AT THE TRANG TIEN PLAZA shopping mall in Hanoi, Vietnam’s capital, on some evenings a curious spectacle unfolds. Couples in wedding finery pose for photographs in front of illuminated shop windows, with Salvatore Ferragamo, Louis Vuitton and Gucci offering the sort of backdrop for romance more usually provided by the sea or the mountains.

The women are not wearing Ferragamo’s Vara pumps, with their distinctive bows, or toting Vuitton’s subtly monogrammed handbags. They cannot afford them.

Tran Van Cuon, who assembles mobile phones at a Samsung factory, posed with his fiancée in a brown suit and bow tie that cost him the equivalent of $US150. Some day he hopes to become a customer in the mall. Until then, he will proudly display the photos in his home.

To stumble across an outpost of European luxury in a relatively poor and nominally socialist country is not all that surprising. Luxuries such as silk have travelled long distances for many centuries, and even modern luxury-goods makers have been pursuing wealth in new places for more than a century.

Georges Vuitton, son of Louis, the inventor of the world’s most famous luggage, showed off the company’s flat-topped trunks (better for stacking than traditional round-topped ones) at the Chicago World’s Fair in 1893.

The oil-rich Middle East has been a magnet for expensive foreign trinkets since the 1960s. The Japanese became insatiable consumers in the 1970s. Today, two in five Japanese are thought to own a Vuitton product. And now it is China’s turn to lap up luxury.

As luxury-goods sales have expanded geographically, they have also spread across the social scale. When Coco Chanel created her No. 5 perfume in the 1920s she reserved it for her best couture clients, but in the following decade she sold it in smaller bottles so that more women could afford it.

Cartier’s “Les Must” jewellery in the 1970s put the brand within reach of consumers who could only yearn for Panthère necklaces and Tank watches. Many other brands followed Cartier’s sortie du temple (descent from the temple), seeking to broaden their appeal while retaining their cachet. Not all succeeded.

Over the past 20 years the number of luxury-goods consumers worldwide has more than trebled to 330m, according to Bain & Company, a consulting firm. Their spending on expensive jewellery, watches, clothing, handbags and so on has risen at double the rate of global GDP. Most of these new buyers are not the very rich but the merely prosperous, with incomes of up to EUR150,000 ($US188,000). Shares of listed luxury companies have far outperformed those of other companies (see chart).

Consumers’ rush to quality has created billionaires at a rate that Silicon Valley might envy, especially among the main shareholders of luxury conglomerates that have gathered together many of the best-known brands. They include Bernard Arnault, a French tycoon who controls LVMH, owner of Louis Vuitton, Moët & Chandon champagne and a host of other brands, and his rival François-Henri Pinault, whose Kering group owns Gucci, a big Italian leather-goods maker.

Nick Hayek’s Swatch Group and Johann Rupert’s Richemont (Cartier’s owner) are powerhouses in watches and jewellery. Among the owners who have made fortunes from selling stakes to investors in the past few years are Brunello Cucinelli, whose eponymous company makes casual-chic clothing at serious prices, and Remo Ruffini, a fellow Italian who floated Moncler, a maker of down jackets.

Personal luxury goods are just one small corner of this empire of opulence. Upmarket options can be found in industries from health care to banking, though most analysts leave such things out of their reckoning. Using consumers’ own perception of what constitutes luxury goods and services, the Boston Consulting Group reckons that $US1.8 trillion was spent on such items in 2012. The biggest category is travel, followed by cars and then personal luxury goods. Bain comes up with a smaller sum for a similar spread of sectors (see chart). But luxury’s boundaries are fuzzy and hotly disputed.

This special report will concentrate on personal goods, which face the tricky task of trying to achieve global scale while maintaining the artisan roots that give them rarity appeal. Ultra-expensive cars will make only a brief appearance, and yachts will just sail by on the horizon: globally, only 14,000 people are able to afford a really big one. But the report will include such fast-growing “experiential” sectors as hotels and wine, which are growing faster than things to buy and own.

To view the world through the lens of luxury is to see it subtly altered. Some of the normal rules do not apply to luxury-goods makers, even though in many ways they are similar to other consumer-goods companies. The cost of production is not usually a prime concern and capital investment is generally modest, except for watches.

A really prestigious item can be a “Veblen good”, named after an American economist born in the mid-19th century who noticed that demand for some goods actually rises as they get more expensive because they confer yet more status. And the margins even on lesser luxury goods are much better than on mass-market items.

Luxury companies like to set their own agenda. Their creative directors oversee both the development of new products and the way they are presented in magazines, shop windows and online. “We are not going to let people influence the vision,” says Patrick Albaladejo, deputy managing director of Hermès, a French luxury house so august it claims not to have a marketing department.

Luxury companies often get the most attention for the things they sell least of. Karl Lagerfeld, Chanel’s creative director, made headlines this year by sending his models down a catwalk decked out as a grocery shop. But “the bread and butter of the company are chemicals,” explains Armando Branchini of the Altagamma Foundation, which represents Italian luxury firms. Luxury perfumes and cosmetics are thought to account for over half of Chanel’s business.

Diageo, a big drinks company, has a “Reserve” division that gives special attention to its priciest tipples, such as Johnnie Walker Blue Label whisky. They are marketed through the patient cultivation of the coolest bars and influential “advocates”. “You need to be a black belt in relationships when it’s about luxury,” says James Thompson, who runs the division.

Luxury’s lens does odd things to the map as well. Europe is still the pre-eminent maker; its brands account for 70% of the world’s luxury consumption. Germany matters in cars and yachts, but the real powerhouse is Italy, which serves as the workshop for French fashion and leather goods as well as its own.

Luxury is “one of the few industries where Europe has a sustainable competitive advantage”, says Michael Ward, managing director of Harrods, a posh London department store. America is both an underexploited market, given its wealth, and a base for brash competitors such as Coach, Michael Kors and Kate Spade, which are challenging established European brands with a more affordable take on luxury. China, already a voracious consumer, is just beginning to stir as an exporter.

Of late, though, the champagne has gone a bit flat. The war in Ukraine and the sanctions imposed on Russia in response have put off rich citizens of that country, among the giddiest new consumers. The Japanese went on a spree early this year ahead of a rise in value-added tax, then stopped spending.

The Ebola epidemic in Africa and pro-democracy protests in Hong Kong, where Chinese mainlanders do much of their shopping, have unnerved consumers. Most important, slower economic growth and the anti-corruption campaign mounted by Xi Jinping, China’s leader, have dampened the spirits of Chinese shoppers, who now account for nearly a third of the global demand for personal luxury goods. The share prices of recently listed luxury companies have fallen by a quarter this year. After two decades when annual growth averaged nearly 6%, the rate this year will be just 2%, predict Bain and Altagamma.

These passing crises come on top of more profound changes. One of them is a shift from “having” to “being”, especially in rich countries, where the well-off are becoming less keen on owning and more interested in experiencing things. Consumers in China are turning from monogrammed showiness to subtler elegance.

Younger people everywhere have their own ideas about how to consume luxury, helped by social media and e-commerce. Inequality is a growing concern from Berlin to Beijing. Last year a pope whose red shoes were widely (but wrongly) thought to have been made by Prada, an Italian fashion house, gave way to one who shuns the Apostolic Palace for a guesthouse. That captures the mood and contributes to it.

Sobriety has bypassed some sectors, including fine wine and expensive cars. Yacht sales, too, are buoyant again after a period in the doldrums in the late 2000s, and today’s yachtsmen often add a helicopter or two to their order. But mostly substance is winning over style.

In some ways, today’s preoccupation with sustainability plays into the hands of luxury-goods makers. With their ample margins, they can afford to reduce the environmental damage they cause. “Luxury can show the path that answers the major issues of our century,” argues Marie-Claire Daveu, Kering’s sustainability chief.

By and large, makers of luxury goods employ European workers rather than sweatshop serfs in Bangladesh. The key trend now, says Diageo’s Mr Thompson, is “away from show for its own sake towards knowledge, appreciation, craft and heritage–something with a story.”

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