Last evening after work was done and had Japanese class I attended a dinner hosted by the FCC where the main subject was about affluence and trends in the APAC countries. The speaker was the President of AMEX Japan. American express is different than VISA and MASTERCARD. It is not so widespread but more targeted. They target HNWI *High Net Worth Individuals” with a lot of cash to spend. Basically in this case not cash but plastic.
Before the speech started the president of the FCC made some observations regarding marketing and digital marketing. Did you know that a commercial on Superbowl costs around 300 Million? That is an amazing amount. Other interesting subjects were that People watch more TV and more commercials than ever, a worldwide phenomenon. 11 minutes more than 1990 or 1998 I do not remember the exact year. Online advertising in social network sites is definitely not working, 4 out of 10.0000 people click on advertisements(not the best ROI). Apple loses around 240 million by people who buy iphones and they do not activate them with AT&T.
What will be even more interesting is that there are more female users on the internet and these statistics may be telling: Women online do more shopping, dating and parenting information search. Men search for more adult content, games, Healthy living(that is a surprise), news reading and active participation in communities. Ads targeted to men are supposed to be more effective( not sure though if I got this correctly). There is a backlash toward social network since now people have created their own communities and they do not want to be bombarded with advertisements any more(cue to Facebook and myspace).
After we heard this small report it was time for the main course. I wished I h ad taken notes but unfortunately I thought the presentation would be available to all of us. It seems it is company restricted though. I hope my memory is one of my strong points and I will try to recite what I learnt yesterday. First of all APAC accounts for the around 38% of the worlds’ HNWI and it is forecast to grow more than 40% till 2015. Of course this number may appear small if you consider that China, Singapore, HK, India are bustling with hot money but I suppose that also the definition of HNWI will also change. In today’s world HNWI are people who have financial assets(excluding first residence) of more than 15 million dollars.
Japan accounts for the highest number of HNWI in APAC, china a close second(proving the fact that although China is a poor country, still, the inequalities are rising). Singapore has the highest percentage of HNWI per population, affirming the charge that Singapore is by far a city for millionaires and their money. Hong Kong has also a big percentage. India is on the map but it gets dwarfed by the countries mentioned above. Though one has to say the middle class is growing the fastest in India. India middle class according to the presentation is about 5% of total population but is the fastest growth segment.
The luxury industry according to some estimates is about 80 billion USD per year and there are a lot related industries that have sprung, like luxury consultancies, premium services, new crafted products and anything else that appeals to the affluent. The major spenders in luxury are not the “old” rich, but the neo-rich. People who either grew in poverty or acquired money too fast. They want to have the extravagant and most new item. They believe that with money they can buy access to experience they couldn’t get otherwise. Like a fantastic private chef. Even if they do not understand his cuisine subtle tastes they feel satisfied with the fact that they can taste it and afford it.
AMEX’s research categorized luxury spenders in 4 categories: Meditative, Authoritative, Inquisitive and Acquisitive. The last one Acquisitive has to do with people who like to spend just to spend. They want the newest, the most expensive. Their purchases offer no functionality. EG one will buy a new car every year just because a new model is out, not because the new model offer anything else. China and India fit in this category. People spend money to feel better about themselves. They believe that with money they get respect.
On the other hand Singapore is on the inquisitive side. Singaporeans also care about the experience for exampling sampling a nice bottle of wine. It is more about the experience money can buy. Hong kong and Australia according to AMEX are authoritative consumers. They seek authenticity on what they do. It is more about authenticity that distinguishes the individual. They like mass luxury but avoid it if possible.
Japan now and Most of Europe are on the meditative site. For Europeans consumers and Japanese now spending a lot of money on luxury is not because they need to show to others they have money or that they are successful. It is about self fulfillment. These are people who are mostly mature, had money thought their life, grew up in an affluent society. Luxury must not be screaming “LOOK AT ME” but rather be understated and sublime. Some of the quotes were really telling. A woman who lets say can buy any kind of shoes, goes to a specific store in omotesando since it is the only one that offers her custom made shoes with very high heels. They are not branded by the big companies but to her it adds more value.
Value, that it is all about! Value and how we define it. Another person wanted to enjoy a nice dinner on Christmas but wanted to avoid the trouble of going to crowded restaurants. AMEX arranged for him, his family and friends a special treat. They brought to his house a world-renowned Chef, who prepared a special dinner for them(according to their requirements), live music was included. What a special experience. For people who want something for their inner self and do not need to show off, value means unique and personal. There are a lot of business getting built around this concept. Hotels which offer rooms designed by different architects, personal jet services, specialized sake, custom made clothes(especially suits).
What I enjoyed mostly was a quote form a successful silver era person who bought a huge field in Japan to prepare his own labeled sake for him to enjoy. Another person goes only to one restaurant(it wasn’t specified how many Michelin star it has) and where he is treated like a king and pampered. Of course There are the apprentice affluents, who although may not have the economic flexibility to afford luxury but they do in any case. Case in point japan where you are NOBODY unless you own at least one LV bag.
I liked the presentation although ti didn’t offer any new specific knowledge other than reaffirmed my concept that Japan is a cash society, where credit card transaction represent only 8% of all transactions. People are not afraid to carry cash, A LOT of CASH, since Tokyo has virtually no muggers. Another point is that people who have money do not care to buy what others consider good or “IN”, but they follow their own desires. For example art spending is going through the roof. That doesn’t mean the quality of art is increasing, rather than just people are willing to pay a higher price and artist oblige. Moreover since art is subjective, the price doesn’t reflect general value, but the value the individual assigns to the art object.
There were a lot of questions which I didn’t really remember. One in case was about the affluent giving back to society and charity. This had to do with the Meditative concept. From the feedback I got this is all talk. Other questions had to do with the Japanese market. I would like to close this report by reminding you that not everything that glitter is gold
Brutal Facts out!
Hi Zani,
Came across your blog and its really interesting. Would like to stay in touch with you for any advice,tips and guidance you can give me on my application :)
You can mail me at avinash.samtani@gmail.com
Appreciate your time.
Regards
Avi
Posted by: Avinash | February 20, 2008 at 21:41