Luxury Institute News

February 27, 2014

Handset Makers Go Big on Smartphones

By Brian X. Chen
New York Times
February 26, 2014

BARCELONA, Spain — Smartphones are going against one of the long-held rules in portable electronics, that smaller is better.

Year by year, computers, storage devices and music players have shed size and weight. And for decades, it has been happening with cellphones, too.

But now cellphones, and smartphones in particular, are going the way of the television: They just keep getting bigger and bigger. And people keep buying them.

The trend became even more apparent this week, as handset makers introduced a number of big-screen smartphones — from five diagonal inches to more than seven inches — at the Mobile World Congress trade show in Barcelona, Spain.

Click the link to read the entire article which includes a quote from Milton Pedraza, CEO of Luxury Institute: http://www.nytimes.com/2014/02/27/technology/handset-makers-go-big-on-smartphones.html?hpw&rref=fashion

June 7, 2013

Wealthy Will Spend Less on Jewelry for Rest of Year, Survey Finds

Posted in Uncategorized

A new survey predicts that high-end jewelry “may be under some pressure” for the rest of 2013, with 25 percent of affluent consumers saying they plan to spend less on that category.

By Rob Bates
JCK Magazine
June 2013 Issue

The survey by the New York City-based Luxury Institute polled consumers with a net worth of at least $5 million and minimum annual household income of $200,000.

The survey also found that spending on handbags was projected to fall, with ultra-wealthy respondents preferring to spend on travel, dining, and wine.

“They are definitely going to the ‘experential’ categories,” Luxury Institute president Milton Pedraza tells JCK. “Travel is healthy, technology is healthy.”

Pedraza believes the “economy is not as healthy as people think.”

“Even though real estate is robust and the stock market is robust, there is a lot of uncertainty out there,” he says. “There is some pent-up demand, but also a lot of caution.”

http://www.jckonline.com/2013/06/06/wealthy-will-spend-less-on-jewelry-rest-year-survey-finds

May 25, 2013

Neiman, Saks could create international success

By Daniel Abril
Dallas Business Journal
May 24, 2013

A Saks Fifth Avenue, Neiman Marcus merger could create new opportunities for both brands to save money and expand their footprints, a retail expert industry expert said.

News broke this week that private equity firm KKR could be considering purchasing and merging New York-based Saks and Dallas-based Neiman Marcus.

Milton Pedraza, CEO of New York-based Luxury Institute, thinks that the chances the two retailers will merge is 50/50. But if they did, he said, the two would open the doors in the luxury retail world.

“The savings from being together would create more buying power, whether it’s for marketing or products,” he said. “It gives them opportunity to be more profitable and innovative.”

Pedraza said the savings that would come from combined back office operations and online efforts could create more resources to do what both companies need to survive in the current market: Improve customers’ shopping experiences.

“They don’t deliver a compelling person-to-person in-store experience,” he said. “They’re transactional, not focused on relationships.”

He also said a merged company could fill a gap in the international luxury market.

“There is no international brand that has mutibrands under one roof … that really delivers a fantastic experience,” he said. “I think Saks or Neiman could fill that void.”

But if the two were bought and merged, its owners would need to keep the two brand identities intact, Pedraza said. This could manifest itself in the two brands buying different products from the same designer and also offering their own unique selections.

A merge would make the two retailers a unique luxury brand in a market that is thriving, according to Pedraza. But a move like that wouldn’t happen overnight.

“A lot of pieces have to come together to build that puzzle,” he said, adding that management would have to spend time developing a sound business model. “There is a business case to be made … but it might be really unique opportunity.”

http://www.bizjournals.com/dallas/blog/2013/05/retail-expert-neiman-saks-could.html

May 9, 2013

Going public could bring more innovation, long-term growth for Neiman Marcus

By Erin Shea
Luxury Daily
May 8, 2013

If Neiman Marcus Group Inc.’s private-equity owners decide to launch an initial public offering of the company, it could mean more innovation and long-term growth for its department stores.

The Irving, TX-based company’s private-equity owners Texas Pacific Group and Warburg Pincus LLC are rumored to be meeting with banks to discuss a public offering of the group, which owns department store chain Neiman Marcus and New York department store Bergdorf Goodman. Since the brand is healthy and the economy improving with the Dow Jones Industrial Average at an all-time high, now seems like an opportune time for the owners to sell.

“2013 is a good time for Neiman Marcus to have a public offering,” said James Dean, vice president and head of luxury practice at WealthEngine, Bethesda, MD. “Initial public offering activity is gradually escalating and likely to spike upward in the second half of 2013 and into 2014.

“With the stock market rising and demonstrating less volatility, the central bank actions are creating a stronger economic environment and generally brighter prospects for luxury consumers in 2013,” he said. “Now is the right time for companies considering an initial public offering to act.

“With the luxury goods market doing well and outperforming the rest of the retail business sector, I expect TPG and Warburg Pincus to take advantage of conditions and take Neiman Marcus public.”

Mr. Dean is not affiliated with Neiman Marcus, but agreed to comment as an industry expert.

Neiman Marcus declined to comment.

Cashing out
Neiman Marcus was previously a publicly traded company after it spun off from its retail parent Carter Hawley Hale Stores in 1987.

General Cinema – later Harcourt General – retained control of 60 percent of the company until 1999.

In May 2005, Neiman Marcus was part of a leveraged buyout by Texas Pacific Group and Warburg Pincus. The two private equity firms purchased Neiman Marcus for $5.1 billion in cash and debt.

Initially Warburg Pincus and TPG planned to hold the company for approximately five years, but were delayed by the 2008 recession.

Now, it seems that TPG and Warburg Pincus are looking to launch an initial public offering of the company by hiring Credit Suisse Group to aid in the process. The owners are hoping to receive approximately $8 billion for the company, according to Bloomberg.

Since the economy is doing well, this would be an ideal period for Neiman Marcus to debut an IPO.

“The owners want to cash out, the brand is healthy and I think that this is a natural progression of private equity,” said Milton Pedraza, CEO of The Luxury Institute, New York.

“I think this is a good move, since it is a good time to go public,” he said. “I think being a public company is not a short-term focus.

“Being in the public domain with many shareholders is far more open than it used to be.”

Sharing the power
If TPG and Warburg Pincus were to launch the public offering, Neiman Marcus would join other publicly traded luxury companies such as Saks Inc., Nordstrom, Michael Kors, Salvatore Ferragamo and Tiffany & Co.

A number of luxury brands went public in 2011 to increase their reach emerging markets (see story).

In addition, taking the company public could give more opportunities for its department stores.

“With the luxury markets doing well, luxury retailers that are public companies can really take advantage of the conditions by expanding their brand and opportunities,” WealthEngine’s Mr. Dean said.

“Luxury retailers such as Saks, Nordstrom and Michael Kors Holdings benefit as public companies, helping them further the growth of their business, expand their client base and improve their financials,” he said.

“When luxury retailers go public, it allows them to expand their brand, open new stores, advance their product line and create a greater opportunity to improve the customer experience.”

Also, going public would allow the company more room to grow financially on a long-term basis.

“When you’re a private company, the focus is more on short-term profitability,” the Luxury Institute’s Mr. Pedraza said. “Being public would mean the company would have more access to capital markets and more access to investors.

“Shareholders are long-term investors,” he said. “Private-equity owners are not long-term investors.

“Today, if you have a courageous management team, you can compromise a little bit of the short-term investments to build out the long-term investment.”

This decision would also bring more innovation and freedom to Neiman Marcus as a whole, since the company would be controlled and owned by its shareholders.

“This would open the brand up to a lot more innovation by being in the public domain,” Mr. Pedraza said. “This means freedom to innovate, and freedom to empower employees. Of course, it is a choice, not a given.

“The management could have many different shareholders on the board and have different ideas from the shareholders,” he said.

http://www.luxurydaily.com/going-public-could-bring-more-innovation-long-term-growth-for-neiman-marcus/

March 19, 2013

The Celebrity Endorsement Game

By Tina Gaudoin
Departures
Mar/Apr-2013

Famous faces have been selling luxury goods for years—but how well do they really work?

 

This exclusive Departures content includes several quotes from Luxury Institute CEO, Milton Pedraza.

http://www.departures.com/arts-and-culture/the-celebrity-endorsement-game

December 6, 2012

Customer relationships, seamless media approach vital for 2013

By Tricia Carr
Luxury Daily
December 5,2012

Executives from the Luxury Institute, Digital Luxury Group and Morpheus Media who spoke during a Luxury Daily webinar said that marketers should focus on relationship-building through technology and moving away from a fragmented media approach in 2013.

During the “Luxury Outlook 2013: Up, Down or Flat?” webinar Dec. 4, the senior executives agreed that consumer segmentation by geographic and demographic factors can help brands distinguish the “who” and “why” of luxury marketing next year. Overall, the executives concurred that the outlook on luxury for 2013 is “up.”

“It is simple – long-term relationships build sales and profits,” said Milton Pedraza, CEO of the Luxury Institute, New York.

“Instead of looking at what the competition is doing, do what Apple is doing,” he said. “It had the product, but it created an even greater value proposition for the brand.”

Click the link to read the entire article which includes additional quotes from Milton Pedraza, CEO of Luxury Institute:
http://www.luxurydaily.com/customer-relationships-seamless-media-approach-are-keys-to-luxury-marketing-in-2013-luxury-daily-webinar/

October 11, 2012

Ultra-Wealthy Shoppers Spend More On Luxury Where They Maintain Personal Relationships; Pentamillionaires most likely to be close with specific sales professionals at Barneys, Bergdorf Goodman

(NEW YORK) October 11, 2012 – U.S. consumers with at least $5 million in assets and $200,000 in annual income share detailed opinions and observations about their relationships with salespeople in six luxury categories in the new 2012 Luxury Customer Relationship Index survey from the independent and objective New York-based Luxury Institute.

High-ticket categories show higher rates of customers who deal with a specific salesperson.  Watches (49%) lead all categories in terms of proportion of customers who maintain relationships with salespeople, followed by jewelry (40%) and men’s ready-to-wear (38%). There is a noticeable drop-off in rates of personal relationships at luxury retailers (30%), handbag brands (27%) and women’s ready-to-wear (21%).

Across categories, 70% of ultra-wealthy customers who transact and communicate with a specific salesperson say that this relationship causes them to spend more on goods and services in stores and on the Web. The biggest positive impact on sales comes when customers maintain relationships with salespeople in luxury retail, and in both men’s and women’s ready-to-wear categories.

In luxury retail, Bergdorf Goodman (51%) and Barneys (49%) enjoy the highest rates of maintaining relationships with ultra-wealthy customers, with larger chains like Bloomingdale’s and Nordstrom seeing lower incidence of relationships. In the middle are Brooks Brothers (36%), Neiman Marcus (32%), Lord & Taylor (30%), and Saks (26%).

“Luxury retailers know that relationships drive sales,” says Luxury Institute CEO Milton Pedraza. “The right hiring, education programs and Customer Culture help to promote more productive relationships and higher sales.”

About the Luxury Institute (www.LuxuryInstitute.com)
The Luxury Institute is the objective and independent global voice of the high net-worth consumer. The Institute conducts extensive and actionable research with wealthy consumers about their behaviors and attitudes on customer experience best practices. In addition, we work closely with top-tier luxury brands to successfully transform their organizational cultures into more profitable customer-centric enterprises. Our Luxury CRM Culture consulting process leverages our fact-based research and enables luxury brands to dramatically Outbehave as well as Outperform their competition. The Luxury Institute also operates LuxuryBoard.com, a membership-based online research portal, and the Luxury CRM Association, a membership organization dedicated to building customer-centric luxury enterprises.

October 3, 2012

Meet The Millennial 1%: Young, Rich, And Redefining Luxury

By: Larissa Faw
Forbes
October 2, 2012

Two Millennials walk into a bar wearing denim jeans, Converse sneakers, and carrying iPhones. They are identical except for one factor: one makes more than six figures a year, while the other is unemployed and lives at home. Affluent Millennials may be hard to pick out of a crowd, but they are redefining the luxury industry.

There are currently 11.8 million Millennials age 18-30 living in U.S. households with annual incomes exceeding $100,000, according to the Ipsos Mendelsohn Affluent Survey. Plus, never before has such a large group of young people been raised by wealthy parents: 34% of today’s Millennials have been wealthy throughout their lifetime, say American Express and the Harrison Group.

“There are more out there than you expect,” says The Luxury Institute’s Milton Pedraza. “If you are a 28-year-old working as a creative executive, you are making $130,000 a year and are most likely are single. It’s not as if you have a lot of assets. You might have some debt, but there’s still a lot of disposable income to go to technology, travel, and entertainment.”

Click the link to read the entire article which includes quote(s) from Milton Pedraza, CEO of Luxury Institute:
http://www.forbes.com/sites/larissafaw/2012/10/02/meet-the-millennial-1-young-rich-and-redefining-luxury/

September 12, 2012

Poor Burberry earnings point to problems for luxury market

By Stacey Vanek Smith
Marketplace
September 11th, 2012

Shares of Burberry are down more than 18 percent this morning. The luxury retailer slashed profit forecasts and warned that the luxury goods market is headed for hard times.

The main cause, says Milton Pedraza, CEO of the Luxury Institute, is global slowdown. Even while other retailers struggled, luxury retailers were boosted by sales from overseas, especially in Asia.

“China had been the engine of growth for the last several years,” says Pedraza, “[and] it generated a tremendous number of tourists who had been holding up the European luxury market.”

The Chinese slowdown, therefore, has not only affected the luxury market there, but also in Europe.

Luxury retailers could react in a number of ways, says Pedraza, from lowering their prices to reducing their inventory. Most importantly, though, he thinks they will “go after retaining customers who have purchased before,” hoping to increase customer culture and keep previous customers coming back.

http://www.marketplace.org/topics/business/poor-burberry-earnings-point-problems-luxury-market

September 7, 2012

Rolls-Royce targets blooming Asia-Pacific market in boutique expansion

British automaker Rolls-Royce Motor Cars is keeping its brand top-of-mind with trend-savvy, affluent consumers in Thailand through a new boutique experience set to open in the fourth quarter of this year.

The new Rolls-Royce Central Bangkok boutique will be the first of its kind in Asia. The automaker has additional plans expand its presence in Thailand due to strong interest from consumers in the emerging market, which seems to welcome status brands with open arms, experts say.

“Rolls-Royce understands that Asia has a lot more opportunities than just China,” said Milton Pedraza, CEO of the Luxury Institute, New York. “It has large populations that are growing in their economic and demographic profiles.

“The slowdown in China, while it is still a wonderful opportunity, is causing the brand to move further out,” he said. “Now you have to open your eyes a little wider, and you will find out that Asia is much bigger than China with a tremendous amount of growth opportunity.”

Click the link to read the entire article which includes quotes from Milton Pedraza, CEO of Luxury Institute: http://www.luxurydaily.com/rolls-royce-targets-blooming-asia-pacific-market-in-boutique-expansion/