Luxury consumers cut back, albeit slightly, on their spending during the first quarter of 2004, according to a report from Unity Marketing, a consulting firm that specializes in the spending practices of wealthy consumers. The wealthy were spending less based on an index of 100 in January, which dropped to 97.8 in March.
The report stated that luxury consumers are “heavily invested in maintaining their luxury standard of living and do not spend anywhere near their capacity. & Far from viewing luxury consumers as spend thrifts, marketers need to understand that these thrifty ‘rich folks’ are always on the hunt for a bargain.”
The luxury consumers sampled had incomes above $75,000 – one third had incomes above $150,000.
Meanwhile, less affluent consumers are spending more, according to the National Retail Federation’s Retail Sector Performance Index. The index showed a reading of 58.3 points, up 16.3 points from a year ago. The federation is the world’s largest retail trade association, representing more than 1.4 million U.S. retailers and more than 20 million employees. It also is an umbrella group representing more than 100 state, national and international retail associations.
On a local note, Chapel Hills Mall, the Citadel Mall and the Shops at Briargate are experiencing more traffic because of troops returning from Iraq. Allison Towe, marketing director at Chapel Hills Mall said they are seeing “lots of people in military uniforms” walking the mall corridors with their families. “The traffic is growing, and the atmosphere is upbeat,” Towe said. “The spending emphasis appears to be on personal services like hair salons, and many people are getting their pictures taken at the studios.”
Diane Loschen is the senior marketing manager for The Citadel. She said the return of the troops has had a positive impact on sales in the south end of the city as well. “Apparel has come back to life, especially shoes,” Loschen said. “We’ve seen an overall 4 percent increase in spending. In March and April, we experienced a 5 percent increase in traffic, and I know it is directly linked to the military coming back to our community.”
The general manager at the Shops at Briargate agrees with Loschen and Towe about the effect of the returning troops. “I think the entire city benefits from the returning troops,” Karen Faulkner said. “We have definitely seen increased traffic.”
In addition to the military spenders, retailers generally get a boost when tax returns start pouring in.
Tracy Mullin, president and chief executive officer of the National Retail Federation, said in an April news release that, “Consumers remain enthusiastic about shopping as they begin to receive tax returns. Retailers are trying to give consumers every reason to spend those checks at their stores with special incentives and promotions.”
Tara Bradshaw, a spokeswoman for the U.S. Department of the Treasury, said the combined effects of the Economic Growth and Tax Relief Reconciliation Act of 2001 and the Jobs and Growth Tax Relief Reconciliation Act of 2003 have reduced tax payments, which might influence spending indexes during the next quarter.
According to an April report by the department, more than 1.7 million taxpayers in Colorado had lower income tax bills in 2003 because of the 2001 and 2003 acts, and Bradshaw said the same will apply to 2004. The economy could see a boost because more than 470,000 Colorado business taxpayers could use their savings under the two acts to invest in new equipment, hire additional employees or increase employee pay.
The report also indicates that more than 1.5 million taxpayers in Colorado will benefit from the 10 percent bracket formed in 2001 and accelerated for 2003. Everyone has benefited through the 10 percent bracket because it doesn’t matter whether you are making $12,000 a year or a half-million, the first $7,000 falls into the 10 percent bracket, said Greg Shafer, certified public accountant and owner of the Gleneagle-based Shafer Group.
More than 460, 000 Coloradoans who pay taxes will benefit from the Economic Growth Act of 2001’s reduction in income tax rates above 15 percent. They will also benefit from the Jobs and Growth Act of 2003, which was phased in earlier than expected.
More than 500,000 married couples in Colorado will benefit from provisions that increase the standard deduction for joint filers to double the amount for single filers. Shafer said that what the legislation does, in effect, is eliminate the marriage penalty couples in the 15 percent bracket. “It used to be cheaper for couples to live together,” Shafer said.
About 410,000 Colorado parents – married and single – will benefit from an increase in child tax credits under the act’s acceleration to 2003, with an increase in the deduction from $600 to $1,000 in 2003 and 2004.
More than 400,000 taxpayers in Colorado will benefit from reduced tax rates on capital gains and corporate dividends under the Job Growth and Tax Act.
All of this means Colorado taxpayers have more money to spend. After filing 700 returns by the April 15 deadline, Shafer said, “Everybody across the board fared better. Taxes were cut for people on the high end and the low end.”