A Toast To The New Resourcefulness: "Being In The Black Is The New Black"

Dr. Jim Taylor

American Express Publishing Research Reveals:
The Affluent are worried about running out of money,
and about an imminent Depression.
But Still They're Happier!



The closely watched Annual Survey of Affluence and Wealth in America, presented on April 29 by American Express Publishing and Harrison Group, the market researchers, revealed that the basic psychology and overall habits of the affluent have undergone dramatic change in this economic downturn. They are now proud of not spending and boast of buying jewelry at Costco.

But all this does not mean bad news for travel - with the affluent retaining as strong an intent to travel as ever - just to spend less and take shorter trips. Following are highlights of the study, as presented by Dr. Jim Taylor, vice-chairman of Harrison Group; and Cara David, Senior Vice President, Corporate Marketing and Integrated Media for American Express Publishing.

As background, the research groups the affluent into four segments:

  • Upper Middle Class - $100K to $124K
  • Affluent - $125K to $249
  • Super-Affluent - $250K to $499 K
  • Wealthy - $500K-Plus
Cara David
Collectively, they represent 10% of the American population; and account for half of all retail sales, 70% of all profit margins and 80% of all non-retirement account assets. However, in the last year this overall group has seen its size contract almost 10 percent in terms of the number of households - with their average income declining 12%.
Highlights follow:

  • More than half (53%) worry that they could run out of money
  • Almost three quarters believe that the recession will last longer than a year; worse, a significant percentage expect a Depression.
  • Optimism in the future continues to track lower; less than 46% say they are optimistic about their own future. Paradoxically, 66% say they are "very happy" -- the clearest upturn since this research started two years ago.
  • More than three quarters take pride in their prudent new shopping habits. Beginning last Christmas, said Dr. Taylor, "Shoppers - especially women - began to take pleasure in saying no to unexamined consumption. They began to take pride in their ability to resist the urge to buy and started to examine why they needed a new dress, a new fixture, anything really. And then, they derived pride - self-esteem - from their ability to make careful, reasoned purchase decisions."
  • Added Cara David: "This new resourcefulness means that as the recession ebbs, merchants cannot expect a return to the sort of 'retail gluttony' that has characterized the last 10 years. Instead, consumers will continue to apply their newfound skills in comparative pricing, needs identification, budget-based and values-based shopping. Brands will have to get in line with the spirit of this 'rational exuberance': the tendency to take pleasure in saying 'no. The purchase criterion for the upper middle class, affluent and the truly wealthy, who account for half of all U.S. consumption, is now, 'What do I really need?"
  • 80% of the affluent observe that they wait for an item to go on sale before they buy it; and 65% shop with coupons "fairly regularly." Additionally, the majority (77%) are buying fewer big ticket items, as compared to a year ago, an increase of 15 percentage points since last December. The same group is carefully reviewing every spending category, to see where they can economize, an increase of 10% over the same time period last year.
  • More than half of the respondents (57%) believe that "a few luxuries are important in tough times," compared to those (54%) who feel guilty about purchasing premium priced goods in the current economic climate. The study also found that categories that have seen significant spending reductions, such as weekend getaways, vacations, dining out and fashion accessories, have now begun to show signs of renewal.
  • Ego has gone out of the purchase equation, with words and phrases like "successful" and "being a leader" now absent from reasons for buying luxury items.

  • Brands are more important than ever-as is quality, craftsmanship and service. Said Taylor, "Excellence is doing fine."

The Travel Tale: Still A High Priority For Affluent

  • The intent to take weekend getaways is back to where it was before the downturn; and negative spending intent on taking vacations is moderating. However, restaurants remain in a trough when it comes to intent to spend.
  • The affluent might splurge in the fourth quarter as a reward for their saving the rest of the year - and that might particularly affect travel.
  • The affluent who do take luxury vacations travel to places where they are not easily seen, so as not to stand out. Taylor called this "enclaving."
  • People are looking for less risk in choosing a vacation, which often means returning to a favored place. Said Taylor, "This is a non-experimental economy."
  • The intention to take a vacation is back to 2007 levels - but those vacations will be shorter and less costly. 22% of the wealthy will cut back on vacations while that number is 34% for the UMC and super affluent

Concluded Taylor, "There will be no wholesale abandonment of travel and it won't collapse for lack of demand."

 

Harvey Chipkin with Hershel Sarbin