Luxury Spending Will Survive Recession

A few weeks back, I posted a blog installment on the future prospects of luxury spending in times of economic uncertainty or recession. Our survey of Middle-Class Millionaire households drew a distinction between “luxury discretionary spending” like jewelry, watches, and other cultural ephemera, and “values-based spending” that reflects the middle-class perspective of the working wealthy, such as charitable giving.

In a recent survey, we looked at that distinction more closely. It shows that the self-made wealthy will continue to spend on travel and their homes, and will pause, but not cancel, other luxury spending.

The Affluent Will Travel, Spend on Luxuries

Between March 4 and March 7, Russ Prince and I surveyed a random sample of 338 Middle-Class Millionaires throughout the nation and here's a summary of what we found.

More than 77% of those surveyed believe that recession is imminent and more than 93% do not believe the government will provide an adequate bail out.
Despite the downturn, the Middle Class Millionaire won't be putting a permanent hold on luxury spending.  In fact:

* Nearly 48% of those surveyed says they will take a vacation, one that exceeds $10,000, in 2008;

* While more than 38% will curtail their spending until the economy improves, the rest will continue to shell out for things like home renovations, luxury cars, and second homes;

* A full 66% say they will increase their luxury spending when the economy recovers.

There's clearly significant luxury spending continuing even among the Middle-Class Millionaire on those items that help them achieve the values they hold most dear: home life, education and family time. As for the current state of the economy, the Middle-Class Millionaire is pressing the 'pause' button, not the 'stop' button. Their demand for luxury goods will become pent up and they expect to make up for lost time when the economy turns around. For luxury brands, their best bet is to exercise a strategy that keeps them on top of their client's mind during this downturn so they are the high net worth's first stop when that pent-up demand is ready to blow.