Luxury Executives Expect Growth From UHNW Segment in 2014


Sophie Doran | April 24, 2014

Revenue growth is expected in North America and Asia, as overall competition intensifies for the attention of the ultra-affluent luxury consumer

Wealth-X has just launched its first Luxury Sentiment Survey for Q1 2014, in a bid to better understand how the luxury industry is engaging with ultra high net worth (UHNW) individuals and gauge the optimism of executives when it comes to the future of their relationship with these individuals.

The results are optimistic. Nearly 80% of respondents are confident that revenue from UHNW individuals will increase in Q1 2014. More than ever, these individuals are considered essential for the growth of the luxury market. Only 9% of respondents revealed that they do not specifically define UHNW individuals within their marketing plan.

“ 80% of respondents are confident that revenue from UHNW individuals will increase ”

UHNW Behaviour

According to half of the respondents, North America continued to generate the largest share of their revenue in Q4 2013, followed by Asia with 29% and Europe with 19%.

Respondents believe that Asia and North America are the two regions most likely to have the fastest growth in terms of luxury goods revenue in Q1 2014.

This is perhaps unsurprising when we consider the findings of the 2013 World Ultra Wealth Report. The United States led for the year in terms of real growth in UHNW population numbers, with an additional 2,250 individuals joining the ranks of the ultra wealthy.

The densest UHNW populations were found in California, New York, Texas, Florida and Illinois respectively. Which is interesting in the sense that there has been a flurry of luxury brand retail entry in Dallas, Miami and Chicago – and optimisation in Los Angeles and New York City – in the previous twelve months.

Thankfully for luxury brands, according to the sentiments based research, 76% of respondents said their clients were mostly domestic consumers, rather than tourists.

Category Performance

Though North America generated the most significant amounts of revenue for executives surveyed, this differed in various sub-sectors within the luxury industry.

For traditional luxury items (such as apparel, leather goods and jewellery), Asia was perceived as the main revenue generator. Furthermore, over 50% of respondents expect Asia to display the largest growth in Q1 2014.

Despite positive sales increases for most of the major brands in 2013, respondents in this
subsector were particularly affected by competition: 67% of respondents considered competition the biggest challenge in Q4 2013.

“ 50% of respondents expect Asia to display the largest growth in Q1 2014 ”

They were also markedly less optimistic about Q1 2014, with a quarter of respondents expecting to see a small decrease in revenue in the coming quarter. Perhaps as a result of this negative outlook, most of the respondents planned to intensify their targeting of UHNW clients.

For the art collectibles and wine & spirits sub-sectors, Asia and Europe were the regions responsible for the largest share of their revenue. More than 50% of respondents expect Asia to display the largest growth in Q1 2014.

Manufacturers of big luxury items such as yachts and private jets are particularly optimistic for the coming year, with 87% of respondents expecting growth in revenue and more than 33% expecting an increase of more than 10% in Q1 2014’s revenue compared to Q4 2013.

More than half of respondents confirmed that North America is responsible for the largest share of their revenue.

Marketing preferences for reaching UHNW consumers

Marketing Implications

67% of respondents in the hospitality and services sub-sector of stated that the majority of their revenue is derived from UHNW clients. Therefore it is unsurprising that 83% of respondents have specific targeting strategies to further engage their existing UHNW clients.

What did come as a surprise is that 67% of respondents do not have specific strategies to attract new UHNW clients. Instead, they rely on their general marketing strategy, mainly revolving around events or relying on word of mouth.

Of all the sub-sectors surveyed, art collectibles and wine & spirits brands seem to have the most targeted marketing approach for UHNW individuals.

“ 67% of respondents do not have specific strategies to attract new UHNW clients ”

72% of respondents said their firm had a specific strategy for expanding relationships with existing UHNW clients, whilst 64% have a specific strategy for attracting new UHNW clients.

36% said they used more than half of total marketing budget specifically towards UHNW clients. These marketing strategies mainly revolved around events. Indeed, 74% of all respondents surveyed said events were the main way they targeted UHNW clients, and that word of mouth was also considered important.

Of those surveyed, only 25% are engaging with their UHNW clients via online portals: 75% of respondents appear not to engage with clients through online services at all, or consider their use to be insignificant.

The main sub-sectors using online portals were the hospitality & services; information services and yachting & boating sub-sectors

To download the full Wealth-X Luxury Sentiment Survey please click here

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

- 5 Key Insights from The 2014 Wealth Report by Knight Frank
- Key Insights from the 2013 World Ultra Wealth Report
- Understanding Brazil’s Next Generation of Wealth

Data | Markets | UHNW