GDI: About the new prestige-driven consumer trend
GDI: About the new prestige-driven consumer trend
Media release, 17 April 2008
GDI Gottlieb Duttweiler Institute:
About the new prestige-driven consumer trend
Why the desire for status is growing, what this has to do with luxury, who can benefit from it and where it will lead: these were some of the questions the Gottlieb Duttweiler Institute addressed at its 4th European Consumer Trend Conference in March. Read below about the most important findings of the conference.
By Alain Egli, Manager PR & Communications, Gottlieb Duttweiler Institute (GDI)
The luxury-goods market is booming. This year alone there have been 40% more applications for places in private schools in the United Kingdom. And seldom have there been as many autobiographies on bookshop shelves as now. There is no doubt about it: the desire for status is growing at a breathtaking pace.
This trend has also been confirmed by a study that the Gottlieb Duttweiler Institute (GDI) will be publishing in early summer (and which we will be discussing here in greater detail): over four-fifths of 1000 interviewees in Germany and Switzerland are convinced that differences in status will increase over the next few years.
There are various reasons for this new desire for status. Consumption is becoming increasingly democratic (think of H&M or the premium labels of big retailers such as the Migros Sélection range) and therefore the need to be different from others is growing – individualisation is trumps.
The result is permanent upgrading: McDonald’s opens upmarket coffee shops; Tchibo revamps the packaging of its lingerie items; Audi places four-colour double-spread ads for used cars; and business-class comfort is increasingly found in low-price air travel. Yesterday's premium market is tomorrow's mass market. "After the acquisitive culture of the post-WW2 years and the throw-away mentality of the eighties and nineties, we're now living in an upgrade society", said Peter Wippermann from Trendbüro Hamburg at the GDI's 4th European Consumer Trends Conference.
There is an intensification dynamic at work here that spreads to the very highest levels, as the GDI's CEO David Bosshart noted: "If Bill Gates builds a 4000 m2 villa, the poorer billionaires take it as their yardstick." Trickle-down effect is the name of this process, which makes the top-end luxury-goods segment an important indicator of change.
Bosshart described another factor that drives concern for status: growing scarcity of resources. Water is already in short supply in many places. As raw materials become more expensive, we could also soon be seeing shortages of foodstuffs that we currently regard as products for everyday consumption, fruit from southern countries, for instance. And, for that matter, we could also be seeing a comeback of the pantry and of stores of emergency supplies. Population growth, global warming and cooling of the economy are likely to aggravate shortages – and thus create additional means for people to differentiate themselves. After all, our own prestige is often enhanced by things that other people are deprived of.
This is also true of the growing numbers of older people. Those who have got used to fame and respect in their working lives are reluctant to do without permanent confirmation of their worth from their peers when they retire. Opulent parties, grand mausoleums and ostentatious philanthropy are only some of the signs that this desire is being compensated.
Needless to say, this kind of self-promotion does not just start at retirement. Rather, as disparities of wealth and income grow, so too do the numbers of rich people and the craving for status.
Alongside these demographic changes in the Western world, account also has to be taken of the growth of emergent economies, which generate additional demand for prestige and its symbols.
The question is: which symbols are actually involved here? What exactly is status? According to Vienna sociology professor Roland Girtler, "man is an animal ambitiosum, a being that is excessively anxious to enjoy honour and respect". There is, he claims, no difference between aristocrats and great rogues, and every group has its own hierarchy. More important still: whatever the group, an "aristocrat" exerts himself only if there is no point in doing so – playing golf, for instance. Both rogues and aristocrats appreciate being left in peace. And right down to the present day, countless social preferences ranging from fashionable clothing and culinary practices through to the rituals surrounding death have been aristocratic in origin.
Status is often equated with luxury because the latter is rare and enables people to feel different through exclusivity of access. However, leisure ("free" time) and health are just as susceptible to status considerations as traditional luxury goods are. At the present time, in fact, immaterial as opposed to material luxury is growing in importance. The GDI study mentioned above will shed light on the causes and consequences of this shift.
One thing is clear: status ultimately implies recognition, and this can take many forms – success, attention and relationships are just as important as access, uniqueness and differentiation – in other words, privileges. According to David Bosshart, "status means the freedom to live where you like, to pay what you like and to say what you like". The "conspicuous consumption" (as the US economist Thorstein Veblen called it at the end of the 19th century) of a decadent society can confer just as much status as the luxury of the currently fashionable "conscious consumption" or concern for the natural environment.
According to Peter Wippermann, the new awareness of people like Arnold Schwarzenegger with his hydrogen-powered Hummer or Richard Branson with his coconut oil-driven aircraft contains a profoundly aristocratic core: the endeavour, like the kings of earlier times, to assume responsibility for the people. However, philanthropic capitalists of the Bill Gates variety have long since stopped donating funds with no hope of returns, as Tom Savigar of the Future Laboratory in London commented: "They want successful investments, even here."
And they, too, want to be different from others. According to Savigar, the numbers of rich and super-rich are soaring, and more and more of them are self-made. There are already about 1,000 billionaires in the world, 33 of them in Moscow alone and 33 of them under the age of forty. In the USA, 8% of the population are millionaires. New "wealth tribes" are arising, for instance derivatives traders, "Richistanis" or "billiarchs". The luxury market grew to 160 billion US dollars in 2007. As a result, the sense of luxury is changing. According to Tom Savigar, the artistic, the rare, the emotional and even the ethical categories of luxury are growing in importance. A new austerity is creeping in – discreet luxury and "stealth wealth". Savigar: "Less is the new moral order."
This is not news to Daniel Borter: "Luxury is necessary, pompous splendour absolutely superfluous". Borter offers overnight stays on beds of straw in alpine huts at his five-star Hotel Lenkerhof in Switzerland's Bernese Oberland region. "My guests are looking for something authentic, something original." Such experiences have made great stories.
Stories are also what define the watch brand IWC. CEO Georges Kern makes no bones about the fact that they sometimes have to make them up: "Our brand stands for engineering, but a brand can be enriched." However, consumers cannot be treated as if they were stupid – everything must be genuine, credible and clear. Price, he claims, plays a subordinate role in his segment as it is a component of luxury. "It doesn't make any difference whether a watch costs 50,000 or 55,000 francs." And that applies worldwide. According to Kern, "there's not a single genuine luxury brand that isn't geared to the global market".
That is something Ruchita Sharma Bhardwaj knows all about. With experience of working for brands such as Salvatore Ferragamo, she now analyses the needs of the Indian market on behalf of the government. And her forecast for it is headlong growth. She reports a real obsession with brands – Bhardwaj even describes herself as a luxury junkie. Yet the Indian market is a young one in two respects. On the one hand, not even Coca-Cola was in India twenty years ago, and Louis Vuitton only opened a store there in 2001, the first luxury brand to do so. On the other, Yulics – young urban liberalised Indian consumers – are growing in importance. They are consumption-oriented, troubled by no feelings of guilt about indulgence, and live according to the motto: I want it all, I want the best and I want it now.
All over the world, of course, there are always people who have no chance of taking part in all of this. Roland Girtler divides them into three groups: the intrepid, the resigned, and the alcoholic/drug user. For former lifestyle journalist Neil Boorman, the situation is even more complex. As a reformed brand junkie, he now fights tirelessly against a form of consumerism that once made his life hell. Boorman admits that he was so obsessed by labels that he could hardly think of anything else: "Shopping was both the source of and cure for my anxiety, like in alcohol addiction". And he was not alone in this – a quarter of all Britons describe themselves as addicted to shopping. The causes of this addiction are, according to Boorman, low self-esteem, lack of identity and a materialistic upbringing in a society dominated by consumption. It is no accident that only one industrialised country (apart from China) features among the first fifty countries on the National Happiness Index of the New Economics Foundation. Boorman was cured of his addiction only after he had burned his entire possessions to great media effect and prescribed himself withdrawal treatment in the form of living for a year completely without brands. Today, he himself is a brand. And has thus acquired more status.
Luxury's new DNA
At the 4th European Consumer Trend Conference of the Gottlieb Duttweiler Institute (GDI), Tom Savigar, Strategy & Inside Director of The Future Laboratory in London, outlined five stages of luxury. The majority of Western consumers are, according to Savigar, positioned between stages two and three. But for growing numbers of rich consumers, stage three is mixed with stage four.
Stage one: Acquisition and value, where luxury is used to demonstrate wealth, define social position and visibly separate the buyer from the mass market. This is the dominant form of luxury in China or South Korea.
Stage two: Discernment and worth, where customers buy brands, products and services that allow them to express higher levels of taste. They are relatively aware and do not just ask "what" but also "why".
Stage three: Emotion, experience and knowledge, where customers are concerned less with brands and values and more with the uniqueness (limited editions!) or emotional impact on offer – which a stage-two customer would not even understand.
Stage four: Responsibility and awareness, where customers are concerned with a brand's values as much as its value. The focus is less on products than on experiences.
Stage five: Intelligence and poeticism, where customers have the finances, knowledge and spiritual readiness to indulge their passion for something.
Manager PR & Communications
Gottlieb Duttweiler Institute
Phone: +41 44 724 61 11
Phone: +41 44 724 62 78 (direct)
Fax: +41 44 724 62 62