Ubercool

Superpremium

June 30th, 2008

In January, researchers at the California Institute of Technology and Stanford business school reported that people ranked the taste of a $45 wine higher than the same wine priced at $5. The same was true when a different wine was compared at $90 and $10.

The study discovered that higher priced wines sent more blood and oxygen to a part of the brain called the medial orbitofrontal cortex, whose activity controls pleasure. Perhaps that explains why over the past few decades, prices for consumer goods and services have gone “where no man has gone before,” to quote Startrek.

In June, a London Burger King announced it was serving a $190 burger made from Wagyu beef, topped with white truffles and Pata Negra ham and served in a bun topped with organic-white-wine-and-shallot-infused mayonnaise, pink Himalayan rock salt and Iranian saffron.

American excess. In 2003, New York restaurateur Daniel Bolud launched the $50 DB Bistro Burger Royale, made with boned short ribs, truffles and foie gras. Move over Bolud, a London Burger King now offers a $190 burger that makes yours look positively plebeian.

While many pricing tactics like this are aimed at generating PR, there are numerous sectors where pricing has long been used as a yardstick for product sophistication. The audiophile business caters to “golden ears” – consumers who do not blink while spending $6,000 for audio cables or $70,000 for a pair of Wilson Watt Puppy speakers.

That was then. A scan of the current audio scene shows that there are at least 53 speakers priced over $100,000, according to HigherFi. And while the jewelry business has long enjoyed the vagaries of eye-popping prices, there’s no question that the superpremium market spread outside its rarified audiophile atmosphere and infected other consumer categories.

In June, a jumbo black watermelon was auctioned in Japan for a record $6,100, the most expensive watermelon ever sold in that country. This after a pair of Yubari cantaloupe melons fetched a record $23,500 in May. In November 2007, Guerlain introduced a lipstick priced at $62,000. And we’ve already reported that Japan’s Fillico markets a $100 bottle of water in our “What’s Tappening” story.

French excess. This November, Guerlain launched a $62,000 “Kiss Kiss” lipstick, bejeweled with Swarovski crystals – a perfect complement for that Louis Vuitton Tribute handbag ($45,000), designed by Mark Jacobs, which sold out before it even hit retail stores.

Music mogul David Geffen reportedly sold his Jackson Pollock painting “No. 5, 1948,” for a record-breaking $140 million in 2006, exceeding the $135 million that cosmetics heir Ronald Lauder paid for Gustav Klimt’s “Adele Bloch-Bauer” that same year.

At least with art prices there’s the intrinsic value of rarity that may merit overpaying. But can the same be said for a $2 million Bugatti Veyron sports car? The trend – which acquired its “superpremium” nomenclature from the alcohol business, where bottle prices are setting similar records – does owe its logic to one phenomenon: the growing millionaire class.

The number of millionaires has exploded over the past decade. Figures released by the 12th Annual Merrill Lynch and Capgemini World Wealth Report in June shows that India and China are the fastest-growing millionaire generators. People whose net assets are valued at $1 million or more increased 23% in India, to 123,000 individuals, and 20% in China, to 415,000.

Indian excess. Mukesh Ambani, India’s richest man, is building a 27-story mansion in the heart of the country’s commercial capital, Mumbai. Total cost of the home is expected to reach $1 billion, equal to the average annual income of 1.5 million Indians.

These two countries are followed by Brazil, whose 19% yearly growth rate raised its millionaire population to 143,000. Meanwhile, Barclays Wealth noted in May that 41%, or 436,000, of Singapore’s households would have assets of at least $1 million by 2017, compared with 39% in Hong Kong and 28% in Switzerland.

Is it any surprise then that USA Today reported that the Louis Vuitton Tribute bag ($45,000), designed by Marc Jacobs, sold out so quickly? Other people may not be able to tell that my handbag costs more than their car, but my medial orbitofrontal cortex tells me otherwise.

Ubertrends: Generation X-tasy
Value Propellants: Indulgence, Exclusivity, Prestige, Experience

Entry Filed under: Lifestyle, Luxury