The entire concept of luxury brands expanding sales by marketing to a growing aspirational consumer segment is being undermined by a growing trend: the marked concentration of wealth at the higher levels of the richest one percent.
Leading up to the World Economic Forum in Davos, Switzerland, this week, a study by Oxfam International titled Working for the Few outlined how wealth is increasingly concentrated:
• Ninety-five percent of the U.S. wealth generated since 2009 was had by the top one percent.
• The world’s richest one percent controls nearly 50 percent of global wealth.
• Ninety percent of people in the U.S. are worse off than before the financial crisis.
Being among the top one-percent richest U.S. households requires an annual income of just under $500,000, according to IRS data. About 1.2 million out of 117 million U.S. households fall into that category.
In the luxury market, meanwhile, the starting price point is about $5,000 for watches and jewelry, about $1,000 for handbags and $500 or more per night for luxury hotel rooms. Those prices serve an exclusive market, because few if any people in the 99-percent wealth category can afford them. Yet only a miniscule sliver of luxury advertising goes to consumers who earn more than $1 million.
In fact, over half of all luxury magazine and newspaper advertising is spent on consumers making less than $200,000, according to the 2013 Ipsos Affluent Survey, which tracks readership habits of some 140 print publications. Less than an handful of publications in the survey have subscriberships with a median household income that breaks $200,000. In fact, Ipsos doesn’t survey households making less than $100,000, so the true median income of readers is substantially lower.
Douglas Gollan, co-founder of Elite Traveler, a magazine distributed on private jets, has a theory: “Private jets set the rich people free, so to speak. Our readers make an average of 41 trips per year and over 100 flights a year. They have three, four or five homes,” he says. “What it means is that legacy print publishers who focus circulation on subscriptions or newsstands miss the mark. For marketers, [the one-percent market is] definitely a difficult audience to reach, and vehicles that worked a decade ago may now find only one or two issues a year are actually seen or read by the super-rich.”
The fact that legacy print media isn’t effective in reaching the jet-setting super-rich has not been completely unrecognized. Clear Channel, a multibillion-dollar media company know for its ad displays in commercial airport terminals, now sells advertising in private terminals. Gollan counts at least a half dozen start-ups focused on the same type of marketing, but he says so far they don’t have the money to gain widespread distribution in private jets.
Then again, some of the super-rich are relatively easy to find. You just need to know where to look. Many are traveling the world on their private jets, vacationing on tropical beaches, hitting the ski slopes, attending corporate and nonprofit board meetings or entertaining and networking at Formula One racing events, Wimbledon, the Super Bowl or, of course, the World Economic Forum.
