The uncertainty coming out of Capitol Hill made consumers more cautious this year, even those with very deep pockets and the luxury market felt the impact.
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Despite consumers dropping $75.8 billion this year on high-end apparel, gadgets and accessories, experts say high-income earners spent less in 2013 than in years prior. Worries about the still meandering economic recovery and unrest in D.C. made luxury shoppers less lenient with their spending.
Euromonitor International reports designer clothes were the highest-grossing category in the luxury market with Americans spending $29.5 billion on apparel in 2013. Spending on accessories came in second at $15 billion spent and luxury jewelry and time pieces round out the top three categories with high-end shoppers spending $14.4 billion.
Pam Danzinger, luxury tracker at Unity Marketing, says luxury consumers had more of a “yo-yo mentality” when it came to spending this year, simply because luxury items are non-essentials. “Luxury is the easiest thing to cut out. They are pulling back in terms of indulgence; people are pulling back because they feel less confident and not in control of their money. This makes them unwilling to indulge.”
She adds higher-earners approached spending with more of a middle-class mindset this year. “Luxury consumers are cutting back on things like fine dining, maybe eating out only once or twice a week,” she says. “And lots of luxury brands may not be measuring up to consumers’ demands for value.”
Mid-tier luxury brands that offer “affordable luxury” fared better this year compared to their higher-end counterparts, according to Monica Mehta, principal at New York City-based Seventh Capital investment firm.
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“From a consumer perspective, the greatest strengths in the market are affordable luxury. Coach and Michael Kors were go-tos. Popular categories were clothes, jewelry and cosmetics.”
Another category gaining traction with the luxury crowd is high-tech gadgets, she says. “Luxury consumers are spending more on phones and tech items—they are hitting certain aspects of the luxury market.”
High-end spenders also felt comfortable investing in home upgrades and repairs this year, Danzinger adds.
“That is not a handbag or a new outfit,” she says. “Homes retain some value, so they were willing to spend there.”
Outside of the U.S., Asia, Latin America and Nigeria are all experiencing a steady increase in the size of their luxury consumer base, Mehta says.
In 2014, Euromonitor International projects luxury consumers will shell out $78.8 billion globally. Shoppers will find their sweet spot between mass market offerings and high-end luxe with apparel, accessories and jewelry leading the pack again.
Next year Mehta forecasts cosmetics, jewelry and gadgets to be top-grossing categories.
“Affordable luxury brands like Coach and Burberry will be popular,” she says. “There is just a wider net of people to buy that stuff, they are high earners who are not wealthy yet.”