How do the world’s up and coming wealthy define success? The 2011 Futurewealth Report: The Essence of Success focuses on this question.
Over 1,700 individuals gave their time to provide a window on what they expect from themselves, and what they value in others. This is Scorpio Partnership’s second survey of one of the most interesting consumer groups on the planet, supported by Standard Chartered Private Bank and SEI.
In the analysis to determine what it takes to be successful, Scorpio isolated three qualities that stand out as being critical for the Futurewealthy group: innovation, accountability and energy.
The most financially successful participants in the Futurewealth research had energy levels 80% higher than the rest of this high-achieving group. And they channel 60% of this energy into tasks associated with innovation, such as “doing things differently” and “hunting out new opportunities”. They also believe it is important to “take responsibility for others” as they grow wealthier.
Not surprisingly, these same values are strongly reflected in brand values that the Futurewealthy admire as a group: 43% indicated their admiration of a particular brand was based on its ability to deliver superior quality; and 28% attributed a brand’s success to its innovation. When asked to identify their favourite brands, the names that loom large are Apple (65%), Google (56%), BMW (52%) and Microsoft (40%).
If technology brands are the global standouts in delivering the client experience, in China luxury peers take their place. While Scorpio did not break out the brand values results by geography, the Hong Kong-based brokerage and investment firm CLSA has looked into this crossover between wealth and luxury spending in a new report titled Dipped in Gold: Luxury lifestyles in China and Hong Kong.
Today, and in the future, there is probably no other market where the nexus between rapid wealth creation and the success factor of luxury brand spending is better illustrated than in China.
The wealth scale of the market is, of course, huge already and very soon likely world leading. For luxury brands and any other sector looking at this market, the numbers and their future potential are a growing attraction. In 2010, China had 72 billionaires (according to Forbes), 477,000 HNWIs, up 31% on 2009 (says Capgemini), and the Chinese stock market capitalisation soared more than 100%.
This has fuelled spending and, as the CLSA report points out, the prime beneficiaries of this have been the brands of the luxury goods sector. In fact, luxury sales in Greater China already represent 10% of the global market, which means the Chinese are punching about 250% above their wealth weight (according to Scorpio Partnership). However, including the huge level of sales to Chinese tourists buying abroad, Greater Chinese consumers account for 15% of global sales.
Furthermore, CLSA predicts the luxury sector will also be the fastest growing consumer category in China through the next five years, with 25% CAGR. By then, Greater Chinese customers will account for 44% of global luxury sales and 50% of sales growth. Regardless of whether the Chinese are by that point the world’s wealthiest country, their thirst for luxury will drive a huge sales boom for the global luxury sector.
So what is it about luxury brands that the Chinese love? As Scorpio identified with Futurewealth, the lead factor is quality: the Chinese believe luxury and expense equals quality and they’ll pay a premium for it. They also believe it strongly shows off success and buy to reward themselves and friends and family for that.
Both the Futurewealth report and the CLSA report focus on understanding the customer, more or less, and both reveal that brands that match their appeal with the buying habits of Chinese HNWIs are the most likely to succeed.
The CLSA report does not evaluate financial services as a part of consumer spending patterns. If it did, Scorpio would not be surprised to find it was consistent with how the rest of the Futurewealthy see the industry.
What Scorpio found is that the financial-services industry is not just poor at delivering the kind of client experience that this key client group wants. That was known already. Scorpio found that the financial-services sector is the only major consumer industry that wealthy customers believe delivers a negative client experience.
In this debate, it's important to bear in mind that brands change and values change. The Futurewealthy project is designed specifically to understand the issues, needs and wants of future wealthy customers – not necessarily the customers of today.
What the results suggest is that wealth managers will increasingly have to nudge their brands down the path of innovation and deliver high levels of quality and accountability if they want to appeal to their customers of tomorrow, whether in China or the rest of the world.