The number of millionaires in the world is set to rise – and with it, opportunities for luxury brands to capitalise and further expand their empires – according to a new report released by Wealth-X.
The report, ‘Decades of Wealth: The Next 10 Years In Wealth & Luxury’, offers a roadmap into the foreseeable future of Ultra-High-Net-Worth-Individual (UHNWI) wealth and highlights some key areas of evolution to watch for.
Overall, the report confirms that millionaires are on the rise, with the surge to continue as businesses are bought and sold and family inheritances are passed on – in total, Wealth-X expects US$4.1 trillion will be transferred globally by UNHWIs over the next decade, including US$1.2 trillion in liquid assets.
However, while UHNWIs – in this case, defined as those having net assets of $30 million or more – will surge, an evolution in terms of consumer behavior, country of origin and and the use of wealth is set to sweep this new generation.
As the report states: “The world’s newly wealthy will rapidly become more discerning luxury consumers.
“The rise in discernment amongst the world’s wealthy will not only affect the brands they buy, but it will also affect what they buy.”
Here, we highlight what you need to know about this emerging and highly lucrative target market.
“ The world’s newly wealthy will become more discerning luxury consumers ”
We may be now entering “India’s Decade”, according to Wealth-X.
While Brazil continues to struggle to live up to expectations of its potential, Russia and China have taken much of the limelight in the past – with both economies growing over 600% — however, they may be running out of steam.
India has always been slightly enigmatic, over the past year, the rise in Indian wealth and the number of wealthy has been impressive – the number of millionaires climbed from 196,000 to 250,000, an increase of 27%.
The country is forecast to generate new millionaires at a rapid pace – we forecast 437,000 millionaires by 2018, and potentially double that number by 2023.
Fuelled by a young, well-educated population with high levels of entrepreneurship and business ownership and coupled with the fact that wealth creation and luxury consumption are not as controversial in India, nor hampered by social inequality or austerity agendas as has been the case in Brazil and China – the market environment will soon be ripe for the picking.
Wealth growth in Africa – particularly in the key markets of South Africa, Nigeria and Kenya – will continue, at an impressive trajectory of over 10% per annum.
By 2040, the continent’s ultra high net worth (UHNW) population is expected to quadruple and encompass more than 10,500 individuals.
Additionally, though it is rich in natural resources, Africa has also become the focus of technological innovation, which could see the continent develop in a different and more accelerated way than other emerging economies have over the past decade.
“ The continent’s UHNW population is expected to quadruple ”
Also raising its profile is the Middle East, with Iran picked out by Wealth-X as a possible “one to watch”. A state rich in natural gas and other precious resources, it could undergo rapid economic resurgence once political and economic reforms have taken place. Such reforms could inspire a latent cosmopolitan and educated Iranian middle-class who have the potential to broaden the country’s horizons.
Turkey, with its increasing economic growth, in combination with its geostrategic position and emerging middle class, could also soon strengthen its regional role in the Middle East and rise into the ranks of the 20 wealthiest nations.
Finally, Wealth-X believes Mexico will continue its path of strong growth. Compared to the high import duties of Brazil, the Mexican market enjoys a competitive economy, where doing business is easy and the tax burden is low, and the population is both familiar and interested in fashion and luxury, fuelled by exposure through the US.
Along with changes in the emergence of wealth, will come changes with how that wealth is spent.
Wealth-X has identified four implications of the shift in luxury consumer behaviours in emerging markets for brands that target wealthy consumers:
• Less Internationalisation, More Localisation: In the coming decade, it will be increasingly important to segment and understand the wealthy at a more detailed level – most likely defined by cities within countries. Brands should also be prepared for the non-linear development of economies and wealth creation.
• Pushing Frontiers Will Generate New Spending and Opportunities: The wealthy have always been among any early adopter group, and new frontiers will become the focus of both luxury consumption (such as space travel) and of investment.
• Experience More Desired Than Products: Growing discernment among the rich in emerging markets will increasingly shift luxury consumption away from product purchases to experiences such as space travel and underwater holidays.
• Exclusivity and Personalisation Sought: As well as fundamental rarity, personalisation will be the second major driver of exclusivity in the next decade. This will be manifested in tailored and unique products, through to one-off experiences.
• Intimacy: Privacy and Closeness Will Gain Importance: There will be an increasing desire for privacy among the wealthy in the future, yet at the same time a desire for greater intimacy among the select providers they trust.
This is an excerpt of the Wealth-X Decades of Wealth: The Next 10 Years In Wealth & Luxury 2015. For further details we encourage you to download the full report
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