Twelve months ago , Moscow overtook New York as the billionaire capital of the world, with 74 tycoons to New York's 71. Today there are 27 in Moscow and 55 in New York. Now Russia has less billionaires (Forbes.com) and it has certainly changed certain mood states for the remaining bunch.
Yet, you are still far from being poor once you have dropped from being a billionaire to a mere millionaire. For Russians it is just a travel along the “toilet paper route”. In the 80s, we had only one or two plants in the USSR that produced toilet paper. So most of the population had to re-use newspaper as toilet paper, if they hadn’t had a chance to buy a low-quality one-layer Soviet-made toilet paper proper (4 layers to 2 layers TP). In the early 1990s, we moved up a notch and saw in our stores 2-layered toilet paper made in Poland. By the 2000s, everybody could afford 4-layered, colored, flavored toilet paper. The current crisis means that figuratively speaking, that we have to move from 4 layers down to 2 layers, but we are still a long way to go back to recycling newspaper.
Something similar happens to the very rich Russians currently – they find themselves forced to tier down in their consumption habits but on a different scale. But we want to highlight here that in Russia everybody remembers how it feels to be quite poor.
One of the Russian tycoons understands that. But he also believes that moving up is as easy as moving down this scale in Russia. He built his estates for the very rich in the middle of the generally poor and unkempt landscapes on the outskirts of Moscow. “Agalarov believes that as it is possible to become extremely rich in a short amount of time in Russia, so it is not such a tragedy in that culture to lose one’s wealth. And poverty isn't far away from the Agalarov Estates, trees have been planted close to the new estate to mask the rundown village nearby. Many of its inhabitants gave up their homes, succumbing to hefty cash offers, according to Sky's report.”
This is what Agalarov Estates look like:
And this is what is hidden by the face around this estate:
So losing some of the riches is not seen by the Russian tycoons as that much of a tragedy so far.
Insight: When you make so much money so fast you treat them as easy come, easy go. Some of the emotional attachment and joy disappears after a certain order of digits in your bank account.
Before the crisis, there were a few big restaurant owners who opened most of the restaurants in Moscow which would be aimed at mostly the rich. The main purpose to visit those places would be to show off - actual dining and hanging-out was at the bottom of the list. The apogee of this trend is the new restaurant claiming itself to be “a place for those who have money that will never end...” This restaurant boasts eclectic interior design – placed in a very old villa with Gothic arches combined with ultra modern furniture and a white bar in the middle of it.
Now there are a few companies owned by the younger generation and this year they opened a handful of more democratic places with good and simple food for normal prices; which was not the case even 1 year ago. There is an emerging interest in different simpler format of restaurants.
There is also something new for Russian restaurant visitors - they start to visit restaurants to meet with friends and to “party” rather than to try new flavors and develop their sense of taste.
This proves that Russia is moving from the “village”- Asian type of culture to the urban - European culture.
For centuries Russia was managed in the centralized fashion. Hence the richness of Moscow and the stagnation of the regions. The Russian understanding of beauty has always been rooted in its Orthodox roots - Byzantine-gold and flashy design.
Look at the interior of the recently opened Russian-cuisine restaurant - Barbarians:
Now we are moving towards the European, “urban” culture, where it was a common habit for centuries to spend most of your life in the public - living in a medieval city with narrow streets. That is why Europeans can spend hours sitting in a cafe just talking over one cup of coffee.
Russians are only beginning to understand how one can come to a restaurant not to show off and celebrate their achievements by spending hundreds of dollars on a bottle of wine, but to casually converse and just hang-out.
Compare Barbarians with a recently opened Ginza Project restaurant with moderate prices which is frequented by the golden youth:
Plus, more and more restaurants are offering dishes with simple ingredients but done in a sophisticated way.
The same is supported by the night life in Moscow. Julia, 24 years old, used to spend a lot of time in Dyagilev, First, The Most and other famous high-end night clubs in Moscow: “I would say that there is a trend towards democratization of night clubs. Drinks and food in clubs become less expensive, say, more user friendly. Before that they were ridiculously over-priced. People tend to be more interested in organizing home parties for friends rather than going to clubs. They would invite a DJ and order food delivery from their favorite restaurant and still have high-quality fun.”
Insight: Pure show-off entertainment attracts less and less. People are looking for that cozy feeling that you don’t get in usual night clubs.
When you are down to your last hundred of millions, the most important is to save your face. It is the question of who is in and who is out. One businessman told us: “Nobody knows how many digits you lost in your bank account. I have the same Lexus, the same 2 bodyguards. So on the outside people will think my business and I wasn’t affected by the credit crunch.”
Yet, it can be hard to conceal your financial troubles when you live on the shore of a local sea and you share the pier for your yacht with your neighbors. This is when they will notice when you had to sell your yacht and they probably know your factory is not doing well. Next time you might not get invited to some event where a lucrative deal can be concluded.
In Russia, it is very important to maintain connections. Thus the places where you can show off and make connections are always in demand in Russia.
This is why we see that even though over a year, 215 restaurants were closed in Moscow, 358 new ones were opened. Rich Russians still want to feast in a high-profile way to network.
Insight: One of the new drivers in the luxury consumption is that people are looking for simple/affordable ways to be still ‘in’: now it is even more important to look fresh, still throw parties with exclusive but more affordable champagne, etc. Show-off behavior is less kitschy now.
What is still important to the rich Russians is the security and the acknowledgement of their luxury that was achieved relatively recently – somewhere in the 1990s. They long for the authentic, 100% luxury, there is no doubt about that.
Uskov, Editor-in-chief of GQ Russia, who is considered the icon of the rich and glamorous lifestyle in Russia, proves this point: “Luxury is a statement of personal success in Russia and Russians love status symbols. Russian money is mainly new money, but the ultimate dream is to look like old money.”
Hence, there are three main reasons why anyone would spend extravagant money on a pair of sunglasses or a watch in the midst of a recession. They are: brand, inherent cost of materials and craftsmanship. The show-off period of the new Russian money is over. Now they are looking for the qualities of the old. Fewer people are looking now for clothes with conspicuous luxury brand logos. They look for watches that can be inherited by their grandchildren.
This is also supported by the trend to buy classical books in quality editions. Publishers note that less of low-grade pulp fiction is consumed this year. Rich people are interested in collecting libraries of classic literature in expensive editions.
Therefore, moderation is in for the top consumers in Russia. It is now considered very improper and so-last-season for your appearance to scream “Luxury”. One rich girl told us: “In this economy it is so improper to wear too many diamonds. It is more important now to look fresh and groomed: tanned skin, beautiful hair, perfect nails. These are the best class indicators today. The point is that you have to have sufficient money and time for this. And yet it’s more affordable than diamonds.”
The rising trend in beauty care is lead by no other person but the current girlfriend of Roman Abramovich (who actually lost a staggering amount of money on the London Stock Exchange within just six months as Evraz's value plummeted from €28 billion to just €3.2 billion) – Daria Zhukova. Dasha claims that “the real it-girl unlike others can combine a Chanel handbag with Converse sneakers, and wears a simple white t-shirt as if it was haute couture. And this she proves by selling simple white t-shirts from her own clothing line for some 50 dollars.
The beauty care trend has reversed from subjecting your skin to some heavy duty treatment with conspicuous flashy make-up and heavy salon-tanning to investing significant money in skin-care. Now the proper way is to invest a lot of resources in beauty care to maintain your natural look. Combining luxury accessories with a simple white t-shirt, accompanied with simple but well-kept hair, skin with zero or invisible make-up, but shining with its natural, healthy look – this can take some serious time and money investments, although so far only people in the know will understand how expensive it can be.
“Buying pendants for your mobile phone for 500 Euro is so irrelevant now. It is a symbol of bad taste and makes you look odd and stupid.” Olga, 26
Insight: There is a yearning for a certain kind of sustainability in luxury. Something that cannot be taken away with a credit crunch. Something that will always indicate your social status. (Even if you have 40 Euro in your pocket, you still have Breguet on your wrist and your skin is shining with wealth.)
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The global financial crisis has affected people all over the world. Marketers and the media have focused largely on the impact to middle and lower income families, and with good reason as they make up most of the population and their lives have changed dramatically. But what about that small percentage of people who earn the most? What has happened to the 8.6 million High Net Worth Individuals whose combined wealth declined more than 20% in 2008? How have their lives changed? How do they see their future?
As Xplorers, we need to get involved in their lives. Meet them at their homes, offices, bars and spas. Meet the people who inspire them, write about them, serve them, style them and advise them. Hear their stories, find the insights and share the experiences on this blog.
And this is what is hidden by the face around this estate:
