Key Insights from the 2013 World Ultra Wealth Report


Doug Gollan | September 16, 2013

Two key facts, their implications and multiple questions thatluxury brand executives should be asking themselves when it comes to marketing to UHNW individuals

Two key facts, their implications and multiple questions that luxury brand executives should be asking themselves when it comes to marketing to UHNW individuals

The UBS/Wealth-X 2013 World Ultra Wealth Report was released last week providing 45 pages of graphs, charts and data on just how rich the very rich are. In case you haven’t read it, the very rich are very, very rich and getting richer.

Their cumulative wealth increased by $1.7 trillion, about the same as the GDP of India, Russia or Canada and slightly more than Australia. This year-on-year increase alone could buy every Swiss watch made for the next 50 years, or every luxury hotel suite, every night around the world for the next 30 years.

A separate report by WealthInsight for Spear’s Wealth Management Magazine suggests this increase is being driven by globalisation, technology and entrepreneurship. Their research also suggests the very wealthy are getting younger.

In broader economic research studying American taxpayers, economists at the University of California, Berkeley, the Paris School of Economics and Oxford University found that since the U.S. recession officially ended in June 2009, the top 1% have realised 95% of income gains. Obviously the rich were the ones with the money to buy things when the market tanked.

“ Since the U.S. recession officially ended the top 1% have realised 95% of income gains ”

The UBS/Wealth-X report confirms the population of Ultra High-Net Worth Individuals (head of households, net worth of $30 million and above) at nearly 200,000. This means they are outnumbered to 35,000-to-1 by the rest of the World population.

Their cumulative wealth (over $27 trillion according to this study – although other reports estimate $40 trillion or more) is equivalent to 40% of the World’s GDP. Their average Net Worth is $139.4 million. It would take a Mass Affluent household earning $200,000 per year – without spending a cent or paying taxes – 695 years to achieve just the average worth of an UHNW family.

In other words, while Mass Affluent consumers in many parts of the world remain squeezed, UHNWs have plenty of money to spend. In the U.S. for example 32% of their wealth is liquid. Not surprisingly it turns out the Super Rich love their private jets: The average value of private jets for men was $22 million while the women clocked in at $14 million.

“ While Mass Affluent consumers remain squeezed, UHNWs have plenty of money to spend ”

Like virtually all of the now many reports trying to define the demographics of UHNWs, the UBS/Wealth-X report provides excellent data on net worth, country of origin and asset allocation, all good for financial advisors, but a bit light when it comes to spending on lifestyle categories such as watches, jewellery, fashion, cars, vacations and such. Psychographic profiles are also absent.

With Russ Alan Prince, I co-wrote The Sky’s the Limit, based on over 600 interviews with private jet owners. From that we built three basic psychographic buying profiles marketers can use to segment UHNWs: Connoisseurs, Winners and Trendsetters.

We are now working on breaking out the Connoisseurs having noticed that these collectors behave differently depending on their level of interest and experience in a category. Using the Prince findings as a screen for the UBS/Wealth-X report I picked out two key points that provide an interesting conversation for those of us involved in the lifestyle side of pitching UHNWs.

UHNWs in many ways are Luxury Newcomers:

65% of the world’s wealthiest families (Heads of Households) are first generation wealth, and depending on how you define the term “self-made”, it is over 80%. Numerous other studies show many UHNWs grew up in Middle Class non-luxury consumer households.

Oracle founder Larry Ellison was raised in a two-bedroom apartment in a blue-collar neighbourhood of Chicago by relatives, for example. Google’s Sergey Brin spent his early life living with extended family in a pre-Glasnost three-bedroom Moscow apartment.

Implications: The self-made UHNW is not the same aspirational consumer many luxury brands spend most of their marketing dollars chasing, with the idea they enter the brand at accessible price points (wallets, fragrance, key chains) and as they progress in their careers eventually spend increasingly serious amounts.

“ 65% of the world’s wealthiest families are first generation wealth, 80% are self-made UHNWI’s ”

The aspirational segment by and large probably continues to buy mainly at the entry level price points when they can afford it during their consumer lifespan, but never really graduating. On the other hand, the UHNW from the start of work until becoming very rich was focused on his/her business. Savings and credit cards were used to fund the business not buy expensive handbags and loafers.

Family members helped make the business by working during school breaks. There were few if any fancy family vacations, luxury cars or designer fashion. Free moments were spent reading was trade journals and figuring out how to turn their widget business into a billion dollars, or at least a hundred million.

A just completed study with over 200 Elite Traveler readers found sources of wealth from waste management, landscaping, transportation, distribution of consumer products to Central America, car dealerships, manufacturing, convenience stores, supermarkets, auto racing, in addition to energy, hedge funds, insurance, banking and real estate.

“ The paradox: UHNWI’s have the money, but need inspiration & education when it comes to luxury ”

Chances are the spouse also worked the business in the formative years or held another full-time job to enable his or her partner purse their dream.

Fast forward and now that these UHNWs are super rich, they may not be as familiar with luxury brands and service providers as brand managers would like to think. Their passion was their business, not flipping through lifestyle magazines eyeing things they couldn’t afford. The paradox: They have the money, but need the inspiration and the education.

Luxury brand executives should be asking themselves…

• Since you probably don’t advertise in Waste Management News or Landscaping Weekly, while UHNWs may know your name (or not), how much do they really know about the variety of products and services you offer?
• For fashion, watch and jewellery brands, what is UHNW knowledge about your Men’s Collection versus Women’s and vice versa?
• Do they know about your brand extensions?
• Do they know what makes your brand or category special?
• Do they know what you offer that’s different or better than your competition?
• Do they have a clear image of your brand or even primary awareness?
• Do you have a specific multi-platform marketing strategy (beyond just events and sponsorships) to target this unique, high-return audience?

Since the Marketing Funnel (Awareness – Opinion – Consideration – Preference – Purchase) was created in the late 1800s all of the above have been considered key to getting consumers to buy one’s product, so certainly these are questions that need to be discussed if you want your fair share of UHNW spending.

“ How much do UHNWI’s really know about the variety of products & services you offer? ”

Introducing The UHNW Long Tail:

In a market segment where gaining a few new UHNW customers can have a major positive impact on one’s bottom line (Tally the sales of your 50 highest spending customers and calculate the impact of getting 50 more customers that spend like them) the Super Rich are both global and surprisingly spread out. Let me name it “The UHNW Long Tail.”

In the U.S. there are 21 states with at least 1,000 UHNW households, including places like Ohio, Wisconsin, Minnesota, Wisconsin, Georgia, Tennessee and Indiana. Despite the proliferation of mono-brand luxury boutiques none of the above are hot spots. If 1,000 doesn’t sound like much consider Saudi Arabia has all of 1,360 UHNWs.

Arkansas, Kansas, Missouri and Oklahoma each have at least 500 UHNW households, more than the Ukraine (480). Oregon, Louisiana, Kentucky, Alabama, South Carolina, Montana and Wyoming have between 300 and 500 UHNWs, similar to Chengdu, Xiamen and Changsha – 6th, 7th and 8th wealthiest cities in China.

If you doubt these fly-over states have luxury consumers, watch the Reality TV Show “Re-Sale Royalty” where the consignment store builds its inventory through closet cleans of wealthy Missourians and Illini whose shoe collections would rival Imelda Marcos.

“ Arkansas, Kansas, Missouri & Oklahoma each has at least 500 UHNW households, more than the Ukraine ”

In Europe beyond the usual suspects depression-riddled Spain (1,625), Norway (1,450), the Netherlands (1,290), Sweden (1,070), Turkey (900), Portugal (870), Belgium (810), Poland (800), Denmark (740), Luxembourg (660), Ireland (580), Greece (505), Hungary (400) and Finland (400) have at least 400 UHNW households. Even in the U.K, over 40 %of the UHNWs are located outside of London (when they are not on their jet at least).

Go beyond Japan, Mainland China and India, South Korea (1,390), Singapore (1,385) and Taiwan (1,305) each have over 1,000 UHNWs. But don’t stop there: Indonesia, Malaysia, Thailand and the Philippines each have over 600 UHNWs.

Look to Latin America where Argentina, Colombia, Chile, Peru and Venezuela each have between 400 and 1,100 UHNW households. In the Dominican Republic there are over 250 and Puerto Rico have over 100 UHNW households. As a comparison Qatar has 345.

Implications: A recent article by The Wall Street Journal uncovered Google’s private jets (three top executives are billionaires and numerous more are UHNWs) made over 2,500 flights the past five-and-a-half year crisscrossing the globe.

“ Indonesia, Malaysia, Thailand and the Philippines each have over 600 UHNW households ”

Chrystia Freeland’s book Plutocrats told of the Super Rich who no matter where they came from see themselves as citizens of the globe as opposed to citizens of one country. Robert Frank’s Richistan described a fictional global nation of UHNWs who have more in common with each other than their next-door neighbours.

A look at the Google flight records prove this out – from Sardinia to Boston to Seoul to Seattle, Zurich to Miami, London to New York, Antigua to Miami, Los Cabos to Seattle, Amsterdam to Washington DC to San Diego an endless string of flights aboard private jets. At the same time, it’s not uncommon to hear that 50% or more of mono-brand store sales are to consumers located outside of the market footprint.

Clearly UHNWs in the Long Tail serve two purposes for luxury providers: They are potential new high value customers traveling to where you sell via brick and mortar; and Long Tail UHNWs can support your business when large markets falter.

Keep in mind more than 20% of $1 million + home sales in the U.S. were to foreigners in the past six months. Each of these luxury homes has parking spots for nice cars and many are prospects for home design and renovation.

“ 20% of $1 million + home sales in the U.S. were to foreigners in the past six months ”

Luxury brand executives should be asking themselves…

• Is the way you allocate your marketing budgets effectively reaching these spread-out and always on the move Long Tail high spenders?
• Does your company have Global and Pan-Regional marketing allocations that take into account the high travel of this segment?
• Do your current local market media plans reach UHNW travellers who are located outside your market footprint but buy when traveling to your region?
• Are you taking advantage of the spending power in the Long Tail of UHNWs, who travel to markets you sell in, but have a primary bases outsides those markets?

The frequent travel of UHNWs jetting around the world combined with the significant amount who are in the Long Tail provide a large opportunity for luxury marketers who can apply the same marketing wizardry they have laid on the Mass Affluent.

Certainly the move to private jets as the chariot of choice by UHNWs from traditional markets and the Long Tail alike make the segment easier to reach than ever before. And as the UBS/Wealth-X study points out, they have no shortage of cash.

To further investigate wealth and affluence on Luxury Society, we invite your to explore the related materials as follows:

- Understanding Brazil’s Next Generation of Wealth
- How Luxury Brands Are Engaging the UHNW Consumer
- The Rich Just Keep Getting Richer

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