Shopping Under the Affluence

The wealthy shopper is indeed different from the rank-and-file – but wallet size can be deceiving

We’ve all heard about non-affluent consumers who desire a taste of affordable luxury, but what about wealthy consumers? Are they generally looking for opportunities to pinch pennies, or do they simply spend without thinking? According to NPD’s industry experts who recently reviewed the shopping preferences of affluent consumers (those with annual household income of $200,000 or more), spending patterns based on income level may not follow the patterns you'd expect.

While it might seem counter-intuitive, in many industry categories, product pricing is still a very important criterion among affluent consumers. In certain product categories, wealthy consumers seek out lower prices, coming closer in their purchase behavior to consumers in less-affluent income brackets.

Money Matters

The fashion industry is an example of an area in which affluent consumers spend considerably more than their non-affluent counterparts. Overall apparel spending as of March 2005 increased by nearly four percent over the previous year; spending by consumers with a household income of $200,000 or more grew by over 12 percent. This growth was led by sales of men’s clothing, which contributed almost a third of all the dollar sales. In fact, affluent menswear buyers purchased 22 percent more clothing in 2005 than they did last year.

“To leverage behavioral differences in clothing shopping for greater sales success, retailers first need to understand the purchasing trends of their customer sets in order to market more effectively,” said Marshal Cohen, NPD chief industry analyst.

NPD also found some key behavioral differences between affluent and non-affluent consumers in the home video category. Highly affluent consumers are on the leading edge of new technologies. These technologies have increased the number of available distribution choices – and spurred increased consumer convenience. Downloading movies from the Internet is a relatively recent distribution phenomenon, and affluent households are three times as likely to have rented a film online compared with consumers reporting an annual income under $50,000.

“According to NPD VideoWatch data, wealthy consumers are less likely to rent movies overall,” said Russ Crupnick, president of NPD Music & Movies. “When they do rent films, they are much more likely than other income demographics to use subscription services like Netflix or to use Pay Per View (PPV) or Video on Demand (VOD) services.”

When NPD Foodworld recently reviewed the behavior of consumers across a range of household income levels, they found more similarities than differences. “We all want many of the same things: good tasting, easy to prepare, healthy foods that everybody in the family enjoys,” said Harry Balzer, NPD vice president. “But no matter how much money somebody makes, the final decision often rests on the cost of the food item.”

Household income does affect the food brands selected, but not the food categories. It’s not true, however, that Americans in wealthy households eat vegetables and those with less money avoid them. In fact, four of the top five food categories consumed by upper-income and lower-income households are the same: sandwiches, vegetables, potatoes and bread.

Exclusivity, Frugality and the Affluent Consumer

While many wealthy consumers are indeed cautious with their cash and strongly motivated to get maximum value for the money they spend, when it comes to certain products and categories, that’s not always the case. In fact, wealthy consumers will often pay a premium to enjoy a sense of exclusivity or to gain added convenience.

According to a recent NPD report titled, Understanding the Affluent Consumer, wealthy shoppers are more than willing to pay more for quality and a sense of exclusivity when shopping for beauty products – and they prefer to purchase these products in department stores. “It’s not just the prestige product itself that attracts high-end affluent women,” said Timra Carlson of NPD Beauty. “Shopping for fragrances and other beauty products in high-end stores is part of the overall experience sought by the most affluent consumers.”

In the automotive aftermarket industry, NPD also notes some apparent differences among consumers that can be directly associated with particular income levels. Households earning more than $200,000 per year represent just under six percent of automotive aftermarket product buyers, for the simple reason that they are much more likely to own newer vehicles. By the time major repairs are needed, they generally have already moved on to a newer vehicle.

“Affluent consumers, in addition to being more likely than others to own SUVs, are less likely to work on their own cars, than are their less affluent counterparts,” said NPD Automotive Industry Analyst David Portalatin. “In 2004, thirty-eight percent of affluent consumers installed their own motor oil, compared to 60 percent of all consumers who did the same.”

Similarly, affluent consumers often eschew more pedestrian shopping venues, “bargain bins,” and other cost-saving methods used regularly by non-affluent consumers. In the realm of videos and DVDs, Russ Crupnick said, “sales of previously-viewed DVDs have blossomed, but the affluent consumer is half as likely to have bought a used DVD than is the shopper with a lower household income.”

Getting to Know Your Affluent Customers

While similarities and differences among consumers of varied economic backgrounds abound, NPD’s industry experts agree that it’s crucial for manufacturers and retailers to fully investigate the myriad ways their wealthier customers react to the products they sell. In doing so they are more likely to find the most appropriate methods to increase penetration among affluent shoppers, which in turn will bolster bottom-line revenue results.