Like the rest of us, America’s wealthiest families cut back on spending during the recent recession. However, it looks as though that trend has passed. The American Express Publishing and Harrison Group survey polled families with a discretionary income of more than $100,000 and found that spending on luxuries is set to rise 8% compared to 2010. This would represent an increase of $26.6 billion and bring 2011 luxury spending to $359 billion.
Those surveyed represent the wealthiest 10% of American families and are responsible for roughly 50% of overall consumer spending in the U.S. While 34% are looking forward to spending more this year, these families have not forgotten the lessons learned during the recession. These families save a nearly a quarter of their annual income and are expected to seek more “value, quality and service for their money,” says Jim Taylor of Harrison Group. In fact, nearly 75% said they had become more resourceful because of the recession.
Luxury brands are eagerly anticipating this spending shift. PG-Bikes has announced an $80,000 lightweight, battery-powered bike, Richard Mille is selling a $525,000 watch and Porsche is working on a hybrid car that would sell for $630,000.
Think of it this way, it’s only $26,250 per gram!
As views on luxury spending have shifted with the wealthy, so has marketing efforts by these companies. These companies are focusing much more on exclusivity and the personal experience. Only 50 of the Mille watches will be produced and, as Dominique Gerent of Richard Mille said, “It may be ostentatious driving a new luxury car in your neighborhood or around co-workers, but a guy across the room wouldn’t know what this watch is. It’s much more personal. With this watch, you become a member of a club.”
Companies are even getting ready for one of the best holiday seasons in the past few years. One company, Prima Cinema, will be releasing a “home movie-premiere service” for $20,000. This will allow you to show Hollywood films as soon as they are released in theaters. For each movie, there is an additional $500 charge for licensing fees. While there were plenty of skeptics, Prima Cinema is expected to be in a quarter of a million homes by 2015.
Is the rise in spending limited to only America’s wealthiest? Most likely not. Luxury buying is a predictor for consumer spending overall. “If the wealthy are buying, there’s a huge downstream effect,” says Taylor. While the rest of us probably won’t be spending half a million on a watch any time soon, overall consumer spending is expected to rise in 2011.
Do you think the recession is still in full swing for the other 90% of American households or do you think families are slowly starting to spend again?
(Content provided by Credit-land.com)