Luxury cosmetics spend still on the up, but confidence is shaky

By Simon Pitman

- Last updated on GMT

Related tags Luxury Goods Unity marketing

Despite fears over the price of oil and the shaky state of the US
dollar on the international money market, luxury cosmetics and
fragrances are still proving to be a key driving force behind
significant growth in the luxury consumer market as a whole.

The most recent quarterly report from Unity Marketing​ claims that luxury consumer confidence is still running high, rising 8.4 points in the first quarter 2006, to reach 113.2 points. Accordingly this is said to be the highest point since the company's luxury tracking study began at the end of 2003.

However, the statistics do show that the growth in consumer confidence is starting to ebb off, as concerns over the US government's foreign policy and the impact it is having on the economy takes its toll. This is reflected by the fact that growth slipped from 10.4 points for the final quarter of 2005.

Unity Marketing claims that its consumer confidence index is an accurate reflection of a cross-section of America's top earners, giving their opinion on the state of the economy and prospects for the future. Obviously the higher the level of optimism, the more likely high earners are to indulge themselves in luxury purchases.

And the most recent figures on spending patterns for luxury goods would certainly seem to reflect this theory. According to the research company, the increased consumer confidence translated into a $13,820 average on luxury products and services from January to March 2006, up 18 per cent over luxury spending in the same period last year.

"Luxury consumers expressed the most negative feelings to date about the country's overall financial health, with 46 per cent saying the country as a whole is worse off now than it was three months ago."​ said Pam Danziger, president of Unity Marketing and author of Let Them Eat Cake: Marketing Luxury to the Masses - as well as the Classes.

However, despite the pessimism over the country's current state of affairs, the company's research also indicates that, paradoxically, high earning individuals are more positive about their personal financial outlooks.

"They are incredibly optimistic about their own financial status"​ Danziger added. "This then translated into significantly stronger spending on luxuries during the first three months of the year."

The findings are based upon the company's quarterly luxury study which surveyed 1,196 luxury consumers with an average income $145.7k and an average age of 42.7 years. Information about their purchases, spending, store and brand preferences were collected on four major categories of luxury goods and services, including home luxuries; personal luxuries - which includes cosmetics and fragrances; automobiles; and experiences - which includes beauty and spa services.

Although the study points to the fact that every one of the categories was marked by a distinct upturn, it pointed to the fact that home luxuries - including decorations and furnishing - enjoyed the biggest increase.

Regarding this quarter's Luxury Consumption Index rise, Thomas Bodenberg, Unity Marketing's economic forecaster said, "The strong increase in the index this quarter is a function of two psychological shifts. First, luxury consumers have made adjustments for the increased price of oil. Second, there is an expectation that American involvement in the war in Iraq will diminish. These factors combined with the strength in the stock market are reflected in luxury consumers' increased confidence."

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