Are the Rich Like Us?

As retailers fight to get customers back into stores, prognosticators have hoped the high-end of the market would be the first resume spending. Even though luxury's core wealthy customers have not been as hard hit as aspirationals, there is more evidence that the return to old spending habits is a long way off. The highest end of the market continues to cut back spending in all categories. Maybe the rich really are like the rest of us.

Why is this? Well, wealth (like everything) is relative. Even though it's hard to muster sympathy, in high end real estate markets, the lower end is suffering. Foreclosures and short-sale blues are hitting these consumers just as in middle class markets – one in seven mortgages over $1 Million is seriously delinquent. Last week, the New York Times wrote about the spike in payment delinquencies and short-sales in Los Altos, CA, where the median home price is $1.5 million. Note to Los Altos: Palo Alto is snickering at you.

Luxury retailers are adapting to more careful customer behavior. More customers are making multiple visits to stores before deciding on a purchase. These consumers are not only planning purchases more prudently but waiting for possible discounts and prolonging the thrill of the purchase. Neiman Marcus is one retailer retraining associates to work with customers within the longer sales cycle.

I spoke with one customer who related her story of shopping at Ralph Lauren in Atlanta. She fell in love with an evening gown at the store, but wasn't ready to bite at the $6,000 price point. As soon as the dress was marked down to $2,000, the sales associate called her personally and she was ready to buy. Just like us? Relatively.