At the end of March 2023, Jacobs & Co. put up for sale the world’s most expensive watch: $20 million (18.2 million euros at current exchange rates) for a billionaire set with a yellow diamond, one of the rarest. Nature. According to the brand, it didn’t take long for requests from five potential buyers to come in, although none have yet decided to acquire it. Another story: a jeweler with a tradition in Marbella has sold a Patek Philippe this year to a foreign customer for 2.4 million euros, a record for the current year of that business.
There is a mystique about the riches produced by soap operas, reality shows of people who lead carefree lives and live in big houses and about the numbers that the press daily inflates the salaries of CEOs, Hollywood stars or football players. Is. But then there is the superwealth, a world whose greatest privilege is to remain invisible. A situation that shatters any brand that the average citizen might have about what is expensive and that stays in their own place. You won’t find them in restaurants, as they usually have private clubs where there’s always a table just for them. Nor do luxury stores, as VICs (acronym for Very Important Clients) have their own reserve and schedule. Too Little in an Elevator: A building whose tenants have immense wealth, each apartment has a private access elevator, which can occupy several entire floors. The real secret is this: the world of these ultra-wealthy never collides with the world of an ordinary citizen… no matter how rich they think they are.
The luxury industry knows this, which has these unusual buyers but which spends stratospheric figures in recent years as a source of business growth. 1% are dream customers. “Watches from 20,000 Swiss Francs [18.200 euros] They are the ones that are behaving best in relation to other price levels”, explains Brian Lavio, general director of Audemars Piguet for Spain and Portugal, as an example.
25 (Million Dollar) Club
Beyond the very high-end watch sector, there are also numbers that are dizzying. Hotrod company Lamborghini has a waiting list and two years of orders for its first plug-in hybrid supercar, the Revuelto, which launched in March. Although the firm did not disclose the amount, it is believed to fetch between $400,000 and $600,000, which is 30% more than its Aventador supercar. At the last Singapore Grand Prix, dinner at Le Noir, a reserved restaurant, raised 70,000 euros. And at the Milan furniture fair in April, the sections bringing together the highest-priced products had more visitors than Ikea at the start of the month.
The Dubai ‘skyline’ during a foggy morning. The city is currently a symbol of wealth Naufal MQ (Getty Images)
There’s more: Sales of homes priced above $10 million are set to decline in 2022 from the previous year, but are still up 49% from 2019. York and London. According to The Wealth Report 2023, an annual report prepared by real estate consultants Knight Frank, this last city recorded the highest level of sales of this type of housing since 2014.
In the classic car market, experts at Hagi Group, which specializes in the sector, say the wealthiest collectors are back after the pandemic. The €135 million Mercedes-Benz 300 SLR Uhlenhaut Coupé set a new record for the most expensive car ever sold in 2022. And in art, several single-owner collections, including those of Microsoft co-founder Paul Allen and US investor Anne Bass, fetched some $2.5 billion at auction, more than doubling collection sales in 2021. Enclosed, world-class works regularly break auction records, and last year was no exception,” reports The Wealth Report 2023.
And that 2022 was not an idyllic year for the ultra-rich. UHNWIs (Ultra High Net Worth Individuals with a net worth of $30 million or more) declined by 10% globally in US dollar terms. But it is that in 2021, despite the pandemic, their number had increased by about 9.3%.
Today, millionaires face an economic environment such as the war in Ukraine three years ago, the upcoming energy crisis in Europe, with inflation, rising interest rates and global turmoil in the banking system in recent years. Lots of dark clouds on the horizon. Still, more than half of wealthy investors envision portfolio growth this year, “buoyed by asset appreciation, perceived value opportunities and an expected economic rebound,” he says at Knight Frank.
Everybody wants to be VIC
Thanks to these mega-rich, luxury enjoys iron health. The industry enjoys an expanding customer base: 400 million buyers in 2022 to be joined by another 100 million in 2030, according to an annual study by consultancy Bain & Company and the Italian association of manufacturers of premium articles Altagamma. And the top end of the market is also expanding, accounting for nearly 40% of market value last year (1.4 trillion euros in turnover), up 21% from 2021, “due to enthusiastic consumers of products and unique experiences, and the maximum using brands for VIC strategies”. VICs are mostly made up of individuals with high incomes and/or significant wealth, and were a significant contributor to luxury sales in 2022. The top 2% of customers account for 40% of luxury revenue.
For now, the richest seem unfazed, but they are paying more for the luxuries they buy because prices have risen sharply. For example, the channel raised its rates several times in 2021 and 2022 to reflect changes in production costs, raw materials and currency fluctuations. That didn’t stop its customers: The firm projects revenue of $15.6 billion in 2021 to reach an all-time high across all product categories, up nearly 50% from the previous year. The company’s operating profit increased by approximately 171% compared to 2020 and 57.5% compared to 2019.
Plus Gucci, Hermès and Louis Vuitton have raised their retail prices at a steady pace and shoppers haven’t fled. And Rolex implemented an average increase of 3.4% in January and 5% in November last year. Are Rolexes in low demand now? Absolutely.
Those with the deepest pockets have struck gold for luxury brands, which have registered record sales figures in the recent past. According to the study, “However, as these brands players continue to invest in their future growth despite high inflation and rising costs, their profitability is likely to taper off in 2021 after unprecedented growth.” and Altagamma.
10 year queue for a Rolex
The biggest problem faced by millionaires today is that they cannot get what they want immediately. It’s hard to sell you a Kelly bag from Hermès or a Daytona from Rolex without signing a delay list of up to 10 years in many stores. Because the demand is much higher than the supply.
“Well because we are confined to our homes, we have time to learn new things to inform ourselves. Hence, many people have invested in buying items like high-end watches”, Brian of Audemars Piguet Lavio says. “Watches have become highly coveted items along with cars and art. During the pandemic, people could not spend money on travel and events, so many switched to watches and many more,” says The Wealth Report 2023. Younger customers started buying more expensive products.
The passion for quality collectibles drove the Knight Frank Luxury Investment Index (KFLII) up 16% in 2022, outperforming inflation, stocks and gold. Art (up 29%) and classic cars (25%) led the charts, buoyed by record sales and some large, one-of-a-kind collectibles hitting the market. Looking ahead, the outlook is good for the top two categories, with 59% and 34% of UHNWIs, respectively, looking to invest in 2023.
“There has been a change: before, someone made a piece of jewelry or a watch and they looked for the customer. Now it is the customer who is looking for the jewelry, because he cannot find it”, Gómez y in Marbella says Miguel Gomez Molina, co-owner of Molina Joyeros. Gomez Molina says, “At the last edition of the Watches & Wonders watch fair, I went to talk to a small manufacturing house and they told me they sold out everything they have until 2024, so I should contact them again ” “The average consumer profile, which is our base, remains the same with Covid. But every so often a profile with lots of money comes along looking for very special pieces that can’t be sold immediately. They are, above all, Swedish, Belgian, Dutch, Norwegian and Central European. The rich (and the mega-rich) cry too.