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Trends in spending

Most respondents last year dismissed the possibility of any scaling down on their spending because the economic climate both globally and domestically was subdued. Not too many expected the economic downturn to continue for long and were treating it as just a passing phase.

This year, the response was not as decisive, revealing a far greater degree of uncertainty on the economy. Not that, ultra HNIs have not stopped buying luxury gold or diamond jewellery, apparel, luxury watches, high-end mobiles and electronics. But in this year’s survey more people, compared to last year,seemed to allude to the possibility of consciously postponing high-end discretionary purchases (private home theatres, really top-end cars, yachts, aircraft etc.) until they get the sense that an economic recovery is well underway.

Jewellery and Precious stonesChange in spending habits

An interesting finding this year is the Professional appears to be very clear on how much he wants to spend: Across the three years of our survey, we found that his proportion of spend as a percentage of income hovers around 28-29 per cent. By contrast, the proportion of spend is far more erratic for both the Inheritor and the Self-made: on an average, it has varied from 20-22 per cent in 2011 to over 29 per cent in 2012.

Instead, what the Inheritor and the Self-made appear to have maintained fairly constant across all three years is investment into the personal business. Clearly, this is because their earnings are generated primarily from their businesses. Both Inheritors and Self-made reinvest around a third of their income back into their business.

Proportion of spend in normal times

In a normal year, the discretionary to non-discretionary spend ratio is around 41:59; during a sustained downturn, our survey found, that changed to 33:67.

Proportion of spend during a downturn

A third of the respondents suggested that their spending had been adversely hit by around 20-25 per cent. In fact, during a downturn, all categories indicated that they spent less on luxury purchases (discretionary spend, which normally includes premium cars, international designer apparel, international travel etc). By contrast, non-discretionary spending has hardly been impacted.

Preference for spend

Ultra HNIs tend to shrink spending on high-end luxury products (premium wallets, luxury bag, luxury writing instruments) while apparel and electronics continue to be the most sought after avenue to spend.

Place of purchase

The number of ultra HNIs who prefer to shop global luxury brands in India, is growing steadily. This is because most luxury brands are now available in India.

Jewellery and Precious stonesGifts and travel

The ultra HNI continues to spend on immediate family, close friends (through gifts) and celebrations of family occasions.

Gifts and travel

Among the items of spend on immediate family, diamond and gold jewellery continues to be the most popular, followed by cars and clothes.

Family occasions – Type of event

Family occasions such as birthdays, weddings and anniversaries, business launch or success parties etc. continue to be celebrated in a big way. Even for exclusive, small-affair parties, people are increasingly seeking expertise to make it a success.

Family occasions – Organised by event manager

The concept of using event managers for family functions is gaining in popularity, but only gradually. One reason for this is that for small family functions (such as birthdays) most ultra HNIs get in touch directly with celebrity performers/ party hosts who may either be direct acquaintances or friends.

Most preferred vacation locations

The ultra HNIs travel overseas once or twice a year. On an average, the professional sets apart at 1-2 weeks for travelling and vacationing with family; nearly 2/5th of Inheritors and Self-made said that they vacationed for about a week in a year.

One of the fastest growing segments in luxury spending is the concept of a luxury experience. A number of luxury product makers are tapping into this need for exclusivity and offering ultimate luxury experiences such as visits to the premium car plant to see the status of the car that the ultra HNI has ordered and combine it with a special event such as adventure sports/ river rafting etc. at nearby luxury locales.

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Quotes from the respondents

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