Editor’s note: This article was first published in August 2014, reflecting Spain during the 2008–2014 crisis: €70,000 homes that won’t sell, €6.50 set-menu restaurants struggling, €70 versus €10 gym memberships, and the income thresholds used to define “rich” in Spain.
Exactly the same thing is happening in every country. The inequality gap has kept widening, with both the number of rich people and the number of poor people growing. But there is another fact: over these years, consumer spending by the 5% of the population with the most money has grown much faster than spending by the other 95%.
In fact, right now that 5% of the population accounts for 40% of all consumption.
Just look at the housing and car markets. While a middle-class family cannot sell a €70,000 home, every day we hear of property deals at or above €1 million.
In fact, these days it takes no effort to sell a €50 million luxury home, while you have to move heaven and earth to sell a €100,000 house. So if your job or business is acting as a property agent, your potential client is, without a doubt, the millionaire.
The same goes for cars: while sales of mid- and low-range vehicles have collapsed, sales of luxury cars have soared throughout this crisis. These figures show the problem of the economic gap, but they also reveal a business opportunity in serving a growing segment: the rich and the newly rich.
In other words, if you look around your own city, you are probably seeing restaurants with €6.50 set menus competing with one another, almost all of them agreeing that sales have fallen to the point where the business is no longer profitable, while at the luxury restaurants aimed at a well-off clientele you need to call ahead to book a table.
We have always said that a business can be approached in two ways: the first is to compete on price to meet the needs of those who have the least. The second is to aim at the luxury market, where we don’t compete on price but on quality, distinction and exclusivity.
If we look at clothing, we find exactly the same thing. It is a sector that works with ever thinner profit margins and has to compete with Chinese clothing and other brands that import directly from India, while clothing and accessories brands selling €900 dresses, €1,200 suits and handbags of up to €3,000 are achieving high returns.
For every gym chain charging a €70 monthly membership, two small gyms with €10 memberships disappear. And for every mega-club or pub holding 5,000 people, with VIP boxes and entry at €8–10 or even €30 (in coastal areas), several free-entry pubs disappear.
So the advantages of aiming your business idea at that 5% of the population are pretty obvious: profit margins are high and competition is lower.
Even if your new company offers personal services, the rich demand these services far more and pay much more if you are a professional with a good reputation in your field. In the same way, security systems for the rich are more profitable for a small company than competing with the big firms that serve the middle class.
As we said recently, it is easier than ever to get rich today, and the shortest route there is probably to work with the rich or to offer an exclusive product or service to this select group.
* By “rich” we mean people whose annual income exceeds €100,000 in Spain, and even someone earning more than €70,000 a year could count as a potential customer.
See also: 5 personal services business ideas aimed at the 1%
Featured image: kallerna, CC BY-SA 4.0, via Wikimedia Commons.
