Luxury brands are still failing to deliver substance according to more than 400 high-net-worth consumers polled in The Luxury Institute's latest survey.
The survey, titled "Current State of the Luxury Industry" and developed in conjunction with marketing communications and public relations firm Evins Communications Ltd., shows that for wealthy consumers, superior quality (83 percent), superior craftsmanship (78 percent), superior design (69 percent), exclusive products (58 percent), brand heritage and history (54 percent), and superior service (53 percent) are the top six requirements of a luxury brand.
Yet, according to the survey, the luxury industry continues to fall short on quality, craftsmanship and service.
The survey also shows that more than half of wealthy consumers (53 percent) and 56 percent of millionaires believe there are too many brands in most luxury categories today.
Meanwhile, recent discounting of luxury goods and services has lowered the perception of luxury for 29 percent of wealthy consumers, while it has improved perceptions for 17 percent. Fifty-four percent say their perceptions are unchanged.
— Nielsen Business Media
In addition, discounting has contributed to an increase in overall luxury expenditures for 28 percent of wealthy consumers, while 14 percent say it has decreased their expenditures. Fifty-eight percent say their spending habits remain the same.
"The death knell has sounded for 'so-called' luxury brands and it's the luxury consumer who has rung it," Evins Communications Chief Executive Officer Mathew L. Evins said in a media release. "The brands that will survive and actually thrive in this paradigm shift are those that are true legacy brands. They are leaders in their industries, possess rich histories and have earned the admiration of brand aficionados through dedication to craft and an unwavering pursuit of excellence."
The survey also shows that a strong majority of the wealthy (77 percent) believes luxury is less important in today's economy, and only 40 percent believe luxury is a good investment.
Fifty-eight percent of wealthy consumers say they are currently spending more on essentials rather than on what they want (versus 55 percent in January), while 56 percent still say they are being more practical about spending.
In addition, wealthy consumers plan to spend more on travel (15 percent), dining (12 percent) and health/fitness (11 percent), and less on jewelry (42 percent), home furnishings (35 percent) and watches and gifts (both 34 percent).
For the first time, according to the survey, 43 percent of wealthy consumers cited "ratings and reviews from a trusted source" other than family and friends as the most influential source for purchasing luxury goods and services.
"The challenging economy calls for nothing short of a reinvention by the global luxury industry," Luxury Institute Chief Executive Officer Milton Pedraza said in the release. "We are aware that some brands have begun that process, which is a good first step. Yet...brands must realize that wealthy consumers will be the true judges as to which brands are relevant and differentiated by the benefits that consumers think are important, and which brands are 'me-too' players that cannot be differentiated from competitors when the labels are removed. It is a brave new world of transparency and customer-centricity, and the luxury industry overall will come through with flying colors, but a number of individual brands may not."
The Luxury Institute surveyed online a national sample of more than 400 wealthy American consumers for this study. The respondents had an average weighted household income of $415,000 and an average weighted household net worth of $4.9 million. Survey results are weighted to match the profiles of the latest Survey of Consumer Finances from the Federal Reserve.
The Luxury Institute is an independent and impartial ratings and research institution that provides a portfolio of proprietary publications and research as well as consulting services that guide and educate high-net-worth individuals and the companies that cater to them on leading-edge trends, high-net-worth-consumer rankings, ratings of luxury brands and best practices. The Luxury Institute also operates LuxuryBoard.com, the world's first global, membership-based online community for luxury goods and services executives, professionals and entrepreneurs.