A new nation is emerging and many of you will want a visa to do business there. While you won’t suffer jet lag making the trip, you may experience culture shock when you get there.
The new country, right here in America, is Richistan, identified in a book of that name by Robert Frank, senior special writer at the Wall Street Journal. Richistan is populated by the new rich – the really, really rich. It is growing, although perhaps not as fast as a year ago.
The 7.5 million “mere affluent” U.S. households with a net worth between $1 million and $10 million barely qualify to live in Richistan.
To truly be at home there takes a net worth starting at $10 million, which lets in about 1.4 million U.S. households. They, in turn, aspire to live like the Upper Richistanis, the thousand or so households with $100 million-plus net worth.
The middle and upper Richistanis set the tone in their new country. “The pressures from both the top and the bottom, from richer Richistanis and the mere affluent, have forced Richistanis to create an entirely new class of hyperluxury goods,” Frank explains.
“The companies that succeed in grabbing the Richistani market will likely be among the biggest winners in the coming years, with higher growth rates…[and] fatter profits,” predicts the author. “With the population of rich people expanding so rapidly, wealthy consumers have gone from being a niche market to a broad consumer base.”
To do business in Richistan, you need to understand the culture. Here is a field guide.
They love conspicuous consumption. “The huge numbers of Richistanis are furiously racheting up the price of status,” writes Frank. “Richistanis are also spending to outrun the hordes of Richistani wannabes.” This means they are building 30,000-sq.-ft. houses with walk-in refrigerators bigger than a Manhattan apartment. A small closet might be 400 square feet.
Opulence is their favored interior design style. Unlike Old Money, they don’t go for the understated look.
They are not sipping piña coladas on the beach every day. Just the opposite: “The idle rich are being replaced by the workaholic wealthy,” Frank observes. Many of them made their money as entrepreneurs, and often start new businesses out of boredom. Or they become serial builders and remodelers, addicted to projects and consumed by them.
When working with Richistanis, expect to be on an unpredictable but fast schedule. They are restless and move from one thing to another quickly. Meetings may change on a moment’s notice. It won’t be easy working with them, and your systems have to be bulletproof. Frank reports in his Wall Street Journal column that the rich are often paying 20% premiums to fast-track the construction of their mansions.
They are obsessive about details. The author reports on a man who, during the three-year remodeling of his townhouse, oversaw construction of every molding, window and fixture. Be prepared to devote days traveling to meetings out of town, selecting materials.
You must have an excellent network of topnotch suppliers and artisans. They must understand superlative quality, not just “good enough” quality. They have to be willing to put themselves in a whole new league.
Richistanis are obsessive about quality and may see flaws no one else does. They can be litigation-prone perfectionists. The author recalls a Richistani showing him a tiny scratch on the glass stairwell in his townhouse, left by one of the installers. The scratch apparently drove him to sue his contractor, all the while complaining about being tired of “all of the bills, lawsuits and upkeep of multiple homes.”
Since they are insecure about keeping up with the next rich guy, Richistanis are always looking for the next best thing, like the yacht owner who commissioned an $8,000 alligator toilet seat. So you have to be plugged into finding, or creating, the new and unusual.
Speaking of yachts and planes, make them part of your repertoire. Richistanis collect them. Can you find seatbelt buckles to match the faucets and other decorative hardware on a private jet? Can you create a yacht with walk-in freezers, Roman baths, plunge pools, steam rooms and saunas?
Don’t even think about mass luxury brands for a Richistani. “The growing ranks of affluent consumers are increasingly trading up to buy goods once reserved for the rich. Luxury companies, to grow sales, are happy to sell cheaper versions of their high-end products to serve this new crowd of aspiring shoppers. Marketers call it ‘mass luxury’ and, oxymoron or not, it’s making life miserable for Richistani spenders,” says Frank. That is why BMWs, Mercedes and Jaguars have lost cache to Bentleys and Rolls Royces.
There is a big opportunity in our industry to develop super elite brands to fill the void left by mass luxury companies, especially in appliances, decorative plumbing and surfacing. However, these new hyperluxury brands should keep a low profile and be known only to the rich, with no mass marketing. The word should get out quietly. Richistanis should feel they have discovered a brand that is part of their elite inner circle.
With all of their homes, Richistanis have complicated lives and often resort to managers who run their households like a business. On a large project, you may deal with a cadre of household managers. One could be a cost consultant charged with running the numbers. The homeowner may not always know what the cost controller is questioning. This process will add another level of complexity to your jobs and your business manager may become an integral part of the team. Sometimes it can feel more like dealing with a corporation than a personal client.
Once a project is completed, Richistanis need large staffs to keep things up and running. One Richistani has 200 vendors who regularly come to the house, including a woman who does faux finishes on cabinets and “a guy who comes in to fix our French faucets. It turns out you can’t just call A1 plumbing to fix an Etoile faucet.”
A new opportunity is available for a white-glove service business to care for the kitchens and baths of the people in Richistan.
How do you find Richistanis? You can’t market directly to them through conventional means and they are not going to search to find you. Instead, cultivate referrals from architects, designers and high-end builders. Tap into their peer groups at charities, yacht shows, watch shows, equestrian and political events (liberal ones, by the way.)
Even if you aren’t going to Richistan, understanding it is important because it influences the mass luxury market.
“The flood of high-end products for Richistanis has also set a new, irrational reference point that consumers will use when making their own purchasing decisions,” notes Frank. He cites the example of how $5,000 grills have created a market for $1,000 grills, which now seem frugal, even though grills used to cost less than $100.