For the wealthy, a return to luxury spending

Luxury and high-end marketers have picked up on what they hope is a growing trend, offering products that bank on a looming spending spree. Germany’s PG-Bikes is rolling out the $80,000 Black Trail, a battery-powered bicycle. Swiss watchmaker Richard Mille is selling $525,000 timepieces. Steinway has launched a John Lennon-themed grand piano — at $90,000 and up. After selling out a $245,000 model, automaker Porsche is planning the 918 Spyder, a hybrid car that could sell for more than $630,000.

And for the holiday season, tech start-up Prima Cinema will provide a $20,000 device to bring Hollywood films to your home the same day they premiere in theaters. Each first-run film will cost an additional $500.

The products represent rarified shopping territory for even the uber-rich, especially at a time when the nation is coming out of its worst economic crisis since the Great Depression. To many still worried about the economy, spending for luxury goods and ultra-toys with eye-popping price tags is silly. Even so, the trickle of high-end products aimed at deep-pocketed clientele is a potential leading indicator of a broader wave of pervasive conspicuous consumption among middle- and upper-income shoppers, analysts say.

“If the wealthy are buying, there’s a huge downstream effect: It goes all the way down to the $50,000 (annual income) household,” says Selling to the New Elite author Jim Taylor, a marketing specialist with luxury brand consultant Harrison Group, whose annual Survey of Affluence and Wealth in America with American Express Publishing Group gauges shopping sentiment of the affluent.

Consumer spending is the main driver of economic growth. The nation’s wealthiest 5% of households account for about 37% of consumer spending, according to Moody’s Analytics.

Some wealthy consumers have reined in over-the-top spending. Pam Danziger, whose Unity Marketing consultancy specializes in luxury branding, says that Baby Boomers, who make up a large chunk of wealthy households, have tempered shopping urges.

“The male source of pride used to be on how much they spent on fancy TVs, technology and other toys,” Danziger says. “Now the bragging rights are over finding things at great prices. The mind-set at the luxury level and high end has changed.”

Even so, pent-up demand for luxury goods appears to have lessened the angst of other well-heeled shoppers. Luxury carmakers such as Porsche and marketers such as Mille say they’ve had little trouble lining up customers, wait-listing some and fielding offers from others willing to pay premiums.

Rich come out of hiding

Percentage of people with discretionary income of at least $100,000 a year who agree with the following statements:

*Among women

Source: The Survey of Affluence and Wealth in America by American Express and Harrison Group

Wall Street’s gains have helped put many in the mood to shop. Since hitting a 12-year low of 6547 in March 2009, the Dow Jones industrial average has surged 89% to 12,391.

“When Wall Street crashed, it was very unsettling among the kings and queens of the universe,” notes Wendy Liebmann, CEO of consultant WSL Strategic Retail. “It was as much about mind-set as it was about money. They just stopped spending because it wasn’t appropriate to be seen spending. But the affluent are willing to spend again.”

Retail analysts sensed a coming shopping spree by the affluent as stock prices began climbing last fall. By the holidays, tony retailers such as Neiman Marcus, Saks, Nordstrom and Tiffany were posting December same-store sales gains of up to 10% over the previous holiday season. Earlier this month, upscale retailer Ralph Lauren reported a 24% gain in quarterly revenue, while high-end grocery chain Whole Foods Market posted a 12.6% gain.

“Personal embracement of luxury is now back to (pre-recession) 2007 levels,” Taylor says. “We’re seeing that in cars, private jet usage and, finally, in high-end real estate. There’s a real change in the way people feel about money. They’re making purchases they put off during the recession.”

Porsche’s U.S. sales in 2010 were up 29%; Cadillac’s climbed 36%. Rolls-Royce sales rocketed 171%.

Vacation home sales in Cape Cod, Mass., rose 9%, compared with previous years. In Hilton Head, S.C., sales were up nearly 14%. Palm Beach, Fla., home sales surged nearly 40%.

Luxury home sales in hard-hit Southern California also are beginning to rebound.

“We’re starting to see movement,” says Madison Hildebrand, who specializes in Beverly Hills and Malibu listings and stars on the Bravo reality show Million Dollar Listing. “People are more confident.”

The market for $1 million-plus yachts is also poised to set sail, says Thom Dammrich, president of the National Marine Manufacturers Association. “There’s a high-quality crowd seriously looking to buy. That’s changed since the downturn, which was brutal.”

Even high-end art is drawing post-recession buyers. Sotheby’s and Christie’s, which handle more than 90% of fine art, book and collectibles sales, pulled in $1.1 billion during their fall auctions, almost double from 2009.

“The market hasn’t completely recovered, but there were five (art) sales over $50 million last year. That’s unprecedented, even during boom times,” says Katherine Jentleson, analytics director at industry tracker Art Research Technologies. “There’s clearly a lust for extreme luxury items.”

Gary Strauss