What does it take to tap the record number of super-rich consumers?
LONDON, United Kingdom — As the saying goes, the rich get richer. Never has this seemed truer than in today’s socio-economic reality. Indeed, when rented jets have become de rigueur for wealthy teenagers and handbags made of exotic skins, costing tens — sometimes hundreds — of thousands of dollars have become status symbols of such ubiquity that luxury conglomerates have acquired crocodile farms to ensure their supply, inequality has never been starker.
According to a recent report by Wealth-X, a wealth intelligence firm, there are 211,275 households in the world worth $30 million or more. Together, in 2014, they spent more than $234 billion on luxury purchases, accounting for 19 percent of total luxury spending worldwide. To put this into context, the entire country of China accounted for about 30 percent of the global luxury goods market.
According to Credit Suisse, those at the very top of the pecuniary pile are multiplying in number. The financial services group reports that, globally, there are now 128,000 ultra-high-net-worth individuals (UHNWIs), or those with assets of more than $50 million, up from 41,000 in 2000. Forty-five thousand of them are worth over $100 million, up from 14,000 in 2000, while 4,300 have assets above $500 million, up from 1,200 in 2000.
Although the very wealthy are not a new phenomenon, today’s UHNWIs are no longer drawn exclusively from the ranks of entrepreneurial Americans and entitled Europeans. Although the US remains the land of opportunity, boasting 63,000 UHNW residents (49 percent of the total global UHNWI population), 26,000 (20 percent) now reside in Asia-Pacific, including China and India, and this geographical shift is set to become more pronounced in the coming years.
So how is the fashion and luxury market catering to this ultra-rich clientele?
“It's all about trust and personalised service,” said Tina Tan Leo, the owner and founder of Privato Asia, a private, invitation-only shopping service, based in Shanghai. As for her clients’ level of expenditure, “It could be anything from $2,000 to $2 million, or more. It all depends. If somebody wants something that is extraordinary, we are able to find it.”
Alongside service, guidance and education are critical. About sixty-five percent of those with over $30 million in assets are self-made millionaires, according to Wealth-X, many of whom are new to luxury products. “I'm not only educating clients — they're also looking [to be educated]. It's a step forward for them to understand and appreciate things that are beautiful and enjoy a beautiful lifestyle,” said Tan Leo.
London department store Harrods, long known for its UHNWI clientele, will launch its new ‘Superbrand’ department on June 3rd. The 45,000-square-foot space, “dedicated to housing the finest collections from the world’s most luxurious brands,” will feature eighteen marble-encased boutiques from brands including Louis Vuitton, Loro Piana, Céline, Chanel, Fendi and Dior.
Many luxury goods firm are also creating special limited-edition product, specifically targeting UHNWIs, made of the rarest, most exotic, most expensive materials available. Hermès, purveyor of the world famous Birkin bag, known almost as much for its five-year waiting lists as for its style and quality, has been known to create special orders for its very best customers. The Himalayan Croc, which uses the finest Nilo-Crocodile skin, white gold and pave diamonds normally retails at $120,000. A customised version, made with additional diamonds for a private client, sold for nearly $300,000.
“There is much demand and competition amongst brands to source and acquire certain skins. Heritage luxury brands [and groups] like Hermès, LVMH and Gucci (Kering) have each acquired many to most of the tanneries that supply the pelts and skins to luxury brands like our own, and in turn are able to control supply and cost. The demand for the highest-quality materials and the limited supply has driven the cost and growth of the overall luxury goods market significantly higher,” said Tyler Ellis, daughter of Perry Ellis and the owner of emerging luxury exotic skins label Tyler Alexandra.
“People who have seen or have the capability of buying anything they want, they want to be the first to discover something unique, and it doesn't have to be costing in the millions. Luxury is not just about money. Many people can afford luxury things now,” continued Tan Leo.
“You can see it in the proliferation of stores. I am sure that a number of luxury brands had significantly less stores 20 years ago than the number worldwide today. That says that, clearly, there must be a greater volume of product,” said Mesh Chhibber, the co-founder and owner of Peau de Chagrin, a leather goods company that sells extremely limited runs of its designs, made with the highest quality of artisanal craftsmanship. “There is a whole group of people out there that aren’t motivated by status-driven luxury, and they want genuine craftsmanship,” noted Chhibber, whose first product on the market, a run of 100 leather handbags, each made to order at a cost of €3,500 (about $3,850), sold out.
But amongst some super-rich, it’s less about the accumulation of objects and more about the accumulation of experiences. “UHNWI individuals are incredibly busy, so they rely on us to help them live even more enriched lives,”said Lisa Gregg, vice president of international consumer products and experiences at American Express. “Fashion is a real passion for a lot of card members, so we might arrange for front row seats at London Fashion Week plus a backstage meet-and-greet with the designer. Or more recently, we invited a number of premium card members to the gala dinner opening of Savage Beauty at the V&A.”
Indeed, today, some of fashion’s biggest players, including Chanel, Dior, Louis Vuitton and Burberry are staging increasingly elaborate pre-fall and cruise shows with the purpose of entertaining high-spending clients with unique experiences, as much as driving media coverage. Luxury travel and accommodation is par for the course. But access to the inner sanctum of fashion is the real draw for those who, otherwise, have it all. “In Palm Springs, our clients will be able to meet Nicolas [Ghesquière], and there will be a dinner after the show and all of our clients will be able to meet Nicolas. That is something that our clients long for,” said Michael Burke, the chief executive of Louis Vuitton.
Indeed, it is a testament to the importance of the tiny but growing number of super-rich that the industry gives them exactly what they want — even if that is dinner with Nicolas Ghesquière.