The average income for the top 5 percent of people fell from $358,700 in 2006 to $313,298 in 2010, Pam Danziger, president of luxury research firm Unity Marketing said in a report. That means that swanky retailers are furiously vying for customers' discretionary income.
We saw this trend at work with Burberry, whose shares slid 20 percent after the retailer reported sales were down. CEO Angela Ahrendts blamed the trend on the "external environment."
Danziger explained why declining incomes are hitting the luxury retailer especially hard:
"Because these same consumers are significantly invested in their high-end lifestyle with income committed to a wide-range of fixed expenses to maintain that lifestyle, it's in discretionary spending where they are going to take their cuts. So that translates into less money to spend each month for clothes, shoes and handbags, jewelry and home decorative accessories. These folks have plenty of all that stuff already, so it is the easiest, most painless way to adjust one's budget when there is less money coming in each month."