By Benjamin Kessler – New York Times, Aug 17, 2013
Luxury companies have been devoting a significant portion of their marketing budgets to stoking the aspirations of middle-class consumers. But with the recent economic upheavals, the picture has changed.
Middle-class aspirations have tumbled from Hermes to H&M, while a whole new set of consumers _ notably from commodity-rich emerging markets _ are armed with cash and a desire for all the status money can buy. The luxury sector’s greatest growth opportunity may reside at the very top of the economic pyramid, where pent-up demand and purchasing power are bursting at the seams
To be classified as an ultra-high-net-worth individual, or UHNWI, you must have a net worth of at least $30 million, excluding your primary residence, according to the research firm Wealth-X’s definition. There are about 200,000 such individuals in the world, the firm reports. Taken together, their net worth has been valued at as much as $40 trillion. They spend an estimated $300 billion on luxury goods each year, and Wealth-X estimates as many as 95,000 UHNWIs will be created worldwide in the next 10 years.
Experts say companies are losing out by not targeting them more effectively. But they’re hard to find and hard to reach once you find them.
Companies often struggle to reach the super-wealthy, due to their globetrotting lifestyles and ever-present entourages. The luxury-goods holding company Richemont calls UHNWIs “homeless with 20 homes.”
How, then, to hook the consumer who can afford virtually anything?
Manelik Sfez, vice president of partner and corporate marketing for the shopping tourism company Global Blue, says “globe shoppers” are international travelers who make shopping an essential part of their trips.
The “globe shopper” category encompasses many non-UHNWIs, but it has been noted that UHNWIs tend to spend extravagantly when traveling.
Fifty to 60 percent of worldwide luxury goods are sold to travelers, according to LVMH and Richemont _ and not at duty-free airport shops.
Sfez says China leads the world in “globe shopping,” coming in first in the total amount of money spent abroad and the average amount spent per shopper. More than 80 percent of Chinese travelers surveyed by Global Blue said shopping was a vital part of their trips, Sfez says.
Sfez quotes Harrods managing director Michael Ward as saying that in the last four years the Chinese market has gone from one-third the size of Harrods’ American business to four times the size of its American business. Over the next three years, the Chinese “globe shoppers” segment is expected to expand by 10 to 14 percent per year.
Not surprisingly, most Chinese “globe shoppers” say they enjoy shopping abroad because of lower prices. Forty-nine percent cite “better style & design” and 37 percent cite “product quality” as beneficial aspects of shopping abroad.
In addition to discounts, consumers from China are looking for full brand experiences, Sfez says. “Brand” edged out “price” as the main purchase motivator among Chinese “globe shoppers,” 60 percent to 40 percent.
Downtown brand stores were the most popular places to make purchases, beating out shopping malls, department stores and duty-free shops at airports. Brand stores at airports were the least popular locales, with just 3 percent of purchases made in those stores.
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