THE HIGH LIFE

The luxury market is fragmenting fast as the world’s most desirable brands struggle to meet the demands of emerging markets, old world wealth and everything in between. But what’s your idea of the good life? And where does it fit in the new luxury order?

THE WORLD OF LUXURY IS IN RUDE HEALTH. AT THE RECENT International Herald Tribune (IHT) luxury goods conference in Moscow, Bernard Arnault, chairman of LVMH, predicted that the luxury industry will double in the next five years to hit €300bn (£235bn). A good deal of that sum is expected to come from the so-called BRIC nations of Brazil, Russia, India and China, which are fl exing their new-found financial muscle and buying status through brands at a prodigious rate.

“These emerging markets are keeping many luxury goods companies afl oat,” says Martin Raymond, co-founder of The Future Laboratory, whose recent report on the future of luxury plots a five-stage approach to the luxury consumer. The new rich in countries such as China and India enter the luxury scale at The Future Laboratory’s Stage One, where, says Raymond, “Luxury is used to demonstrate wealth, define social position and to visibly separate the buyer from the mass market.”

Merrill Lynch estimates that China’s share of global goods revenues will rise from 11% in 2004 to 24% in 2014. Likewise, Russia is already home to an estimated 33 dollar billionaires and 88,000 dollar millionaires – it’s no coincidence that the IHT conference was held in Moscow. And while these emerging nations will fuel Stage One of the luxury scale, there are plenty of Stage One spenders the world over. “It stretches from the newly minted City trader in receipt of his or her first five-figure bonus, to the Russian trilliarch ordering his second 500ft mega-yacht,” explains Raymond.

The trouble for luxury brands is that as Stage One spenders continue to covet their bold displays of wealth, consumers at the more discerning end of the luxury spectrum are yearning for something with more depth, meaning and relevance. Turned off by the gaudy show of gold and diamonds and infl uenced by an awareness of environmental and ethical concerns, these consumers are looking for something more meaningful, personal and understated. At least that’s what the experts say. Speaking at the IHT conference, legendary fashion designer Tom Ford called on the luxury industry to reform. “We need to replace hollow with deep,” he said. “Luxury isn’t going out of style – it needs to change its style.”

Such depth is a particular challenge for the fashion industry, which is, by definition, dependent on the superficial and temporary allure of passing seasons and changing trends, but where there’s a will there’s a way. “One way for luxury fashion to add meaning to the offering,” says Radha Chadha, co-author of The Cult of the Luxury Brand, and an expert on the luxury industry in Asia, “is to focus on the supply chain and ensure that the garment is ethically made and politically sourced.”

Jewellery brand John Hardy, for example, ensures the wellbeing of its staff by working at the very base of the supply chain. The company employs more than 600 Balinese craftspeople, who combine their traditional techniques with modern silver design. Set in the middle of Bali’s rice terraces, the company provides good quality housing and food for the workers and their families, and is able to trade on its transparency as an ethically-sound luxury brand.

Others are leveraging their status as a luxury brand to endorse political concerns and raise awareness while promoting their own products. Louis Vuitton’s Mikhail Gorbachev campaign, for example, featured the former Soviet president photographed in the back of a car, with a Louis Vuitton bag by his side and the Berlin Wall in the background. It represented a bold step away from A-list models and celebrities, such as Vuitton regular Scarlett Johansson, and included the brand making donations to Al Gore’s The Climate Project and Gorbachev’s Green Cross International, which promotes sustainable development. “It’s not integral to the brand,” says Chadha, “but it’s a start.”

It’s not just in fashion that the new luxury is making its presence felt, and the growing trend for alternative investments is being held up as evidence of individuals seeking a tangible and enjoyable connection to their funds. The new breed of rich have worked hard for their money and they expect to see a return on it. According to Merrill Lynch, 37% of global millionaire wealth has its source in business ownership, 24% in savings from income and only 18% from inheritance, and when money is self-made, things move fast. Only 43 of those featured in the Sunday Times Rich List of 1989 were still in the top 200 in 2006.

It’s good news for luxury because these individuals are highly aware of their assets, and rather than passively sitting on them for generations, they are looking for ways to invest. They are, however, looking beyond traditional investment into commodities, high-risk stocks, hedge funds and property for something with a little more meaning and intellectual cachet. As James Lawson, research director of leading wealth market analysts Ledbury Research explains: “They’re looking for more and more esoteric investments. They make for better conversation than discussing your Jupiter fund.”

Art, design and wine are high on the list, especially in countries like China where the banking system is famously unstable. Record sales over the past two years have established Hong Kong as the world’s third most important art market after London and New York. The wine market, too, is booming as millionaires turn their assets into erudite wine cellars. In the past year alone, prices of 100 different wines on the Liv-ex Index, the equivalent of the FTSE 100 for wines, have jumped by 42%. Between May and June last year, for example, the price of a case of Chateau Haut-Brion 2000 rose from £4,200 (€5,300) to £5,000 (€6,400), a 19% increase in just one month.

Having made their own money, the new luxury consumer also covets the personal touch.

Time poor and willing to pay for services that will make their lives easier, they have created, or at least reinvigorated, a sector of the luxury market that has long lain dormant. In the USA, according to the American Personal Chef Association, the number of households with personal chefs will quadruple to 300,000 within the next three years, while the UK is undergoing a ‘butler boom’, with City & Guilds now offering an accredited butler course in conjunction with Buckingham Palace.

“It’s a new kind of employer now,” says Ivor Spencer, who runs the International School of Butler Administrators and set up his business 27 years ago. “Today, a lot of our customers are wealthy Chinese and Russians, and the butler’s role is more akin to running a small business.”

Spencer recently sent one of his butlers to Bahrain to run a palace of 125 staff, on a starting salary of £100,000 (€127,000) a year. And it’s not just butlers who are in demand: housekeepers, personal maids and private chefs are also wanted. “It’s another booming industry,” says Spencer, of the private chef, “not just for celebrities, but also for the new billionaires.”

It also refl ects the shifting status of women, who, according to a study carried out by the Centre for Economics & Business Research, will constitute 53% of the world’s millionaires by 2020. The effects of this change are already being seen, as women no longer have the time and energy to work and run the home. But what are these ‘femmes financials’ doing to the luxury market?

“The days of getting away with rubbish service are over,” says Margaret Heffernan, five times a CEO and author of How She Does it: How Women Entrepreneurs are Changing the Rules of Business Success. “Women actually talk to each other,” she says, meaning that news of bad service travels fast. Brands are responding to their demanding female customers by offering a personalised service and placing an emphasis on building relationships with the luxury customer.

It’s another level of the all-important personalisation, and helps to explain why the luxury industry buzz word in 2008 is ‘concierge’. “Women are looking for ways to simplify their lives and they see personalised service as central to their consumer experience,” says Heffernan.

For example, hotel apartment living, where the concierge is central to the facility, is on the rise, as are a whole range of services delivered with a concierge smile. Head Concierge in the UK, for example, works on a pay-as-you-go model, costing from £10-£25 (€13-€32) per hour and offering to do anything from picking up the shopping and waiting for the delivery man to looking after a sick child. Combined with the surge in home chefs and even butler services, it seems that the new luxury is embracing a return to domestic servants, albeit with a wide range of price points and some very modern features. Concierge specialists Bluefish, for example, can provide things money can’t buy, ‘inside the velvet rope’ experiences for its members, such as bagging a seat at the Grammy Awards.

Thoughtful, principled, personalised, and of course indulgent, the new luxury is a complicated mix that consumers will navigate their own way through. “That’s luxury after all,” says The Future Laboratory’s Martin Raymond, “the freedom to be discerning and move away from the crowd.”

WORDS BY MIRIAM RAYMAN