Chris Fair, president of Resonance Consultancy, discusses new research conducted alongside the Luxury Institute, examining what affluent American households consider truly luxurious post-recession.
With the economy in the throes of a difficult recovery, affluent Americans consider that the most valued goods, services and experiences are not material in nature, but leisure-oriented pursuits.
That’s according to new research by Resonance Consultancy and the Luxury Institute of households with an average income of $332K and net worth of $3.3 million. The findings suggest that while conspicuous consumption is on the wane, conspicuous leisure may soon be on the rise. For the wealthy, living the American Dream, it’s back to the future.
Just a couple of years ago, it seemed as though from the smoking ruins of the economy, real change might ignite and sweep the landscape. Politics was all ‘Yes we Can’; the pundits, looking for models of the coming new reality, searched backwards,trumpeting thrift. “Talk to people not just about how they feel but about how they’re living now, and you hear more resolve than regret,” said Time magazine in April 2009. Indeed, there seemed to be empirical evidence for a new thrift; savings were up, and some ventured that a ‘Conscious Consumer’ was being born: one whose awareness of the environment and the economy would temper consumption with wisdom, result in triple bottom line purchasing, and set a glowing example for the rest of the world to live up to.
But in the middle of this profound shift, the top 10% of U.S. households continue to sail along. Research conducted by Resonance Consultancy and the Luxury Institute on two different occasions – the first in the summer of 2008 before the height of the panic, and the second in the summer of 2010 – show that while the very wealthy are subject to fashion along with the rest of us, their mindset has been fundamentally unperturbed by the crisis.
The research revealed ideals that are in sharp contrast with popular conceptions of wealthy attitudes. The corporate titles, Ivy League educations, cars, boats, jewelry, large homes, chauffeurs, private jets, furs, art collections, and wine cellars often associated with wealth were nowhere to be found near the top of the ‘most desired’ lists of the affluent. In fact, the ‘top 10’ list of the most desirable luxury items and experiences in 2010 looks like this:
• Taking exotic vacations
• Vacation home in the mountains or at the beach
• Extended time off work
• Freedom to work from home
• Gourmet kitchen at home
• Wife/husband that is able to stay at home with kids
• Smart phone (iPhone, Blackberry, Treo)
• Owning your own business
• Having your own foundation/making a large donation
• Apartment in major metropolitan city (New York, etc.)
The list is virtually unchanged from 2008. In fact, there were only two significant changes in aspirations between 2008 and 2010 – the desirability of a hybrid or electric car and the appeal of jewelry.
Hybrid/electric cars were #8 in desirability in 2008, but by 2010, they’d dropped to 16th place. Perhaps the Prius and its green technology are less desirable today because there are just so many more of them now – in September, Toyota announced that it had sold its 2 millionth Prius. We all know that the more there is of something, the less exclusive it becomes, but being green wasn’t supposed to be about fashion, bragging rights or status. It was supposed to be about the personal satisfaction that comes from doing the right thing for the betterment of mankind. The fact that half as many wealthy households view hybrids as highly desirable in 2010 compared to 2008 would suggest, unfortunately, that for the wealthy, being green was much more about the former than the latter.
In 2008, 29% of respondents rated jewelry and watches as highly desirable, but in 2010 that number plummeted to 18%. Clearly, in a time of economic hardship, showy and flashy have fallen from favor. “In tough economic times, it’s not surprising that wealthy consumers are shying away from more visual displays of wealth such as fine jewelry and watches,” says Milton Pedraza, CEO of the Luxury Institute. But the human need to seek approval through visible displays of our status is as primordial as ever. “From an emotional point of view no less than from a material one, we are anxious about the place we occupy in the world,” writes Status Anxiety author and philosopher Alain de Botton. And as Americans, we are nothing if not conspicuous – flagrant display is part of our DNA. While “conspicuous” may be learning some discretion, what has changed is how and what we choose to display.
“ cars, boats, jewelry, private jets, fur and large homes were far from the top ‘most desired’ lists of the affluent ”
The top-rated things and experiences the wealthy desire are reflective of primarily private pleasures and point to an aspiration for leisure time, the ultimate, and most difficult to quantify luxury.
“The shift away from conspicuous consumption – from goods to services and experiences – can also make luxury more exclusive,” says Substance of Style author Virginia Postrel. “Anyone with $6,000 can buy a limited-edition Bottega Veneta bag, an elaborately beaded Roberto Cavalli minidress, or a Cartier watch. Or, for the same sum, you can register for the TED conference. That $6,000 ticket entitles you to spend four days in California hearing short talks by brainy innovators, famous (Frank Gehry, Amy Tan, Brian Greene) and not-so-known. You get to mingle with smart, curious people, all of whom have $6,000 to spare. But to go to TED, you need more than cash. The conference directors have to deem you interesting enough to merit one of the 1,450 spots. It’s the intellectual equivalent of a velvet rope.”
The idea of leisure as luxury is not new, of course; the rich have been escaping since the Egyptians. In our times, only the destinations change in desirability – sojourns in National Park lodges, escapes to the mountains of North Carolina, winters on the French Riviera, hikes up Kilimanjaro, food-tasting tours of New York’s Meatpacking District and TED. As a theoretical concept, leisure and luxury were first coupled by Thorstein Veblen, he of enduring Conspicuous Consumption fame. While he was examining the habits of the most fortunate at the end of the 19th century, Veblen also coined the phrase Conspicuous Leisure, and in a period when some kinds of ‘conspicuous’ are uncool, it’s an increasingly relevant idea. Conspicuous leisure involves the consumption of what Veblen called “immaterial” goods – “a knowledge of processes and incidents which do not conduce directly to the furtherance of human life.” In short, it means hanging out doing something unessential but interesting, less like a job than like a Ralph Lauren ad. The clothes are pretty great, but the lives apparently led by the people in them – draped over airplanes and sports cars, on their way to a new adventure – seem infinitely fascinating.
Likewise, the exotic vacations taken by the rich aren’t the ‘drop and flop’ getaways the rest of us take in an attempt to recuperate from our exhausting lives; the rich travel because it presents an opportunity for personal growth and discovery (visiting a rare and unusual landscape such as Antarctica was the fifth most popular dream vacation in our study.) And the trips offer virtually impeccable bragging rights. Extravagant watches may be uncouth, but who could refute the virtue of a year spent sailing ‘round the world with the children, nanny and tutor in tow?
“ time off work, exotic vacations and second homes were the highest ranked aspirations of the rich both before and after the crisis ”
The fact that extended time off work, exotic vacations and second homes were the highest ranked aspirations of the rich both before and after the crisis suggests that the trend towards Conspicuous Leisure is here to stay. That’s good news for resorts, high end and highly differentiated hotels, and experience purveyors of all kinds, from travel and tour curators to Lululemon, outfitter to the leisure lifestyler and yoga explorer.
With conspicuous consumption falling out of favor with affluent U.S. households and the fact the upper middle class has been effectively removed from the picture for the foreseeable future, it’s unlikely sales of luxury goods in the U.S. will recover to pre-recession heights for years to come. But the U.S., while significant, is now just one segment of the global luxury marketplace. According to Bain & Company, which released its 9th “Luxury Goods Worldwide” Market Study on October 18th of this year, sales of luxury goods are growing globally. “Starting in 2010, luxury sales increased 6% in the first quarter, 16% in the second quarter, 13% in the third quarter, and are projected to grow 5% in the fourth quarter,” the report said, crediting the depreciation of the Euro for catalyzing growth. A burgeoning middle class in Asia seems determined to ape our historical pattern of consumption – Bain pegged Chinese growth at 30% year over year growth in 2010. "The luxury shopper of this decade is more likely to be Chinese, more likely to be male, and more likely to be young,” says the report. “Brands that meet the needs of these new segments will be in the best position to keep growing in a new decade.
So while the trend may be towards conspicuous leisure here in North America, internationally, conspicuous consumption is way, way in. It would appear that the populations of growing economies are determined to ape our extravagances rather than learn from our mistakes. Which proves one thing: we are collectively, after all, only human.
This article has been published courtesy of Resonance Consulting where it first appeared here under the headline, ‘Leisure is Luxury for affluent U.S. households’.