Welcome to the first Affluent Perspective newsletter! As part of our rebrand, we put a magnifying glass to our study. We reviewed all of the questions we asked participants, the sectors we targeted, our methodology, and how we present the data with a goal of providing informative and actionable analysis, while maintaining our unique and insightful take on affluent households in the U.S. – and around the world.
The result is an inaugural Affluent Perspective Global Study that reveals an estimated total discretionary spending by the top 10% of households in the US economy that will slightly exceed $2 trillion. The study also reveals that discretionary spending will be tight and growth will be constrained over the next year, resulting in a 0.9% reduction in spending from 2015. The reduction is found across all age and income groups - except for Millennials and America’s 400,000 wealthiest households - whose spending is expected to increase by 8% and 10% respectively across the nine categories of discretionary spending that we measure.1
We anticipate the steepest declines to be in home décor, jewelry and watches and related consumable categories. Additionally, while we do anticipate an increase in discretionary purchasing among Millennials - seemingly the most sought after consumer category nowadays - its worth remembering that Millennials only represent 18% of the 14.1 million affluent households represented by our 2016 sample, and 18% of total spend across all nine categories. Gen X and Boomers account for the majority of affluent spending, so despite their reporting small increases or even a decrease in spending - 1.1% increase year-over-year, representing $96 billion for Gen X and 5.3% decrease year-over-year, representing $117 billion for Boomers - it is imperative that these generations are not left on the sidelines.
What troubles the affluent?
Despite all the rhetoric and hoopla it’s received, the income gap does not make affluent America’s list of top five concerns. Just 39% of the affluent are concerned about the gap between the 1% and the 99%. The issue that has the biggest and most alarming currency among the affluent is the race for the presidency (79%), followed by:
- The future of their children (64%)
- Gun control (54%)
- Global warming (51%)
- The threat of ISIS (49%)
Interestingly, there is concern that the economy could turn at any moment. Forty-eight percent of respondents are concerned about the state of the U.S. economy and 38% believe that this country is heading into another recession. Even so, the affluent share a collective sense of stability in their own personal economy. Fifty-seven percent of the affluent, including 83% of The Wealthy (those with $10 million or more in assets) claim to be either extremely or very confident in the strength of their personal economy. The affluent have spent the years since the recession strengthening their financial situations – striving to become immune to circumstances beyond their control. They have no interest in going backwards and they are willing to make immediate adjustments when necessary.
What’s more, brand loyalty is on the ropes. While nearly all affluent consumers are loyal to something, most categories see on average 40% choosing a product based on something other than brand. Long the Holy Grail for marketers, consumer loyalty can deliver tremendous value to brands that earn it. However, with brand loyalists anticipating reciprocity in their relationship with a brand (expectations of discounts, points, and freebies) and with loyalty itself in decline, the concept is at a crossroads. This requires developing a different path to brand empowerment. Advocacy may be that path.
Brand advocates, while smaller in number than loyalists, can be a brand’s best friend. As the luxury consumer matures, brand loyalty is a transitional step in a process towards a kind of consumer luxury expertise that begs to be shared. The emotional fruit of a lifetime of luxury purchases is knowledge that enables the consumer to offer their network intelligent observations and opinions about a category and a select group of its brands.
The benefit for the advocate is a sense of competence and self-confidence that is shared freely the old-fashioned way – in person. What’s more, when advocacy and loyalty are combined, the spending output is often amplified.
1 The nine categories are: leisure travel, fine dining, fashion apparel, accessories and handbags, home décor and electronics, fine jewelry and watches.