Frank's Bank

I talked with Frank today. Frank is a 66 year-old businessman who recently started a new bank. 

 

In the throes of the recession, Frank’s bank is thriving, his happiness is high, and his health is better than ever. But his perspective has changed. No longer cares to fly to Europe every year for the food and culture, or to Los Angeles every quarter for the shopping.

 

Frank attributes this shifting perspective to his age. Luxury in the past for him was in the form of an Alfa Romeo, mink coats, and yearly trips to southern France.

 

“The recession has made me focus on how finite life is. Luxury means caring what the day is like. The striving part is less important.”

 

He spends but he spends differently: less. He spends but he spends more thoughtfully: on time. For Frank, it has become more important not just having time, but to make sure he spends his time meaningfully. More time with his grandchildren, more time at his vacation home in Florida, time on his rose garden, longer runs, time focusing on continuing a thriving business. Time in Europe is replaced by one “mind-blowing” experience in Africa.

 

“You can’t compare a luxury item to a luxury experience. I stay at high quality hotels because I don’t want to waste my time. It’s not a statement to anyone but myself.”

 

IMPLICATION: Whether it’s a function of age or a function of the cultural moment, luxury today is measured by experiences and products that enable us to get more out of our time. There's an opportunity for brands to empower people to maximize their experiences, particularly at a local level.

All Gilt, No Guilt

House in the Hamptons? Of course. Amex Black? Naturally. Yacht parties in South Beach? A weekly occurrence. For most of us, the only way we can get access to this level of luxury is through 3°+ of separation connections - which is the only way I was able to meet Tameka and Nick.

Despite the downturn in the economy, Tameka is investing her own money into a startup cosmetics company. Her husband flips hot Miami properties. Her kids enjoy the spoils. While speaking on the phone with her, she received a picture message on her iPhone. A friend spotted the cutest little $1,000 jumper by Rosa Chá. Based soley on the photo, Tameka casually mentioned to "pick me one up too." Apparently, this is mere pocket change to Tameka, which leaves this humble-spending blogger wondering, "Is there a $1,000 value menu out there somewhere for these people?"

Tameka and her husband boating in South Beach.
Tameka and friends enjoying a "little weekend retreat" at Sanctuary Spa in Phoenix.
In New York, Nick owns several restaurants on Long Island. He gets his model looks from his Greek ancestry, but his body from his personal trainer whom he pays to see six times a week. While walking with him into his Upper West Side high-rise apartment, Nick asked if we could stop by the front desk to check his mail. Nick is immediately handed several boxes of daily shopping spree. He has a near unquenchable thirst for fashion. And in order to keep up with the trends, he scans a luxury designer website, Gilt, every evening and one-click buys a few items. The concierge didn't even bat an eye at all the packages. I, on the other hand, clicked my tongue knowing all I would have to look forward to from my tiny metal mailslot were MasterCard credit bills and Ikea circulars.

Nick on a recent month-long trip to Greece and posing off his expensive physique.
Gilt: All in a Day's Mail
Though the recession has not yet truly made a dent in either Tameka or Nick's lives, their expression of luxury is no simple case of conspicuous consumption. They've both built up their own empires to enjoy the money for their own sake. They feel they've earned the lifestyles they now have and are determined to live their personal lives outside of the economic downturn as much as they can. In fact, they admit they may even be slightly overcompensating with the stubborn sensibility that,"no economy is going to tell me what I can and can't have." For them, luxury should be guilt-free.

Opportunity: Acknowledge their "I've earned it" attitude and tap into their "no matter what" take on luxury.

Does Luxury Have a Future?

What has made luxury a luxury will always remain true. There are elements of luxury that are foundational and have endured over time. But because we do not live in a static world, people have changed and the context for luxury has shifted. As a result, luxury expressions and manifestations will change over time. Once defined by social significance (owning a lot of expensive things), luxury has evolved to be about personal importance (creating unparalleled experiences for oneself).

My first conversation was with an expert in the field of luxury who spends a great deal of time researching what the future of luxury looks like and will mean to affluent consumers. She was quoted in a recent article by saying, "luxury is as much about people looking for ways to define themselves as it is about exclusivity."

In our conversation, she talked about how modern notions of luxury embody ‘tools that allow for personal transformation, that add originality and a new dimension to oneself.’ In other words, luxury today is less about being an owner of expensive things, and more about looking for ways to express oneself as complex and original human beings.

Luxury consumers still want to consume; they’re just looking for ways to justify it. In turn, she infers that luxury is nuanced and multi-dimensional. Some of the new dimensions could include:

Ethical: Luxury is less about expensive and inaccessible materials/craftsmen. It’s more about just methods of production, fairly sourced materials, and having an interesting and transparent back-story.

            Altruistic: Luxury experiences or products that give back.

Productivity: Luxury with an element of utility that allows one to maximize their time and experiences.

Luxury has endured because it never loses sight of its foundation. But if luxury brands continue to act the same in a changed world among a changed consumer, they risk becoming irrelevant. 

Denny's!

Hallie and her husband have built great success as owners of many designer clothing brands and manufacturing operations. They have a huge home in the hills above LA that they recently renovated top-to-bottom, and four luxury cars in the garage. When they built this house, they imagined it as the perfect place to retire and indulge in their passions for travel and collecting fine vintage wine.

But the recession has hit them hard. Since American consumers stopped spending on designer clothing, Hallie’s livelihood has virtually disappeared. Her husband had to shutter multiple clothing lines, and has begun manufacturing goods for mass retailers instead of his high-end designs in order to keep the business afloat.

Not only has this been a dramatic financial change for Hallie and her family, but it’s fundamentally changed the way she sees her spending. “When we were younger, and when we were doing well, we just didn’t pay attention to how we spent money. We weren’t reckless or irresponsible, we just didn’t pay attention. I think we assumed we could do that forever”

Since she’s watched her retirement savings disappear just a few years before her husband was planning to retire, Hallie has dramatically changed her lifestyle. She’s cancelled her family’s annual Christmas celebrations abroad and has stopped shopping for anything that isn’t a necessity. In fact, when I spoke with her, she had just returned from brunch with her husband at Denny’s. “Before all this, I never would have gone into Denny’s in a million years! It would have seemed totally ridiculous. But you know what? This morning I got to go out with my husband for fifteen dollars! We had a brunch date and did the crossword puzzle. It shocks me that I had a nice time, but I did.”

Consumers have shown a serious ability to adapt in this recession, and luxury consumers are no different. Now is the time to shock them… or help them shock themselves.

General-ese

A common observation we had while xploring luxury and the world of high net worth, was the propensity for individuals to speak in generalities about the types of luxuries they spend their money on. It seemed as if they would shy away from throwing out a brand name in order to not appear to be gloating. When asked what kinds of brands they were loyal to or what brand their handbag was, the answer was always a “you know…” or “well anything that’s nice” kind of answer. On a few occasions, they almost seemed defensive and used quality as a justification of their purchases, “well what matters to me is the quality.”

Is admitting to the fact that your handbag is from Louis Vuitton or your watch is from Cartier uncouth? Could it be that these individuals don’t want to be perceived as people that just spend their money on designer labels? It seems they are willing to open up broadly about the ‘types’ of things they spend their money on i.e. clothes, travel, cars, charities. Speaking in terms of generalities is the modest approach to “name-dropping.”

Insight: Framing purchases in terms of ‘top-quality’ & ‘best experiences’ vs. the price tag or the name is the proper way to gloat.

A Penny Earned is a Penny Well Spent

Putting Work Into the Harvest Buys the Right to Reap Its Benefits

Merriam-Webster states the definition of 'luxury'" as "something adding to pleasure or comfort but not absolutely necessary." Well, according to some of America's wealthy, it seems that "luxury" is actually a necessity, a necessity which lies in the importance of self-expression.

We spotted a group of three 40-something year olds dressed in crisp dress shirts and Prada shoes. These guys obviously understood style as they sat sipping $16 cocktails in a snazzy Beverly Hills hotel bar talking about all the cool things they have done/seen/bought since the last time they met. It's a typical scene with these three as they often enjoy socializing, fine-dining with friends, and traveling the world.

Jim, who is a lawyer at a big law firm in Houston, believed that living this kind of lifestyle was by no means a source for guilt as he viewed his money as hard-earned and well-deserved. He has recently bought a new house and has since been renovating. He joked by saying that he saw the "Cash for Clunkers" program as the "Cash for Bling" program. The timing of his new luxury car happened to coincide with the program shedding light on the vast differences between those who need government assistance to buy a new car Corolla vs. a new Mercedes Benz.

John, who is a photographer, shares the same sentiment and spends his money on travel and the latest technology and gear for work. He appreciates the success he has gained over the years and justifies his purchases as helping him garner even more success/$$ to enjoy the things he'd like to enjoy.



Humor is a Luxury Not Everyone Can Afford

When asked how the recession has affected them personally, they admitted to the fact that it didn't have much of a profound effect on them. They even had a slightly humorous outlook on the situation as they joked that their idea of '"scaling down" meant ordering the prix-fixe meal at Flemings (a prime steakhouse and wine bar in Houston where a prix-fixe meal costs about $40 a person.) Those with money can afford to make light of a grave situation, as seen with these guys. Yet, one thing is for sure, their appreciation for their friends and where they're at in their lives has definitely grown and for that they are grateful.

Mr. Webster's definition of luxury should have a disclaimer that reads "*luxury & necessity are relative terms." Luxury, whether expressed through the food one eats, the drinks one drinks or the clothes one wears, is an expression of hard work and success. The value comes from the freedom to enjoy the things they want to enjoy.

Truth: Access to luxury is something that is earned.

Opportunity: Position luxury products as means of self-expression and as a symbol of success & hard work.

The Sweet Life

America’s wealthy haven’t cut back… but they’ve reallocated.

It’s Wednesday night at the SLS Beverly Hills. Watching well dressed patrons eating foie gras covered with cotton candy one might be tempted to ask, “What recession?”

The bar, restaurant and dessert counter are all bustling at this ritzy hotel.

It seems that high income individuals have chosen not to scale back on luxury experiences during the economic downturn. Based on conversations with the cocktail drinkers and diners we spoke to…the wealthy are still spending money on what they enjoy and value. Dining out, spending time with friends and family, socializing with coworkers and cotton candy covered foie gras are just some of the things make the no-sacrifices list. But if you look closer, some things have changed.

Spending on Self AND Others.
Susan is a high power entertainment lawyer and philanthropist. She looks very put together and is in her element at SLS.

Susan indentifies herself as “very liberal”, and has increased her spending on tips and charitable donations. She tells me she has always been a philanthropist, but now she wants to contribute in ways that have an immediate impact on those in need.

“I am tipping more. I always have, but more now since people are without jobs and I am very fortunate.” Susan still goes out for fine dining and expensive drinks herself, but she is also making adjustments with other people in mind. For example, these days she throws more dinner parities at her house. “I invite my friends over that I know are cutting back. They might pass up on a dinner out somewhere, so this is what I can do to stay in touch.”

Interestingly, while Susan is very open to talking about increases in charitable spending she is more reluctant to discuss the luxury goods she buys (even the items she is wearing at the time of our conversation).

INSIGHT:
Talking about luxury in a conspicuous way is passé even with those who have Louis Vuitton on their shoulders and Louboutins on their feet.