Trends. The HNI shopping cart

What’s the use of having pots of money if one doesn’t use some of it to pamper oneself? Luxury goods and services are so intrinsic to most ultra-high net worth individuals’ lifestyles that many of them would be surprised if they were considered a “luxury”.

For example, the private jets they fly are not only used for leisure, but for business purposes. A suit costing over a lakh of rupees might still be seen as inadequate for social outings.

However, the super rich don’t mind spending on it as it is part and parcel of the image and status they command.

The average global UHNW individual spends $1.1 million a year on luxury goods and services, ranging from expenditure on travel to food, according to the new ‘‘World Ultra Wealth Report 2014’’ brought out by Wealth-X and UBS.

With their global population touching 2,11,275, that translates into total annual spends of $234 billion, constituting 18.9 per cent of the global luxury market in 2014.

This was higher than their 17 per cent share in 2013, with the rise largely attributed to fast growth of the UHNW population as well as their wealth, which rose 7 per cent to $29,725 billion in 2014.

And while the data conjures up visions of men in designer suits driving fast sports cars, the reality is that women seem to favour such trappings more than men do.

The report indicates that men park less than 10 per cent of their net worth in real estate and luxury assets, whereas the ultra-affluent female population holds almost 16 per cent of its net worth in such assets.

As more female members increase their own fortunes, it is likely to have a bearing on the expansion of the luxury industry as well.

Of the total spending on luxury goods and services, travel and hospitality top UHNW individuals’ bills at an annual $45 billion.

This adds up to a 22.5 per cent share of the market. The luxury travel and hospitality sector banks on the UHNW population that is seeking superior lifestyle experiences and willing to pay to get them.

Besides five-star hotels like the Palazzo Versace and first-class air travel by private jet, the cruise market has seen higher UHNW engagement in recent years.

Automobiles come a close second when it comes to luxury spending, taking up $40 billion every year, but the share of the global purchases is just 8.9 per cent. Luxury vehicles are still seen as a status symbol and a social enabler.

The high degree of personalisation for vehicles is helping to double or, in some cases, triple the basic price tag.

The choice of vehicles ranged from classic cars from bygone eras to high performance cars to up-market sedans.

Surprisingly, art is next on the list of big-ticket purchases for the super-rich, with its annual spends at $25 billion, approximately the same amount they spend on jewellery and watches as well. UHNWs contribute to 37.9 per cent of the luxury art market.

The top brands in the watch market include Blancpain, Breguet, Longines, Omega and Rado, besides the ubiquitous Rolex, while many look no further than American jeweller Tiffany when jewellery shopping.

A private jet and a yacht may both seem contenders in the luxury stakes. But to the UHNW, having their own planes is the clear choice.

Their spending on private aviation is at $23 billion, whereas their investment in yachts adds up to $22 billion a year. These products fit into the upper niche of the global luxury market and so comes as no surprise that

UHNWs account for 82.1 per cent of the market for private aviation and have an 88 per cent share of the yacht market.

Apparel and accessories also find a place in global UHNW individuals’ shopping baskets, with total annual spends touching $15 billion and $12 billion, respectively.

According to a Bain & Company study on the luxury market, sales of high-end shoes have surpassed that of leather goods for the first time since 2007, emerging as the new fashion status symbol, even though they attract a lower price tag than other leather goods.

A separate report by Deloitte Touche Tohamatsu, ‘Global Powers of Luxury Goods’, identifies the favourite brands of the swish set, based on annual revenues.

The list is topped by products from the house of LVMH Moet Hennessy Louis Vuitton SA, including Louis Vuitton, Fendi, Donna Karan, Loewe, Marc Jacobs and Celine.

Switzerland’s Compagnie Financiere Richemont SA is next on the list with offerings under the brands Cartier, Lancel, Van Cleef, Chloe, Baume & Mercier, IWC, Jaeger-LeCoultre and Montblanc. Rounding up the top three luxury goods companies is Estee Lauder Companies Inc, with brands such as Estee Lauder, Aramis, La Mer, Aveda and Jo Malone.

Other luxury goods companies that attract UHNW eyes and wallets include Luxottica Group SpA — with brands such as Alain Mikli, Arnette, Ray-Ban, Persol and Oliver Peoples — and Kering SA, with products from the house of Gucci, Bottega Veneta and Saint Laurent.

Their home furnishing needs constitute 28.1 per cent of the entire market, translating into a total annual expenditure of $8 billion on brands such as Swarovski.

Wines and spirits ($8 billion) are often synonymous with luxury, but non-alcoholic beverages are also gaining prestige. Beauty products and services ($4 billion) and other fashion spending ($1 billion) topped UHNW annual shopping carts.

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