Pam Danziger, president of Unity Marketing

The luxury market in 2014 might be more challenging that initially anticipated. “My read of the outlook and attitude of affluent consumers says marketers should hope for the best, but plan for the worse," cautions Pam Danziger, president of Unity Marketing and author of a new report, The Luxury Report 2014. "In particular, Unity Marketing foresees American affluents adopting a new attitude of austerity with a trend toward simplicity and making due with less, rather than aspiring for extravagance and indulgence.

Monthly spending decreasing

Unity Marketing’s latest Luxury Report 2014 tracks affluent consumer spending and purchases of luxury and high-end goods and services since the recession in 2008 through 2013, based upon surveys conducted among more than 1,200 affluent consumers every three months. The survey analysis shows that throughout 2010 and 2011 affluents went through a recovery period where so-called pent up demand boosted affluent spending on luxury. However, since 2012 spending has been slowing as affluents’ consumer confidence has taken a downward turn.

Despite the rising values of their houses and stock portfolios that measure wealth, affluents are choosing to conserve those gains, rather than spending extravagantly like they did in the run up to the recession and immediately afterwards. For example, the average amount affluents spent on luxury goods and services in any three-month study period during 2013 was down 23.2 per cent from 2012 levels. And the prospects for 2014 show affluents remain cautious about future spending on luxury, with nearly 80 percent of n=5,001 affluents surveyed in 2013 predicting they will spend the same or less on luxury during 2014.

" Austerity is the watchword for affluents’ attitudes in the current market, which reflects a return to simplicity and a back-to-basics lifestyle. Luxury marketers need to position their brands with respect for this new attitude. They must demonstrate how their brands deliver a values-based return on investment,” added Danziger .

US households remain the main consumers

While the developing countries have enjoyed the most attention from growth-hungry luxury brands, U.S. households remain the largest buyers of luxury goods and services in the world. However, the wealthiest U.S. consumers are giving up conspicuous consumption and status symbols that proclaim one’s wealth to embrace brands that give them bragging rights to how smart a shopper he or she is.

Marketers can no longer assume that affluent consumers are willing to spend up without a compelling reason and luxury marketers need to modify their positioning and branding to match the new normal luxury lifestyle. The recent recession has reshaped the American economy in ways that will affect us for decades to come. Affluent consumers no longer feel like wearing a symbol of wealth, knowing that the American middle class has been severely weakened from the recession. Most affluents, both the HENRYs [1] (income $100-250K) and Ultra-affluents ($250K+), would rather throw their lot in with the 99 percent and avoid the conspicuous consumption that characterized luxury in previous years,” Danziger concludes.