They say money can’t buy happiness but the world’s super rich are still giving it their best shot, spending .8tn (£1.1tn)last year on luxury goods and services – with extreme holidays, gourmet dining and art auctions emerging as the status symbols du jour.
Whether that means spending a record 2m on a Francis Bacon triptych or diving with sharks, the rich are increasingly hunting for unique objects and experiences, sometimes laced with the thrill of danger, a study reveals.
Perhaps jaded by regular visits to plush boutiques in Hong Kong’s Causeway Bay or Paris’s Champs-Élysées, the world’s millionaires are increasingly preoccupied with spending on the kind of things that money – usually – can’t buy, said the report by the Boston Consulting Group.
“Luxury is shifting rapidly from ‘having’ to ‘being’ – that is, consumers are moving from owning a luxury product to experiencing a luxury,” said BCG senior partner Antonella Mei-Pochtler. “They already have the luxury toys; the cars and the jewellery.”
Of the .8tn spent on luxuries in 2013, according to BCG an estimated tn went on services – from private airline flights to luxury slimming clinics, to a five-star hospital stay where the patient will be waited on by a butler and the en-suite facilities include a marble bath.
The £1.1tn spent is slightly more than the wealth controlled by the poorest half of the world’s population – 3.5 billion people. Oxfam recently estimated their combined wealth at £1tn in a report on inequality, where it pointed out that this sum was the same as the wealth controlled by the world’s richest 85 billionaires.
A breakdown of last year’s figures shows about 0bn was spent on one-of-a-kind travel adventures such as expeditions to the Antarctic or bespoke safaris, while 0bn was spent on the more typical trappings of wealth: designer clothes and handbags.
Other growth areas include fine art and wine, which are seen to be attractive alternative investments to the stock exchange.
One Chinese multimillionaire, according to the report, spent .5m on a two-year tailor-made package holiday that took in nearly 1,000 Unesco heritage sites. His son, meanwhile, not content with adding a second Piaget watch to his collection, spent his vacation diving with hammerhead sharks.
The son is an example of what BCG dubs the “sugar generation”, a label used to describe China’s affluent young consumers who, against a backdrop of a booming economy, have grown up surrounded by luxury brands.
This group accounts for 13% of China’s affluent population, a figure that is expected to reach 30% within five years as the “wealth history” of the average Chinese family becomes longer.
“Both women and men in the sugar generation espouse very different buying habits than, say, China’s successful entrepreneurs do,” said Mei-Pochtler. “The latter group are men, many of whom are the [sugar generation’s] parents.”
The change in shopping habits is forcing the big luxury companies to add new strings to their bow, with Louis Vuitton owner LVMH recently snapping up the Hotel Saint-Barth Isle de France in the Caribbean.
To ensure it doesn’t miss a trick Burberry has launched a customisation service for the well-heeled shoppers who buy from its catwalk collections. The service means customers can see sketches and videos of their item being made on their mobile phone.
Faced with the problem that some shoppers have enough haute couture and designer accessories to last a lifetime, the luxury industry is trying to glamorise mundane activities such as going to the gym or eating lunch.
In the US, upmarket brands such as SoulCycle offer the chance to sweat it out on stationary bikes for ,500 a term, spurred on by instructors tweeting and using Facebook to “energise” customers. With Girls star Lena Dunham said to be among the fans of its gruelling workouts, the brand also has its own line of designer gym gear.
The scars of the 2008 banking crisis mean demand for luxury goods and services is not quite back at the heady level of conspicuous consumption seen before the fall.
Until recently the luxury goods business was being propped up by the growing number of millionaire shoppers in markets such as China, India and Brazil, who picked up the slack as cowed consumers in traditional luxury markets such as western Europe, Japan and the US spent more cautiously. But recently even they have been showing signs of strain, creating problems for luxury brands big and small, while a crackdown on luxury gift giving in China has not helped.
This week British handbag maker Mulberry warned its profits had been hit by a collapse in sales while French giant LVMH has been battling weaker demand for its fashions in Europe and Asia. Nonetheless, BCG predicts the luxury market will grow by another 7% this year.
Not the toast of China
Beijing’s crackdown on luxury gift giving has hit British drinks group Diageo after it warned of a collapse in sales of baijiu, a spirit used to toast business deals and lavish banquets.
Diageo said sales of its baijiu brand Shui Jing Fang had slumped in the wake of an anti-corruption drive.
The size and wealth of the Chinese market has made it a huge draw for Diageo brands such as Johnnie Walker scotch and Smirnoff vodka. But the Chinese government crackdown saw a 66% drop in sales of Shui Jing Fang in the first six months of its financial year.
Xi Jinping, the Chinese premier, has sought to rein in ostentatious spending by officials on gifts, banquets and alcohol-fuelled receptions to ease public unrest about extravagance among the country’s elite.
Diageo finished the day as the biggest faller in the FTSE 100 as its problems in China were compounded by weak sales in other emerging markets for the first six months of the year. Diageo boss Ivan Menezes, who also announced a major cost cutting drive, said he didn’t expect to see a recovery in China until 2015.
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