Despite representing just 0.1 percent of the global adult population, the number of high net-worth individuals (HNWI) – those with net wealth exceeding USD $5 million – is rising across the globe, fuelling fresh opportunities for luxury brands and retailers. A report released in November 2018 by market research firm, Euromonitor International, projects that this population will reach 8 million by 2030: a staggering 93 percent increase from 2017.
The report goes on to reveal that almost half of this growth will come from China, which continues to show strong economic developments and income gains. Additionally, although the US is currently home to the highest concentration of HNWI (accounting for 58 percent of the global high net-worth population), emerging markets such as India, Turkey, Mexico and Indonesia are set to have the largest absolute rise in the number of HNWI between 2018 and 2030, while Vietnam is expected to generate new millionaires at the fastest pace.
Gauging the needs and demands of this group is one of the biggest challenges for brands and retailers: “High net-worth consumers often demand more than luxury goods and services,” says An Hodgson, income and expenditure manager at Euromonitor International and author of the report. “So the key to success is for brands to go the extra mile to provide high-end, unique and exclusive experiences, even when the end goal is to sell physical products.”
Below, ORDRE breaks down the top three effective strategies for retailers to win with this consumer.
“Emerging markets such as India, Turkey, Mexico and Indonesia are set to have the largest rise of HNWI between 2018 and 2030”
Target new wealth
Often newly wealthy, self-made business leaders, high net-worth individuals – particularly from emerging economies – travel extensively. This poses a number of challenges for brands and retailers. “Companies often struggle to reach the wealthy due to their globetrotting lifestyle and the fact that they tend to be time poor,” explains Hodgson. But the report goes on to highlight the opportunity they represent: often risk-takers and early adopters, they are highly likely to engage with new products and services and spend their new-found wealth on luxury items as statements of success.
One such retailer who understands this opportunity is London-based luxury department store Harrods. Primarily targeting wealthy Chinese consumers, in February 2011 it installed 75 payment terminals in-store, offering the option to make payments from domestic bank accounts: this effectively minimised overseas transaction costs and simplified the purchasing process. Additionally, in 2017 after numerous Chinese customers complained about difficulties in navigating the store, it announced a £200 million refurbishment plan to make each floor more accessible, proving that they are willing to go above and beyond to accommodate the needs of such individuals.
Hodgson states that brand authenticity continues to be a major priority for high net-worth consumers: for brands and retailers to deliver, they need to align their story, messages, values and actions across every stage of the business. She goes on to list a number of traits that they should be adopting in order to appear more authentic, including transparency, quality, craftsmanship, consistency, reliability, uniqueness, rarity and social responsibility.
Luxury house Hermès has embraced many of these attributes in both its main lines and offshoot lines, putting authenticity at the brand’s core. In 2010, it launched Petit h, a lifestyle spin-off line dedicated to putting in-house waste materials to good use through traditional craftsmanship. Offering playful accessories and household objects, it champions social responsibility, know-how and uniqueness, giving consumers more reason to trust and pursue the brand.
Achieve loyalty with personalisation
In a highly competitive luxury market, gaining consumer loyalty can often be challenging. Hodgson suggests that those seeking to differentiate themselves should consider a number of personalised solutions such as one-to-one marketing, real-time communication, bespoke products, tailor-made services and personal consulting. She adds that HNW consumers often expect access to long-term privileges and rewards in conjunction with products and services, so these types of exclusive services can set brands apart and continue to ensure interest.
Miu Miu for one is finding success in highly personalised strategies. In 2017, it launched a customisation service, available exclusively at its Sloane Street store in London, offering customers the option to design bespoke shoes from an infinite choice of colours, embellishments and materials. Hodgson suggests that this type of experience puts power in the hands of the consumer as they are free to experiment with their fashion choices and create unique products, forging a personalised relationship with the brand and building loyalty.
Understanding the behaviours and characteristics of high net-worth consumers is no easy feat, especially as this population expands and evolves. But brands and retailers can reap long-term rewards if they implement strategies that put the needs and desires of this consumer at the forefront of the business, and offer services and experiences that cannot be found elsewhere.