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October 2009

NYT: Hey, Big Spender, You Want Value?

Interesting article in the New York Times on the growing luxury concierge business.  Affluent clients are turning to concierges for convenience (of course) and also to help ensure that they are getting good value for their money spent.

...The economic downturn has not stopped the world’s wealthiest from spending, but it may have made them focus more on value. And as the market gets more crowded with luxury brands, products and services, the rich are increasingly turning to concierge companies for information, recommendations and what they hope will be better deals, because of partnerships with luxury suppliers the world over...

Perhaps less obvious, some of the newly affluent are turning to concierges for their knowledge of luxury products, services, and culture, knowledge which the client may lack.

“Twenty years ago, wealthy people typically inherited their wealth and grew up being surrounded by luxury brands,” Mr. Cohen said. They had well-connected family and friends to help them navigate through high society. But newly wealthy individuals today are less likely to have inherited these experiences and networks. Concierge services provide entry into the luxury world, as well as guidance and advice.

October Wealth Report Newsletter now available


In this month's issue:

  • Wealth and Luxury Trends: 2010 & Beyond, by Milton Pedraza, CEO, Luxury Institute
  • Luxury Institute WealthSurvey-Current State of the Luxury Industry (synopsis)
  • Keeping Up With The Rockefellers: Affluent Spending In A Recession
  • The ROI Of Hiring Right In The Luxury Business
  • Rebooting Luxury Expectations with Tomorrow's Stewards of Wealth

Members can access this report on our website (login required).  Note that the Wealth Report is published nine times a year and this will be the last issue for 2009.  The next issue will be January 2010.  More on the report and the Luxury Institute here.

AARC Fall 2009 Affluent Market Tracking Study published today

American Affluence Research Center's new survey of the the wealthiest 10% of US households provides insights into "the new normal," "stealth wealth and luxury shame," and December holiday gift spending.

Conclusions are more positive than the many of the anecdotal examples that have appeared in recent media coverage of the luxury market, though the outlook on the real estate front is not so bullish.

Here are 7 questions and answers that highlight the survey's findings:
Should you be concerned about the prevalence of the concepts of "stealth wealth" and "luxury shame"?
Short answer: No. These concepts apparently apply to less than 7% of the affluent.

What is the "new normal" and will the affluent return to pre-recession levels of spending?
Short answer: The "new normal" is not new to the affluent. Most have been careful spenders and aggressive savers who live within their means. They say they will return to pre-recession levels of spending when the economy has recovered and they have recovered the recent losses in their net worth, which they estimate will take 18 to 24 months.

Which segments of the affluent have been reducing/deferring expenditures, which segments will do so over the next 12 months, and which segments are not cutting back?
Short answer: Age and net worth are more important factors than level of income. There is some variation depending on the type of product.

What are the spending plans for December holiday gifts?
Short answer: 9% will spend nothing and among those that will buy gifts, the average expenditure of $2,400 is a 5% decline from 2008.

Which of 8 major expenditures do the affluent expect to make during the next 12 months.
Short answer: Only the building of new homes has not risen since the Spring 2009 survey.

How do the affluent expect to change their spending for 17 products and services during the next 12 months?
Short answer: The spending indexes for all 17 categories have increased from the Spring 2009 survey.

What do the affluent expect of the stock market, business conditions, and their personal income during the next 12 months?
Short answer: They are more positive on all three than in the Spring 2009 survey.

Some other key insights:
  • Acquisition plans for all of the 8 major purchase items, with the exception of building primary and vacation homes, rose slightly from the Spring 2009 survey. Plans for a major home remodeling showed the most substantial increase.
  • About one in five report they have not changed their spending since the recession began. Of the 80% who have changed their spending, about a quarter do not plan to return to pre-recession levels of spending. This equals roughly 20% of the wealthiest 10% of US households. The two major factors that will influence the respondents to return to pre-recession levels of spending are the recovery of their savings/investments (54%) and the recovery of the stock market (49%). These two factors are important across all demographic segments but a bit more important to those age 60+.  Certainty of job security and/or compensation is relatively more important to those under age 50 and those in the lower level of net worth.
You can find more details and purchase the results on the AARC website.

NYT: Market for Luxury Goods Shifts Further to the East

HongKong_6181__N2hxPtBkKo4I[1] Interesting article in the New York Times a couple days ago about the growing importance of Asia as a luxury market. 

While this is  not a new trend, as the NYT notes, "Asia’s role in the market for super high-end luxury goods is mushrooming, reflecting an underlying shift in consumer spending power that has been creeping along for years, but which received a boost from the global economic crisis."

They go on to note some interesting facts (excerpted and listed below as bullet points):

  • Christie’s and its rival Sotheby’s say that in the last few years Hong Kong has emerged as a top location for sales of expensive jewelry, gems and fine wines. Asians have also become major buyers of ultraluxury goods at their auctions in London, New York and Geneva.
  • Christie’s said that in the spring season, Asian buyers accounted for 61 percent of the total sales value at its New York, London and Hong Kong wine auctions. Four years earlier, the figure was 7 percent.
  • Rolls-Royce, which did not even have dealerships in Asia until 2003, immediately received 20 orders for its new $250,000 Ghost when it presented the car in Hong Kong last month — despite taxes that double the price.
  • China, the world’s most populous nation, has already become the biggest global car market, having overtaken the United States earlier this year.
  • The number of known billionaires in China has grown to 130 from 101 in 2008.
  • China’s population of “high net worth individuals,” those worth $1 million or more, surpassed that of Britain for the first time last year
  • Christie’s said that in the spring season, Asian buyers accounted for 61 percent of the total sales value at its New York, London and Hong Kong wine auctions. Four years earlier, the figure was 7 percent.
You can expect a continued and increased focus on Asia and affluent Asians from the purveyors of luxury goods and services.