Judy Martel
03/01/2008
In the UK, social station is defined by tradition, law and, in many cases, the willingness of one’s ancestors to suck up to the king. The American system is less complex: Wealth determines class. End of story. Those with enough money to buy whatever they want are considered upper class. Those who are comfortable but must still save or borrow for major purchases are middle class.
There are microclimates within the greater social-class environment—the nouveau riche who eat with their fingers and gaudily flaunt their wealth; the shabby genteel who have impeccable table manners but can no longer afford prime rib. Yet for the most part the American class system pays little mind to the details of personal circumstance. Either you’re wealthy or you’re not. And traditionally, determining who was or was not upper class was easily accomplished by observing their purchases. Very few people drove Bentleys, because only a select few could afford them.
However, in an age of easy credit and Machiavellian marketing,
ostentation no longer serves as an accurate barometer of wealth or class. James
Twitchell, the author of Living It
Up: Our Love Affair with Luxury and a
professor of English and advertising at the University of Florida, says we
are experiencing the erosion of traditional class boundaries—however superficial
they may be—due primarily to the efforts of clever marketers and middle-class
shoppers hungry for luxury goods. The power of consumption has defaced many of
the old conventions and, Twitchell maintains, consumers now have the ability
to move from class to class with relative ease based upon the amount of their
wealth. "This free-for-all is moving around the world, breaking conventions," he
says.Indeed, the extremely wealthy are barely staying ahead of this new vanity class, which seeks to own the small trappings of luxury that would give it the appearance of greater affluence—$700 shoes or even a $10,000 watch, for example. "What do the überwealthy have that the rest of us don’t have in small amounts? Very little," Twitchell notes. "Nobody knows if someone owns or leases a Lexus. The middle class can grab a hold of bits and pieces. If they can’t buy it by the pound, they can buy by the ounce."
Narratives of Luxury
Americans find it difficult to discuss class, because the very idea of it runs counter to our democratic ideals. Yet class has always been an integral part of the American social fabric. In the absence of a codified system of privilege, we have relied upon material success to determine where we stand in the social pecking order.
The American system is further defined by what Twitchell calls "the narrative of luxury"—how the upper classes use luxury goods as markers of wealth. Certain styles, tastes and products become synonymous with affluence. "For example," he says, "we are deeply in a story now that started in the 18th century, that French taste is somehow superior. The rest of the world pays attention to this one chunk of the Western world. China and Japan are paying particular attention right now."
Twitchell notes that this narrative is beginning to crumble as some items, like the Chanel handbag, have become available in retail stores everywhere. "Products generate value by being out of reach," he says. Part of the allure of luxury comes from the notion of "I’ve got it and you don’t," which means expensive and elusive items become highly sought-after. "Luxury goods bring us together and separate us," Twitchell explains. "We’re always torn between two axis points, keeping up with the Joneses and moving away and up to another set."
Consequently, says Michael Silverstein—a senior partner and the
managing director of the Boston Consulting Group, and a coauthor of
Trading Up: The New American
Luxury—consumers are continually seeking to
trade up to higher-priced products. He predicts that the market for luxury items
that are seen to define abundance and affluence will grow somewhere between 6
and 8 percent over the next five years. TOP VIEW
Christmas for Marketers
Throughout the world,
traditional markers of social standing are giving way to a class system defined
primarily by the consumption and personal display of luxury goods. Though the
ultra-affluent continue to define the market for such items, the socially
aspirant middle class increasingly makes up the bulk of demand. This confluence
of class and consumption is not, of course, lost on marketers of luxury goods.
As wealth around the globe grows, so do their sales.
The machinations of America’s class system are not lost on the
makers of high-end goods, who are primarily responsible for the current
redrawing of social boundaries. These vendors have captivated the market by
creating higher-priced goods in small quantities to keep the top rung secure,
while still producing masses of the lower-priced entrée items. This trend
started at least as far back as the 1920s, when clothing designers in Paris
began manufacturing perfume under their names and thereby attracting consumers
who could not afford a ball gown.
According to Pam Danziger, president of Unity Marketing, a
Pennsylvania firm that tracks luxury spending in the United States, the
individuals who comprise the market for luxury goods are small in number but
extremely influential. Manufacturers market their wares to these people first,
then shortly thereafter to the trading-up crowd—the middle- and
upper-middle-income consumers who often follow the more affluent in terms of
taste and style.
Luxury branding consultant Robert Burke says that these
acquisitive, "price-resistant" middle-class consumers will always step up to the
cash register to purchase a possible entrée to a social station above their own.
Four or five years ago, designer shoes were priced at $400 to $500 a pair, he
says, and now pairs from Manolo Blahnik, Jimmy Choo or Christian Louboutin can
cost $600 to $700—up to $3,000 for shoes crafted with exotic skins. And still
they buy.
Last year’s Neiman Marcus Christmas catalog offered a perfect
example of this strategy in action. The upscale retailer featured the usual
assortment of affordable luxury items available to the masses—those who might
indulge in cashmere gloves and premier chocolates. Yet it also offered more
unusual items to appeal to consumers aspiring to higher social stations: A cell
phone studded with pink and white diamonds, offered at $73,000, would
undoubtedly turn heads.
The catalog’s apex of opulence was a personal submarine, the
Triton 1000, which is designed to perch on its owner’s yacht, waiting to
submerge up to three passengers as far as 1,000 feet below the surface of the
ocean. Price tag: A steal at $1.5 million. One might guess that the market for
such an item would be confined to only a select few customers, yet Bruce Jones,
the president and founder of the Triton’s manufacturer, U.S. Submarines, says
the company is trying desperately to fill a backlog of orders for the 1000, its
most popular model, while postponing the construction of some of its other
personal submersibles.
What the People Want
Demand for this and other exclusive items is growing, and not
just from the ultra-affluent. The explosion of luxury goods marketed to all
levels of society, coupled with the growth of wealth in America, is making it
difficult for those with the highest net worth to set the lavish standards that
historically were theirs exclusively. Beyond the recent marketing buzz about the
shortages of yachts, cars, planes and the legendary waiting-list-only Hermès
Birkin bag lurks an apparently endless appetite for luxury. According to the Telsey Advisory Group, a market-research firm in New York, luxury sales
worldwide topped $150 billion in 2006, with 30 percent of that spending coming
from the United States.
Obviously the U.S. is not the only country bathing itself in an
opulent glow. Burke and others in the luxury industry note a global rise in
demand for high-end goods, notably in countries like Turkey and South Korea.
"Hermès built an enormous store in Seoul that is three times the size of the
Manhattan store," Burke says. China is rapidly moving up to rank in the top five
countries with the largest appetites for luxury goods and the greatest numbers
of high-net-worth households—behind only the United States, Japan, the United
Kingdom and Germany—according to a report published by the Boston Consulting
Group.
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MAKERS OF affluence: Versace helicopter, Vacheron Constantin watch, Triton 1000, Hermès bag, diamond-studded phone, Christian Louboutin shoe. |
The current economic climate may also clarify class lines that have begun to blur. Ileana van der Linde, a principal in the wealth management practice at Capgemini, says stock market volatility in 2007 affected the merely wealthy and the middle class, who typically have more invested in the market. So these groups might hold back a bit in 2008. However, the luxury market is not tapped out by any means. Social ambition will remain a powerful driver of consumer behavior.
Twitchell says we all still celebrate wealth, and will continue to do so. "The perception of the superwealthy has not changed at all," he explains. "We went from one type of royalty—defined by blood—to a new type, which is defined by cash. This group has taken the place of royalty, because they represent what we are yearning for."
Illustration by Lou Beach.
Judy Martel is a certified financial planner and the author of Dilemmas of Family Wealth: Insights on Succession, Cohesion and Legacy.
Philanthropy and Social Status: Giving for Recognition
As the market for luxury goods continues to swell, megayachts and private islands ultimately will not be enough to distinguish the superwealthy. While the acquisition of material goods will never cease, author James Twitchell says the more recent leap in distinctive consumption has been in philanthropy. "We are moving into a curious world of competitive philanthropy, where you can make a mark. Carnegie and Rockefeller had very much the same problem, which is, I can get all that stuff, but can I get a university?"
In the last few years, numerous charities have promoted the idea of naming rights, giving rise to plaques with benefactors’ names festooning schools, libraries, museums, parks and more. "If you hold naming rights, you’ve made a purchase every bit as real as a yacht or private island," Twitchell says.
There are those, however, who apparently don’t care to participate in the naming game. Warren Buffett recently—and very effectively—put an end to that particular narrative, Twitchell says, by donating most of his wealth to the foundation set up by Bill and Melinda Gates. "It was a wonderful extreme of storytelling," Twitchell explains. "By his saying, ‘You take it and give it away,’ he effectively ended the story of consumption, like the king of England abdicating the throne: ‘Here, you take it.’"