Survey: Wealthy U.S. Shoppers Plan to Curb Spending on Luxury Jewelry, Watches

A significant number of wealthy consumers said they will cut back on buying luxury items this year, according to a survey released Tuesday by the Luxury Institute.

A total of 36 percent of respondents said they plan to decrease overall spending on luxury goods and services through yearend, according to the semiannual “State of the Luxury Industry” WealthSurvey. Just 6 percent said they will spend more.

Among the areas that should see above-average increases in spending include leisure travel, dining, fitness and technology, according to the semiannual survey. Meanwhile, categories vulnerable to further retrenchment are led by jewelry, followed by home furnishings, gifts, watches, handbags, shoes and cars.

The Luxury Institute surveyed U.S. consumers earning at least $150,000 per year—$286,000 average household income—and with an average net worth of $2.7 million.

About 20 percent of wealthy shoppers say that they plan to spend more on “discounted” luxury goods and services for the remainder of the year; 25 percent have already been spending more on discounted luxury in the first eight months of 2010 than they were in 2009.

The most frequently cited qualities that define luxury—superior quality (76 percent), craftsmanship (65 percent), and customer service (57 percent)—are the areas where wealthy consumers are finding the greatest dissatisfaction. About 56 percent say that craftsmanship of luxury products is on the wane; 51 percent say that quality is decreasing; 50 percent notice a slippage in customer service quality; and 48 percent say that luxury products are losing their design value.

“The greatest danger for a luxury firm is to lose its status as a differentiated, premium brand, but wealthy consumer perceptions suggest that luxury overall may be in danger of losing its cachet,” said Milton Pedraza, Luxury Institute CEO. “This calls for a renewal of efforts to be unique and exclusive and to execute well on customer service.”

The Luxury Institute, New York, is a ratings, research and Luxury CRM consulting organization that it says “is the global voice of the high net-worth consumer.”

Graff, Blancpain among Top-Rated Luxury Brands

Heart-shaped diamond necklace by Graff.

The Luxury Institute released its 2011 Luxury Brand Status Index survey of wealthy U.S. consumers. Watches, jewelry and automobiles (selling for at least $100,000) were rated on a one-to-ten scale by consumers who earn at least $200,000 a year. The top three brands in each category follows:

Blancpain L-Evolution

Jewelry
Graff 8.38
Buccellati 8.19
Asprey 8.05


Watches
Blancpain 8.35
Rolex 8.01
Vacheron Constantin 7.85

Ultra-Luxury Autos
Maybach 8.44
Bentley 8.32
Bugatti Veyron 8.22

Brands were rated based on quality, exclusivity, social status and overall ownership experience. In addition, these affluent consumers based their selection on price worthiness, their willingness to recommend it and the likelihood they'll buy it next time they make a purchase in the category.

Bergdorf Goodman Earns Top Ranking Among Luxury Consumers

For the second consecutive year, Neiman Marcus' Bergdorf Goodman subsidiary earns the top ranking among eight luxury retailers in the 2011 Luxury Consumer Experience Index survey of wealthy shoppers conducted by the Luxury Institute. Respondents rated retailers on store personnel, the shopping environment and whether the overall experience resulted in complete satisfaction.

Brooks Brothers earns the second highest overall LCEI score but ranks first for completely meeting wealthy customers' needs. Nordstrom receives the third highest LCEI score, and remains the most popular luxury shopping destination, visited by 38 percent of wealthy shoppers in the past 12 months. It is also earns the highest loyalty, with 98 percent of shoppers planning to come back.

“The top-tier brands of luxury with resources are now focused on becoming customer-centric global enterprises,” says Milton Pedraza, CEO of the Luxury Institute, a New York-based market research firm specializing on high net-worth consumers, which does the LCEI survey. “The only way to achieve this is to create establish a self-reinforcing culture of service to your associates and your customers. The work is extremely hard but the financial returns can be dramatic.”

Survey participants had minimum household income of $150,000, with average income of $271,000 and average net worth of $2.4 million.