More than half of affluent consumers say they feel "guilty" making luxury purchases in this economy, a survey of the most-moneyed Americans finds. Fewer this year also say they like to be labeled as "wealthy."
The survey of people with an annual discretionary household income of more than $100,000, which is generally those earning $500,000 or more, was released Wednesday by consulting firm Harrison Group and American Express Publishing. Discretionary income is what's left after the mortgage and taxes are paid.
People with such discretionary incomes make up 10% of households yet account for more than half of retail sales and 70% of profit margins.
With luxury chains Neiman Marcus and Saks Fifth Avenue posting about the highest monthly sales declines in retail, it's clear the well-heeled have closed their wallets about as tightly as other shoppers. Figuring out why is a billion-dollar question in luxury retail.
Of course, far more than a guilty conscience is at play. More than half of those polled — 53% — said they worry they could actually run out of money.
The savings rate for the wealthiest in the survey is up 20% this year, while the average household discretionary income among those surveyed was down from $480,000 last year to $440,000 this year.
But 22% of those polled say their financial security was unaffected by economic conditions.
While there's been plenty of talk about the wealthy hiding their high-end shopping bags, the findings are believed to be the first to quantify guilt's role in the decline of spending. Of more than 1,500 respondents, 54% agreed they "feel guilty purchasing luxury goods in the current economic climate." Just 29% said they like to be recognized as being "wealthy," down from 35% a year earlier.
The survey, in its third year, never addressed guilt because Jim Taylor, vice chairman of the Harrison Group, says it "didn't become an issue until this year."
Taylor says high-end retailers and brands must convince wealthy consumers there's an added value in their products.
With consumption now often "equated to shallowness," retail branding expert Ken Nisch says products must "marry function and fashion," such as Apple's iPhone.
Andrew Sacks, president of Agency Sacks, which specializes in advertising and marketing to the affluent, says marketers need to give luxury shoppers the words "they can use at a dinner party to justify their purchase."