|
|
 |
|
Viewing report
|
|
|
|
Fall 2011 Tracking Study of the Affluent Market–#20
American Affluence Research Center, Oct 2011, Pages: 67
As an inexpensive way to conduct research among the affluent, proprietary questions can be purchased in these tracking studies for your exclusive use.
Overview
Since our Spring 2011 report, there have been significant and substantial changes in the mood of the affluent, their outlook for the economy and their personal wealth, and their spending plans as a result of the disappointing news about current economic conditions and the stock market volatility in recent months.
The good news is that there is a sizable segment of the wealthiest 10% of U.S. households that plan to continue spending for certain products and services.
Following a substantial uptick in the economic outlook and spending plans of the affluent in our Spring 2011 survey, this new Fall survey shows that the affluent have returned to a strongly negative perspective on current business conditions and their 12-month outlook for business conditions, the stock market, and their personal household income and net worth.
These results are consistent with the general Consumer Confidence Index, reported by The Conference Board in August and September, which has fallen to the low levels last seen in April 2009. The negative mood of the general public and the affluent appears to reflect a number of factors which, for the affluent, include stock market volatility, a poor outlook for their personal household income and net worth, and the expectation that it will be several years before unemployment and the stock market return to pre-recession levels.
While spending plans for the 8 major items and the indexes for the change in spending for the 17 products and services tracked by these surveys declined from the Spring 2011 survey, they did not decline as much as might have been expected given the negative economic outlook of the affluent. There are pockets of strength in the spending plans, especially among the wealthiest one percentile, and in the spending plans for December holiday gifts. On average, the affluent households will spend over four times as much for holiday gifts as that estimated for all households in an October survey by BIGresearch for the National Retail Federation.
Major Findings
- The assessment of current business conditions declined substantially from the Spring 2011 survey and fell to a level below all but one of the readings (Spring 2009) during the recession.
- The index for future business conditions fell well below the Spring 2011 survey index. Given the low rating of current business conditions, this future index seems to reflect an expectation of very little improvement from a poor starting point. This is consistent with the September (and August) Consumer Confidence Indexes of The Conference Board, which, at just over 45, were at the lowest level since April 2009.
- The index for change in the stock market is substantially below the Spring 2011 survey index and reflects little optimism about the direction of the stock market during the next 12 months. The index suggests an expectation that the market will be roughly at the current level 12 months from now.
- The index for the expected change in after-tax personal income also fell substantially. This index indicates an expectation that income will be
reduced over the next 12 months.
- The composite ACE 12-month Economic Outlook Index (which is the average of the 12- month outlook for business conditions, the stock market, and household income) declined dramatically from the Spring 2011 survey and moved back to negative territory. All three components of the composite ACE 12-month Economic Outlook Index were well below the Spring 2011 survey results.
- The index for the expected change in savings is well below the Spring 2011 survey, and while almost at a neutral level, is a strong reversal of the sentiment expressed in the prior survey. This may be a reflection of the expectation of a decline in personal household income.
- Perhaps reflecting recent stock market volatility, preservation of capital as the primary investment objective increased by several percentage points while capital appreciation/growth declined by several points from levels in the Spring 2011 survey. As might be expected, there are substantial differences in savings plans and investment objectives among certain groups.
- While the purchase intentions for most of the 8 major expenditures show surprisingly little change from the prior survey, the acquisition of a new home did increase slightly while plans for a vacation home acquisition declined. A substantial amount of possible additional purchases are represented by the respondents who are “undecided” about a cruise (8%), auto (8%), remodeling (6%), a primary residence (3.6%), and a vacation residence (5.0%).
- Given the 11.4 million households represented by this survey, it can be estimated that the affluent represent potential purchases of 2.1 million autos, 1.5 million remodeling projects, 2.1 million cruises (total of 4.2 million cruisers), 752,000 primary homes, and 285,000 vacation homes during the next 12 months.
- The purchase intentions of those who plan to make a general effort to reduce expenses during the next 12 months and those who plan to reduce spending during the next 6 months because of stock market volatility are very similar for all 8 major expenditures. The same pattern of intentions can be seen among those who expect their net worth to be lower in 12 months. The lowest levels of purchase intentions are among those “under water” with their home mortgage.
- Of the 17 categories of products and services for which expected changes in spending during the next 12 months are tracked , nine declined by 9 points or more. All but three of the categories in the neutral range of 90 to 110 appear to be facing a decline in spending.
- The indexes for expected changes in spending during the next 12 months are very similar for those who plan to make a general effort to reduce expenses during the next 12 months and those who plan to reduce spending during the next 6 months because of stock market volatility. The same pattern of changes in spending can be seen among those “under water” with their home mortgage. The lowest indexes for spending changes are among those who expect their net worth to be lower in 12 months.
- Just over 40% of the affluent say they will make a conscious effort to reduce or defer expenditures during the next 12 months. The responses to this question have been virtually unchanged since the Fall 2010 survey. There are few differences within the age, gender, and wealth groups in terms of intentions to cut back during the next 12 months.
- About 60% of the affluent say that the recent stock market volatility will not impact their spending plans for the next 6 months, while the remainders say it will affect their spending.
- An estimated 27% of all U.S. households are making payments on mortgages that exceed the market value of their primary residence, i.e. they are “under water”. Only 3% of the affluent report having more debt on their home than its market value. Another 5% indicate the debt on their home equals its market value.
- Over 50% of the affluent who are not “under water” have equity equal to 76% or more of the market value of their primary residence. Almost three quarters of these affluent households have equity equal to 100% or more of the value of their home. Among those with equity in their home, the average equity equals 72% of the market value of the home.
- About 60% of the affluent expect it to take 4 or more years for the economic recovery to take unemployment back to pre-recession levels. The affluent are more optimistic about the recovery of the stock market. Among most of the demographic segments of the affluent, about 60% or more believe the stock market will recover to pre-recession levels in no more than 3 years.
- For both women and men, the top item on their December holiday gift “wish list” is some form of “currency” (i.e. a gift card or certificate, money or a check). Both have a slight preference for a gift card/certificate. Clothing is a second choice for both women and men. The third choice is fine jewelry for women and books/CDs/DVDs for men. Almost one in five of both men and women want an iPad or tablet computer.
- On average, about one of every ten among the affluent say they do not plan to buy holiday (Christmas and Hanukah) gifts this year. This compares to about 12% in the Fall 2010 survey, 9% in the Fall 2009 survey, and 3% in the pre-recession Fall 2006 survey.
- On average, only 3% of the affluent planning to buy 2011 holiday gifts expect to spend more than last year, while 28% expect to spend less. In the 2010 survey these numbers (including those planning to spend the same) were essentially identical. In the 2009 survey, 3% planned to spend more, 38% planned to spend less, and 59% planned to spend the same.
- Those planning to spend more report an average potential increase of 9.1%, an increase from the 7.7% increase in the 2010 survey. Those planning to spend less report an average potential decline of 14.4%, about the same as the 14.9% in the 2010 survey.
- Allowing for those who expect to spend the same, the average 2011 holiday gift expenditures of the affluent are estimated to decline 3.7% from 2010 levels. This produces an estimated average of $2,270 for 2011 holiday gift expenditures per affluent household or a total market of $23.6 billion (up 2.3% from 2010) after allowing for the households that will not buy holiday gifts in 2011. This compares to an average household gift expenditure of $518 (up 2.1%) predicted for all U.S. households in a BIGresearch survey for the National Retail Federation.
- Given that consumers often spend a bit more than they planned, particularly during the holiday gift season, total spending by the affluent could be the same or slightly higher than in 2010, especially if there is some strength in the stock market.
- Based on total dollar value of holiday gifts purchased, traditional department stores have been losing share to other sources among the total group of affluent households. However, traditional department stores have maintained a strong position among most demographic segments, and especially among those in the highest net worth group, which has been increasing the business given to these stores since the 2006 survey.
- Discount department stores have been maintaining their share of the total dollar value of holiday gifts purchased by the total group of affluent households. Discount department stores have a strong position among most demographic segments, and especially among those in the lower income and net worth groups.
- Specialty retail stores have been losing share to other sources among the total group of affluent households. However, these stores have maintained a strong position among most demographic segments.
- The Internet has been increasing its share of the total dollar value of holiday gifts purchased by the total group of affluent households. The Internet is named by half or more of all demographic segments except the highest net worth and age 60+ groups, both of which are over 40%. All groups indicate intentions to maintain or increase the share of 2011 business given to the Internet.
- The other sources of holiday gift purchases, which include catalogs and TV (HSN, QVC, etc), have lost some share since 2006 of the total dollar value of holiday gifts purchased by the total group of affluent households. These sources, about half of which are catalogs, are most popular with those age 60+.
Top 4 Ways to Use and Benefit from This Research
If your perceptions of today's luxury and affluent consumers (who are often very different) are largely derived from what you read in the media and online, you are probably creating your marketing strategies and plans based on false premises. To stay ahead of your competitors, you need AARC's new research report to understand today's luxury and affluent consumers and how to market to them.
1) Develop an understanding of the general mood of the affluent and their expectations for business conditions and personal income over the next 12 months. Gives you a basic perspective on general market conditions that will determine marketing opportunities and challenges.
2) Identify changes in the spending plans of the affluent for your specific product category during the next 12 months. Shows you how potential sales of your product category compare to prior years and indicates what competitive pressures may result in your industry.
3) Learn which segments of the affluent market represent the best sales potential for you during the next 12 months. Identify the market segments that are cutting back on spending and those that are continuing to spend for your product category.
4) Create your marketing and sales plans with data based on the future intentions of the affluent. Unlike many other surveys of the affluent, this is not an extrapolation of past actions that they have been asked to remember and reconstruct.
Please Note: Price includes Full Report with full set of 94 tables of cross-tabulated data.
|
|
|
|
