic representations within each segment. The survey addressees many aspects of respondent lifestyle, values, shopping habits, brand preferences, family characteristics, sources of success and wealth, attitudes toward money, lifestyles, and media consumption.

“In going out to the world, we expected to see a lot of diversity among the affluent and wealthy. In fact, we are finding that the experience of this group is nearly homogeneous, with only small variations in demand and expectations,” said Dr. Jim Taylor, Vice-Chairman of YouGov and Research Director of The Survey of Affluence And Wealth In America, at the AMEX Publishing Luxury Summit.

Survey of Affluence and Wealth

The study emerges at a time when luxury goods and services at present enjoy a fairly positive sales growth, even as many marketers struggle to grow profit margins among consumers who are themselves confident in their shopping prowess. Indeed, they feel confident in their ability to maintain a sense of invulnerability in their lives.

It is this word—invulnerability—that is used in the Survey to describe the sense of confidence and pride found globally to describe luxury consumers who have experienced the great recession and now feel confident they can see their family through tough times again, were they to reoccur.

Percent of those who feel more confident in their ability to see their family through tough times:

USA
67%

UK
39%

Germany
58%

Spain
63%

Italy
46%

France
57%

China
77%

Japan
25%

South Korea
66%

Indonesia
74%

Singapore
55%

United Arab Emirates
65%

The UK, Italy, and Japan are the only countries in which fewer than half of those surveyed said that the recession has made them more confident in their ability to see their families through tough times.

Survey of Affluence and Wealth

The Survey also reveals that through disciplined savings, affluent consumers worldwide are fortifying their personal reserves to render themselves invulnerable to economic forces beyond their control.

Percent of income being saved:

USA
23%

UK
17%

Germany
22%

Spain
32%

Italy
27%

France
19%

China
33%

Japan
23%

South Korea
33%

Indonesia
34%

Singapore
33%

United Arab Emirates
32%

“As a result, we have a world of individual economies where the affluent and wealthy are giving increased priority to their families and seeking to live a more fulfilled life,” adds Caryn Klein, Vice President, Time Inc. Research & Insights. “The byproduct of this shift is they are spending more on goods and services that allow them to nurture these relationships and share experiences with family and friends. This trend is also changing the way the affluent customer interacts with merchants, vendors and brands.”

Survey of Affluence and Wealth

Since Q1 2013, among U.S. affluent and wealthy consumers, more feel passionate about spending quality time with family—69% this year, 63% last year; more want to see the world—51% this year, 40% last year; and more want to simplify their life—45% this year, 36% last year. Around the globe, majorities in most countries surveyed also feel good about their ability to define and create fulfilled lives for themselves and their loved ones, with the sole exception of respondents from Japan.

Percentage who feel well-informed about how to live a fulfilled life:

USA
77%

UK
56%

Germany
83%

Spain
71%

Italy
71%

France
68%

China
83%

Japan
38%

South Korea
56%

Indonesia
82%

Singapore
62%

United Arab Emirates
68%

Despite this positive dimension, anxiety remains on many fronts. On average, across the 12 countries included in the research, 64% of those queried expressed concern about their country’s economy; 60% are apprehensive about unemployment; and 58% are uneasy about the concentration of wealth among fewer and fewer households.

Survey of Affluence and Wealth

With U.S. spending expected to increase 6.7% in key discretionary categories in the next year—and luxury playing an important role in the lives of affluent consumers in the U.S. and abroad—the Survey finds a majority of consumers are self-reliant using a range of resources to determine the brands and products that best fit their lifestyle.

The Survey findings also show that today’s global invulnerable, affluent consumers are confident in their own ability to research, investigate and negotiate.

Percentage who agree—when purchasing luxury or high-end products and services, I usually know what I want and what I'm willing to pay before interacting with a salesperson:

USA
80%

UK
73%

Germany
84%

Spain
81%

Italy
84%

France
73%

China
91%

Japan
64%

South Korea
70%

Indonesia
84%

Singapore
78%

United Arab Emirates
87%

A key indicator has emerged from an analysis of America’s propensity to identify “favorite” brands across categories. Compared to 2007/2008, far fewer affluent American consumers in the top 5% of U.S. households now say they have favorite brands in retail, fashion or luxury hotels.

In 2007/2008:

  • 47% selected a favorite retailer versus 28% today
  • 80% selected a favorite fashion brand, in comparison with 61% now
  • 67% selected a favorite luxury hotel, as opposed to 37% currently

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Further, very few affluent and wealthy consumers now rely solely on brand messaging to form their opinions about brands. Among affluent U.S. consumers—with similar findings in most countries surveyed—72% say, “Online comments by users of the product or service are meaningful to me when making decisions on what to buy.” This figure has increased by seven points, from 65%, in 2012.  Moreover, 64% of respondents maintain, “Online comments by experts influence me when making decisions on what to buy,” up from 55%. Worldwide, many affluent and wealthy consumers hold their purchasing power literally in the palm of their hands.

Percentage who agree—When shopping in stores, I often use my smartphone or tablet to research prices or other product options online (among device owners):

USA
49%

UK
34%

Germany
44%

Spain
54%

Italy
65%

France
39%

China
88%

Japan
58%

South Korea
75%

Indonesia
81%

Singapore
73%

United Arab Emirates
55%

Survey of Affluence and Wealth

Affluent Americans’ use of handheld devices to aid the shopping process in-store falls in the middle of the pack, at only 49%. Eight countries, and especially, China, South Korea, Indonesia and Singapore, have a greater percentage of affluent device-owners using their smartphone or tablet to research prices or other product options online while shopping in-store. However, among American Millennials, the percentage jumps to 75%—higher than in other countries except South Korea, Indonesia and China.

In the U.S., the Study found four defined consumer segments in which affluent and wealthy consumers use—or do not use—brand as part of their strategic approach to purchasing goods and services. The four segments—Research Masters, Brand Agnostics, Brand Pragmatists and Taste Masters—vary in how they use key market strategies.

Survey of Affluence and Wealth

Research Masters, 26% of the sample, are brand nomads who are confident in their ability to pursue the very best deals: they go where research takes them. Information dissemination through public relations and product promotions are key for this group.

At the other end of the spectrum are Taste Masters, 28%, are highly involved with brands: they do their shopping in-stores, compared to online. They look for brands that speak to who they are and to what moves them aesthetically. Merchandising is key for this group.

Between these two segments are Brand Agnostics, 21% and Brand Pragmatists, 25%. For these consumers, brand does not play a role in defining who they are or how they express who they are to the world. Yet the groups differ dramatically in the role that brand plays in decision-making.

Brand Agnostics have extremely low faith that brand name provides quality assurance: they rely on their own sense of consumer savvy to determine this for themselves. In contrast, Brand Pragmatists have a great deal of faith in brands—faith that is built from positive personal experiences where a brand has delivered on its promise. However, these consumers are also relatively disengaged with the consumer marketplace. Therefore, with this consumer, relationships must be somewhat formal and impersonal rather than being based on a passion or love for the brand that doesn’t exist.

Survey of Affluence and Wealth

The research also found that in many countries, six in 10 or more affluent consumers show great openness to, and interest in, luxury across categories. In 11 of 12 countries, a majority say they will pay full price as long as they are guaranteed high-quality and great service. In 9 of 12 countries, majorities say that they are willing to spend more for designer brands because they are high quality; and in 9 of 12 countries, a majority says they always buy the automobile model with the highest level of options.

“We see a lot of reasons for optimism,” said Dr. Taylor. “The need to consume is a part of the affluent life and the affluent and wealthy seem sealed as a horizontal, homogeneous and global class. But we see signs that post-recessionary prudence has become a hallmark of enlightened self-interest for affluents around the globe. Because of this, we believe the world needs a new theory on the role of the brand in people’s lives.”

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