HOTELS

Laurence Geller

On My Mind
January 17, 2008

A recent book by Mark Penn compellingly argued that there are no longer a couple of mega-forces sweeping us along, instead there are micro trends—small, under-the-radar forces that involve tiny percentages of the population but which are powerfully shaping our society.

As Generations X and Y shape today’s society, they no longer seem willing to stand by and wistfully aspire to the luxury goods they see the seemingly affluent enjoying. Not content to merely shape society with Ipods, the Internet and Starbucks, they want to have their aspirational goods and experiences now, and are changing the face of retailing, merchandising and luxury products consumption. Importantly they are forcing a widening divide between the affluent and the super-affluent, as the latter want to be segregated (and seen to be segregated) from the hoi-polloi.

A few tidbits of research about 2006 to make this point:

• The super-affluent spent US$22,300 on wines and spirits for social entertaining. The affluent spent $1,900.
• The super-affluent spent $21,700 at home spa services ( personal trainer, massages etc), while the affluent spent $1,600
• The super-affluent spent $91,100 on jewelry while the affluent spent $4,100
• The super-affluent spent $61,200on hotels and resorts, while the affluent spent $2,400

Yesterday, owning a Louis Vuiton product, a Bulgari piece of jewelry, a Chanel handbag, Gucci shoes, a Prada outfit, a Cartier watch was indicator of real wealth. Today, they are commonplace and within the reach of so very many who are no longer contented to be window shoppers.

Retailers obviously saw this trend and department stores now reflect more of a market scene than the staid and relatively homogeneous stores of the baby boomers’ youth. Walk through any major store today and there will a series of product displays counters, all manned by specialists hawking their wares – be it Louis Vuiton, Bulgari, Chanel, Gucci, Prada, Cartier, and the list goes on and on. If you can’t afford that $12,500 handbag, don’t worry they have one you can afford at less than $2,000! If the department store doesn’t have the branded product you want in stock right now, don’t worry the department store just across from ours has that exact product.

The resultant effect is that today’s super-affluent are looking for products and experiences that reflect their own aspirational needs—exclusivity, customization, being in the same class as others like us. If you used to proudly sport a gold Rolex, today you have an IWC Portuguese Perpetual that costs over $30,000. If you wore a lady’s Piaget, today you may be sporting a Franck Muller watch at a mere $50,000 plus.

When it comes to luxury cars, no longer is there a clear status symbol—can’t afford that $350,000 Bentley, no problem. Buy the Continental GT for $180,000 and Voila, instant status symbol, thus devaluing the big sister!

When it comes to vacations then flying first class isn’t that special anymore so private planes are used. Aboard are not only the adults, but also the kids and the nannies and even the pets! The entire vacation experience is customized and personalized well in advance, from the pillows, to the personal trainer and, of course, yoga instructor, that very unique cuvee of champagne that is wanted in the suite, to the very best fly fishing guide. The list is endless, but the message is short and simple—customization, personalization, exclusivity and only the best will do for this breed of consumers.

One obvious example of the follow on trend is in the word of private planes. Tomorrow it will not only be the domain of the big corporations and the super-affluents but will be much more accessible with the new breed of light planes such as the Eclipse and the Honda that suddenly make private jet travel affordable for the affluent. 

It seems inevitable that this trend will continue and accelerate as instant communication and the I want it now attitude of the X and Y’ers gathers even more pace and momentum on a global basis. New brands will proliferate as today’s luxury brands become increasingly commonplace. Unless today’s luxury brands focus on exclusivity rather than unit sales volumes, then I would argue they are doomed to lose their sheen and patina and become commonplace as new high-end brands founded by research driven, bold and youthful entrepreneurs set tomorrow’s ever higher and demanding standard for the superaffluent to enjoy and the affluent to aspire to on.

And so the cycle will continue at an increasing pace.

Posted by Laurence Geller on January 17, 2008 | Comments (0)