Today’s super-rich are more diverse than ever before and the idea that only the most established prestige brands will appeal to them is outdated. As wealthy consumers seek individual service and style, they offer an attractive proposition for UK businesses
When the Duchess of Cambridge chose a £175 Reiss dress for her meeting with Michelle Obama in May last year, the newly married royal was applauded for her lack of airs and graces. And she’s not alone in seeking value-for-money style. Whether it’s a case of notching up good PR for your company – in the case of Kate (and William), The Firm – or simply because even the super-rich have suddenly become cost-conscious, the crossover between Bond Street and the High Street is coming on apace. Just think of the Camerons flying easyJet to Ibiza or the Marrakech flights full of City bankers.
“Twenty years ago, it was about flaunting wealth through luxury brands, but behaviour, geography, interests and connoisseurship are fast becoming the new definition of wealthy,” says Ben Elliot, co-founder of luxury lifestyle specialist Quintessentially. “We are seeing a lot of mature, affluent people gravitating to ‘stealth wealth’, seeking out products that express their own interests and style rather than falling into line with the pack.”
While the average centimillionaire – worth more than £100m – may lose little sleep over the UK budget deficit, not even they are immune from the psychological impacts of recession, says Peter Matthews, managing director of brand and digital consultancy Nucleus. “Luxury consumers are far more self-conscious about their consumption than they were before the financial crisis and are choosing brands with integrity over those built on fluff. While they still want to pamper themselves, and are prepared to pay for authenticity and exclusivity, they won’t think twice about wearing £1,000 Chloé boots with a £100 pair of High Street jeans.”
RISE OF THE SUPER-RICH
Taking a figure of £1m in investible assets as the benchmark of super-wealth, the rise in high-net-worth (HNW) and ultra-high- net-worth (UHNW) individuals is notable. Last year’s World Wealth Report by Capgemini and Merrill Lynch found that 10.9 million people could be defined as HNWs, with the figure up by 8.3 per cent on the year before. It also noted that the number of super-rich individuals in Asia had surpassed those in Europe, but continued to lag behind the 2,692 US families worth more than $100m (£62m).
Whether we’re talking super-rich, deca- millionaire (worth more than £10m) or centimillionaire though, recent behaviour by brands such as Omega Watches, which raised eyebrows by taking space at Westfield Stratford City, in east London, or Selfridges, which has opened its first Primark concession, our longstanding assumptions about what the wealthy will and won’t buy are being stood on their sleekly coiffured head.
Clearly, the explosion in global wealth offers huge rewards for any UK firm keen to establish its HNW credentials. Yet, for some at least, the meshing of prestige with proletarian can pose challenges. “Our image is unashamedly luxurious,” says James Booth, managing director of £3m- turnover Rococo Chocolates, “and we don’t want to do anything that would harm that.”
While the award-winning firm is keen to expand into less traditional and more everyday markets, the dilution of its appeal among core buyers is a concern. “Along with our handmade chocolate hampers at £160, we also sell jelly beans at £3 a bag, but we tend to keep quiet about that because not everyone approves. We know that some wealthy consumers do not want to share their favourite brands with the rest of society and would be disappointed, for example, to see our chocolates sold in what they might see as less salubrious outlets.”
Yet to Mark Henderson, deputy chairman of Savile Row tailor Gieves & Hawkes, today’s Holy Grail of customised service is transcending yesterday’s brand snobbery. “With so many more rich people in the world, brands such as Swiss Watches – which sells two or even three £125,000 pieces to a top tier of customers looking to wear them for different occasions – simply cannot fail to make money.
“But the key to unlocking the potential of the super-rich is to offer a bespoke product and, of course, unique style, a quality which in my industry is just as likely to come from a fresh new brand such as Uniqlo (the Japanese-owned low-budget fashion house) as it is from the prestige end of the market.”
SPENDING IS A TWO-WAY STREET
If the rich are finding no shortage of outings for their Louis Vuitton calfskin wallets, the move from high end to low end and back again is refreshingly two-way. It may not yet be possible for all of us to afford a £3,000 Chanel suit, but a £750 handbag may at least make a modest fashion statement on the journey to work.
“I would say that the mass market are finally being catered for by the crème de la crème brands and they’re doing this with more accessible, entry-level products to fit rather smaller budgets,” says Patrick O’Brien, senior analyst at research firm Datamonitor. “For a brand like Burberry, which tends to appeal to younger consumers, an £85 tie or £95 silk scarf not only offers the mainstream consumer an affordable entry point to luxury but encourages them to trade up to more expensive lines as they get older and hopefully more wealthy.”
When it comes to the vital Chinese HNW market, mainstream London stores are also adapting their service, O’Brien believes. “Stores such as Jaeger are upping their game by accepting the UnionPay credit cards of Chinese visitors, for example. The awareness of HNW shopper needs will begin to spread among mid-market brands such as M&S, which enjoys a far higher brand perception overseas than it does at home.”
While 85 per cent of Thomas Cook’s tourism and currency business is consumer- facing and mass market, the firm is migrating from its High Street roots to the rarefied world of the super-rich in the run-up to the Olympics via its rights over short-break travel and accommodation packages. It’s a journey that has taken the firm from its usual stamping ground of £350 per person deals to a shade under £5,000 each for a full bells-and-whistles corporate package.
“Our experience from the third parties representing HNW corporate visitors is that many of them have the attitude ‘I want, I want, I want’, and are unwilling to understand that some things simply aren’t possible regardless of how much money you throw at them,” says Stephen Vaughan, head of Thomas Cook’s London 2012 partnership.
“Having spent time and money on investigating the super-rich corporate market and having built our own sales experience in this area, we hope that we can begin to present Thomas Cook as a firm with strong expertise in luxury niche travel for the HNW market.”
Vaughan notes that while many clients from the Bric countries, Middle East and US have been concerned to be “seen to do the right thing” in terms of cutting their spend on corporate entertainment, they appear in practice to prefer paying for a five-star experience.
“Many agents have booked no-frills deals for clients because it’s good PR to be seen, for example, to be using public transport to get to the Games. But an awful lot of them have had a change of heart overnight and have phoned the next morning to upgrade to our more exclusive packages, including transport to and from the stadia via our fleet of accredited cars.”
NEW HABITS OF THE SUPER-WEALTHY
Although it is clear that the cachet of owning prestige brands has significant resonance among many wealthy consumers, in many other ways the super-rich are as individual as the rest of us. “Fifty years ago, the wealthy tended to be very conservative when it came to brands and many didn’t look outside the prestige market,” says James Lawson, a director at Ledbury Research, which provides data on the wealthy and their spending patterns.
“Today’s rich buyer is far more diverse in terms of age of background and is more likely to share the rest of society’s concept of good and bad value. To assume that all rich people travel first or business class is about as dangerous as assuming that all women, or all people over 60, automatically share the same values and aspirations.”
Yet Lawson believes wealthy consumers do share some characteristics that make them vital to marketers. “They provide a test-bed for trends and are more likely to be early adopters of expensive IT. This is because they have more hobbies than the rest of us, read more magazines and have access to more product information.”
While their second characteristic, says Lawson, is that they often make choices from a broader set of options and may be more discerning, they are also more influential than the rest of us. “The rich are far more into social networking and because they tend to know more people, they can be very important ambassadors for your brand.”
To Emyr Thomas, founder of concierge service Bon Vivant, the fact that the super- rich look beyond the clichés has been refreshing. “For wealthy businesspeople, seeking out memorable experiences is the key goal, and for every rich person who won’t countenance staying in anything other than a starchy five-star hotel, there’s another looking for a warmer, boutique ambience, and for whom stars aren’t vital.”
But when it comes to well-reviewed new restaurants, the desire to be among the first to grab a table sees the moderately rich, the super rich and the plain glory-hunters vying for a reservation. “Be it a case of fine dining or cool and hip, our clients want to know where to have fun and want to be first in so they can tell their friends about it. Keeping on top of all the good restaurant openings in London is a full-time job. And that’s where we come in.”
FIVE WAYS TO TARGET THE SUPER-RICH
• High-net-worth individuals (HNWs) are attracted by glamour and exclusivity, so offer a bespoke – and uniquely stylish – product.
• Make it easier to pay for goods. Some top London stores now accept UnionPay credit cards, favoured by super-wealthy Chinese consumers.
• Remember that the personal backgrounds of the super-rich vary enormously. And they are likely to be just as aware of value for money as the average consumer.
• Regardless of the nature of your product or service, make sure it offers a memorable experience – a key goal of high spenders.
• And don’t forget that HNWs are enthusiastic social networkers and users of sophisticated IT so can be ambassadors for your brand.
By Virginia Matthews, June 2012