“I’m not there, yet” says Janie Pryor when asked if she’s ready to eliminate her regular Botox treatments in an article titled, “The Latte Era Grinds Down” (Newsweek, Oct. 13, 2007). Written by Daniel Gross, the very astute observer of money and culture for venues including Slate.com and Wired, this article introduces us to affluent Americans like Pryor, an L.A.-based jewelry designer who claim that rising interest rates, falling real estate values, and higher gas prices have caused them to consider living a more frugal lifestyle.
From the latte lover who cut his daily coffee bill from $8 to $1 by buying his own espresso maker, to the couple who put their Dallas McMansion on the market because “I find myself going into rooms I haven’t been into in a couple of months,” this story paints a picture of economic hardship that would have been hard to believe a decade ago. We’ve become an affluent nation where the cutbacks from the heights of our spendthrift ways have reduced us to merely living very, very well.
While I don’t doubt there are well-to-do Americans who’ve been touched by the meltdown in housing values, it seems as though any efforts to rein in spending are more a matter of defensive lifestyle adjustments than any real experience of hardship, based on Gross’s account. This kind of reaction is echoed by my friend Russ Prince’s recent research that compares the spending habits of the super-affluent to the more earth-bound affluent. In his recent book, The Sky’s The Limit, Prince shows us that both lead increasingly expensive lives but that the spending of the super-affluent (average net worth of $20 million or more) seems to roar on no matter what the economy is doing while the outlays of the more broad-based affluent (net worth of $1 million to $10 million) seem to fluctuate based on their sense of the economy’s overall strength.
For example, while annual spending on wine and spirits for the super-affluent has climbed from $4,500 to $6,300 between 2004 and 2006, according to Prince, wine and spirits expenditures for the broad-based affluent has dropped from $1,000 to $900. About these groups, Prince writes that the super affluent “maintain their buying capacity and tendencies irrespective of the state of the economy as a whole,” whereas the more broad-based affluent “are dramatically impacted by the ups and downs of the economy; they spend more when the economy booms than when it merely simmers.”
In that regard, the broad-based affluent can be seen as an indicator of economic health, although I couldn’t say whether they are predictive, reactive, or just on their own economic track altogether.
Yet, there is some evidence that the economic activity of the affluent is having an increasingly visible role in certain parts of the retail sector. In an Oct. 3 article in The Wall Street Journal, “Wal-Mart Era Wanes Amid Big Shifts in Retail,” Gary McWilliams points out that Wal-Mart, once the dominant figure in all of retailing in the U.S,. seems to be slipping in its role as gatekeeper to the American consumer. Picking up the slack in customer influence are higher-end retailers, such as Whole Foods. Even Costco is getting into the luxury act, selling $500 bottles of wine and $4,000 watches from Cartier.
These two articles—the first about buying espresso machines instead of individual cups of coffee as a way to save money and the second about Americans changing retail loyalties—communicate a larger point that’s worth noting: the American affluent consumer is now a dominant fixture in the retail landscape. They aren’t just shopping at Hermes and Tiffany. Now they’re bringing their ideas for living well to the big box stores and supermarkets that speak to their aspirations and lifestyle. Not only are they changing their brand loyalties but, based on my research with Russ Prince for our forthcoming book, The Middle-Class Millionaire, they’re also very influential, telling many other people about the products and services they buy and the brands they cultivate.
If the impact of the affluent is being felt at your local supermarket and Wal-Mart, what other areas of daily life await the touch of the affluent, I wonder?
Where have you seen the impact of the affluent in your community? At your child’s school? Your place of worship? Your local government or community-service organizations? I’d like to hear your thoughts on this…
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