Research
How the rich are getting by these days
By Diego Vasquez
Apr 17, 2008 - 1:15:26 AM

In many ways, the very rich are not so different from the rest of us. They are concerned about the current economy and they’re using the internet to sniff out bargains. But in other ways they are very different, and most of it has to do with how much money they spend and the way in which they spend it. That’s according to the Second Annual Survey of Affluence & Wealth in America, produced by American Express Publishing Corporation and Harrison Group, which came out this week. The study examined the purchasing habits of roughly 12 million households, which have an average $352,000 annual income. The group accounts for half of total U.S. consumption and buys 70 percent of the nation’s total assets. The study found that 70 percent prefer to use the internet over in-store shopping to identify, price, compare and often buy significant fashion and home purchases. The web, at 43 percent, was the top purchase influencer ahead of magazines at 30 percent, experts at 29 percent, and radio and television at 19 percent. The survey also found that while the super-rich are still buying things, they’re wary about the state of the economy and the world. Jim Taylor, vice chairman of Harrison Group and co-director of the study with Cara David, senior vice president of strategic insights and marketing and sales for American Express Publishing, talks to Media Life about where to reach affluents, what’s changed with them since last year, and what’s worrying them in this economy.

 
What did you find most surprising or most interesting about this survey?
 
We were impressed by the extent to which millions of American women across the country have discovered their newfound power to create value and lower the price they pay.

They’re taking advantage of multiple channels--retail, internet, discount--to find the best value.
 

Did you find any notable differences between this year's responses and last year's? Why?
 
Yes, because consumers have taken greater control at the storefront, and retailers have realized the price discrepancy between their stores and their internet channels. 
 
Value has returned to the retail channel and, with that, created an uptick in the importance of retail. However, the power of kids in the shopping equation, the power of one’s own experience, and the entertainment value of retail have also tipped the balance.

It is clear that it is not strictly an internet, or retail, or catalog discount world for manufacturers or retailers. It’s all of them simultaneously. Consumers are weighing factors like price, delivery and receipt of the purchased merchandise to decide where they will make a purchase.

What effect generally is the current economy having on shopping decisions for the wealthy?
 
We went back to the field last Wednesday for a second round of data collection and asked our sample that very question. They gave us several answers. 
 
First, they are managing unbudgeted expenses and looking at how to delay or reduce required expenses.
 
Second, they are eliminating from their spending plans things they don’t need, especially in fashion, accessories, and merchandise categories like furniture, luggage and the like. Vacations and automobiles remain strong.
 

What are some of the reasons that upscale shoppers will choose in-person shopping over the internet? Does this differ from the rest of the population?
 
There are four key factors that drive retail when a person has a choice as to whether they want to buy online or if they want to buy in a store. 
 
First, the warranty and second the exchange policy. Both of these are skeptically received in online transactions.
 
Third, the ability of the salesperson to act like a docent for the merchandise, acting like a historian, a person knowledgeable of the materials, and the special detail of the product.
 
And fourth, the environment itself lends entertainment and joy when the environment is compatible with what people really want in a store.
 
On the other hand, internet triumphs when the price is 30 percent below the retail price, the distance to the store exceeds 30 minutes or more, warranty issues are clearly and amicably resolved, product fraud risk is substantially reduced, and shipping and handling are intelligently managed.

It’s important to notice the two sets of factors are not polar opposites that rely on different dimensions allowing people to choose their means without having to forsake their other choice from future considerations.

You found that 73 percent of respondents are very or extremely optimistic about their own future but only 30 percent are optimistic about the future of America or (26 percent) the world? What accounts for those differences?
 
First of all, between December, when we collected the data, and today, confidence in oneself and ones future has fallen to 63 percent and 24 percent, respectively, an obvious consequence of recession anxieties. 
 
However, confidence in the country and the world has been falling for three years and we have chronicled its steady fall from the mid 50s to low 20s (we are not alone on this, nor is it restricted to the affluent). 
 
From the focus groups and interviews we have done on this subject we believe that three factors are responsible for this decline.

First, America has never done well with long wars. Second, many people believe (roughly 63 percent), that America is no longer “number one” and may in fact be heading for second-class economic status. And third, there is a sense of a leadership vacuum and the anxiety that the lack of a strong and charismatic leader evokes in democracies.
 

Why do such a small percentage--19 percent--rely on traditional mass communication outlets (radio, TV, direct mail) as purchasing influences, as opposed to the internet (43 percent)?
 
First of all, it’s not just the internet.

It’s the social networks that have grown up around it and the ability of people to find “mavens”—people with special expertise in categories as diverse as automobiles, fashion and financial services. The knowledge and intelligence of mavens and the raw information power of the internet give people the power to discover, evaluate and pull the trigger for merchandise in a way that respects their special nature.

Magazines still rank highly, with 30 percent citing them as a top purchase influencer. It should be noted that 19 percent still gives television and newspaper significant power, but the golden age of mass merchandising has passed. 
 

What's the most important thing media buyers and planners can take from this study?
 
That the consumer understands that her purchase dollars are more important, and that the inventory distribution model prominent today works to her benefit.

As in so many areas of life, it's a case of who blinks first loses. Merchandisers are blinking.