Luxury Institute News

August 29, 2016

Bijan property on Rodeo Drive sells for $19,000 a square foot

Los Angeles Times
August 26, 2016
By: Andrew Khouri

The demand for $5,000 handbags and $25,000 suits is slipping amid global turmoil.

But enthusiasm for real estate on Rodeo Drive, where such high-end goods are sold, isn’t hurting. Instead it’s setting records.

The parent company of Louis Vuitton recently paid $122 million, or $19,405 a square foot, for the yellow House of Bijan building at 420 N. Rodeo, long home to a boutique known as “the most expensive store in the world.” The deal, revealed in public records, was the second time in seven months that a record fell on Rodeo.

Late last year, Chanel paid $13,217 a square foot for a store it was leasing nearby at 400 N. Rodeo, the high-water mark for California retail until last month’s Bijan sale.

The eye-popping amounts reflect how few properties there are on the Beverly Hills street, as well as how infrequently they go on sale. And in a struggling market for luxury goods, the deals underscore that high-profile streets such as Rodeo or Manhattan’s upper Fifth Avenue are far more than a place to sell a $10,000 timepiece.

“They are billboards in some places for the brand,” said Milton Pedraza, chief executive of consulting firm Luxury Institute. “The companies can demonstrate power, and their staying power, by buying up these properties.”

Indeed, Marc Schillinger, a director with commercial real estate company HFF who represented the seller Bijan Properties, said “everyone came out of the woodwork when we announced the opportunity to buy this asset.”

“There are only 2½ blocks on Rodeo Drive,” said Schillinger, who declined to confirm the price or buyer. uEvery luxury retailer wants to anchor their brand on Rodeo.”

That’s proving true even as the luxury retail market takes a breather. Sales of luxury goods in the U.S. have fallen around 10% on average over the last year, while traffic in luxury stores is down 20%, Pedraza said.

The downbeat numbers are due to several reasons — similar to ones that have softened ultra-high-end residential real estate markets in places such as Los Angeles, New York and London.

Slowing global economies and a strong U.S. dollar have sapped the buying power of foreigners and dampened tourism. Meanwhile, uncertainty over the economy in the U.S., along with the upcoming presidential election, has caused some wealthy Americans to hit pause on big purchases.

On Friday, Italian retailer Prada said its retail sales in the Americas fell 15% in the first half of the year, explaining that the U.S. market “remains tough.”

“So many factors have converged — unfortunately in a negative way,” Pedraza said.

LVMH Moët Hennessy Louis Vuitton has done better than many retailers though. The Paris-based luxury goods conglomerate reported that U.S. sales climbed 7% during the first half of the year.

A high-profile store, however, isn’t just about selling goods. Even in the age of e-commerce, high-end digs have worth as a place to hold flashy events and market a brand’s cachet across the globe.

Fashion houses are willing to pay a premium to buy such an opportunity. They’d rather do so than rent and risk losing the location if their lease is not renewed, said Robert Cohen, vice chairman of real estate firm RKF.

That’s especially true as fast-fashion companies with far lower prices increasingly compete for such locations, including an H&M that opened on a pricey stretch of Fifth Avenue in Manhattan in 2014.

The highest price per square foot for a U.S. retail space came two years ago when Chanel purchased a shop it was leasing in New York on Madison Avenue for $31,329 a square foot, according to Real Capital Analytics.

“They are protecting their position on the street and in the market,” Cohen said of such purchases.

It’s unclear what LVMH’s plans are for the Bijan building, where the iconic store has operated for 40 years.

The Paris retailer with 70 brands already has multiple stores on Rodeo including Louis Vuitton and Dior locations that it leases and a Celine store that it owns.

A spokesperson for LVMH declined to comment, as did a manager at Bijan.

Iranian American designer Bijan Pakzad opened his appointment-only boutique on Rodeo Drive in 1976. It became known for its ultra luxury goods such as $6,000 suits and $19,000 ostrich vests.

Through the years, House of Bijan counted many high-profile names among his clients, including Michael Eisner, King Juan Carlos of Spain and Presidents Carter, George H.W. Bush, Clinton, George W. Bush and Obama. Pakzad had success to match, with homes across the world he flew to on his own jet.

Pakzad died in 2011 but left a lasting imprint on Rodeo Drive, helping to make it a world-class destination. The store’s manager, who declined to give his name, said the store is now owned by Pakzad’s family.

“Long before Tom Ford and Karl Lagerfeld, Bijan had a keen understanding of the cult of personality in fashion, starring in his own ads and billboards, name-checking countless celebrities and parking exotic cars outside his store, all to stoke his fame,” former Times fashion critic Booth Moore said following Pakzad’s death.

But throughout the decades, as rents soared along with the cachet, Rodeo has lost many of its local boutiques, including Fred Hayman’s famed Giorgio Beverly Hills, with its distinctive white-and-yellow striped awning, which closed in 1998.

The Bijan store is operating under a lease; its expiration has not been disclosed.

Given the sky-high sale to LVMH, the pricey but small House of Bijan is likely to go as well, real estate broker Cohen said.

The French firm may want to bring in a deep-pocketed tenant who would pay more in rent, or give yet another of its brands a foothold on Rodeo.

“It’s one of the greatest luxury streets in the world,” he said. “It’s global branding and global domination.”

Source: http://www.latimes.com/business/la-fi-bijan-sale-20160825-snap-story.html

March 4, 2016

Save the date May 4: Luxury Roundtable: Midyear Review 2016

Posted in Uncategorized

Luxury Daily
March 3, 2016

Please mark your calendar: Luxury Daily will host its Luxury Roundtable: Midyear Review 2016 conference in New York on Wednesday, May 4.

Confirmed speakers include senior executives from Rolls-Royce Motor Cars, XOJet, Redfin and the Luxury Institute, among others.

The daylong summit will focus on the state of luxury at the midyear point, what luxury brands and retailers have accomplished strategy-wise so far in this economy and what they expect to do to steer their companies through the rest of the year.

This is the only midyear luxury conference. It is part of Luxury Daily’s portfolio of events, including Luxury FirstLook, Luxury Insights Summit and the Luxury Retail Summit.

The agenda with more speakers and their talking points will be posted sometime next week.

Please check back in with Luxury Daily. We hope to see you at our event where you can learn and network with smart luxury marketers.

Source: https://www.luxurydaily.com/save-the-date-may-4-luxury-roundtable-midyear-review-2016/

 

November 25, 2015

Nordstrom, Bergdorf Goodman lead retailers in overall satisfaction: report

Luxury Daily
November 25, 2015
By: Forrest Cardamenis

Department store chain Nordstrom is the top-rated luxury retailer, according to findings detailed in The Luxury Institute’s third annual Luxury Multi-Channel Engagement Index.

Consumers evaluated six luxury fashion retailers both in-store and online across a total of 31 attributes – 15 online and 16 in-store. Because the findings come from consumers, they can help each retailer determine which areas it needs to improve on and what specialties will help distinguish it from competitors.

“[We wanted] to get the voice of the client, not to have a panel of experts, not to have one individual,” said Milton Pedraza, CEO of The Luxury Institute. “This is the wealthy consumer rating their own experiences, these are all clients of the brands.”

Ahead of the pack
Barneys New York, Bergdorf Goodman, Bloomingdale’s, Neiman Marcus, Nordstrom and Saks Fifth Avenue were evaluated on the ease of 14 common criteria both online and in-store. In addition, there was one additional criterion for online shopping and two for in-store.

The common traits are: finding desired products, the perception consumers had of the retailer, product selection, customizability, customer service, policy on returns and exchanges, product displays, exclusive or limited products.

Traits also included whether selections were relevant to the consumer’s lifestyle, the availability of proper sizes, pricing, loyalty programs, confidence that the retailer would meet the consumer’s needs and how often products from that retailer receive compliments.

SAKS 5th Ave
Dior beauty counter at Saks Fifth Avenue

Respondents had a median age of 52, minimum household income of $150,000 and an average of $289,000 and $2.9 million in net worth, numbers that align with luxury retailers at large. Among the findings about consumers is that twice as much spending takes place in-store, with women and consumers under 45 years of age being more likely to spend online.

Bergdorf Goodman beat out Nordstrom in some notable categories. It is best perceived as a luxury retailer, as having the best prices and having the best personalized shopping experience.

However, Bergdorf Goodman has only two stores, one for men and the larger for women, both on Fifth Avenue in New York, whereas Nordstrom has 118, which will play into perceptions of luxury. Nevertheless, Bergdorf Goodman’s relative aversion to discounting did not stop consumers from highlighting its prices.
Nordstrom
Nordstrom

Nordstrom topped the rankings of more categories than any other retailer. Among them: its convenient refund/return policy, carrying relevant products and styles, having a navigable Web site, including helpful ratings and reviews and good shipping policies online, convenient locations and in carrying products that are complimented by others. It also beat out national retailers in prices and having good personalized shopping.

Fittingly, Nordstrom is the most popular retailer online and leads in market-share on both channels.

Tough times

Mobile transactions do not comprise a large share of the revenue for any of the retailers. While mobile is an important part of the transaction journey for many consumers, who use it to research and in-store to compare prices and selection, it has not yet become a major source of transactions.

Retailers are missing out on significant revenue opportunities by failing to personalize consumers’ shopping experiences, thanks to the lack of adaptive pages, product recommendations and search functionalities on their mobile sites, according to a Retail Systems Research report.

In its “Personalization Across Digital Channels” report, sponsored by predictive analytics platform Reflektion, Retail Systems Research highlights the major faux paus that brands commit when it comes to mobile commerce. As consumers’ expectations for retailers’ digital offerings grow higher, marketers must deliver optimized experiences, including saved search histories, suggestions on previous purchases and responsive pages tailored to each device (see story).

neiman.hudson yards rendering
Neiman Marcus Hudson Yards rendering

Nevertheless, online shares have grown and retailers have proven themselves adaptable to new technology.

“I think what [the data] tells you is that, even though we thought that the luxury multi brand chains were going to be overrun with the likes of Amazon and others, that just hasn’t happened,” Mr. Pedraza said. “They have become very nimble and very agile at online and ecommerce. Don’t underestimate these omnichannel chains. They definitely will rise to the occasion.”

One of the major obstacles in both ecommerce and in being perceived as luxury is in discounting. Discounting is a surefire way to lure in new consumers short-term but represents longer-term risks for the brand.

As a result, many retailers have opened up discount stores, which, despite also risking perception, could become a venue to funnel discounted merchandise and leave the main store full-price.

Although this change could not be implemented suddenly without alienating some consumers, there are already signs that it is taking place and may become more visible as holiday shopping is amped up.

Bloomingdale's Ala Moana exterior
Bloomingdale’s Ala Moana exterior

Consumers should expect a reduction in holiday promotions from retailers, according to a recent report by Upstream Commerce.

Based on the past two years of holiday promotions, the report predicts that 2015 will see a decrease in both the number of products discounted and in the discount rate. Fewer sales incentives and lower discounts could indicate a new strategy based on the “right” offering rather than simply presenting more promotions (see story).

“There is a lot of discounting out there, but full-price will remain relevant,” Mr. Pedraza said. “Unfortunately I suspect there will be a lot of discounting in the fourth quarter because when you enter their store they are flushed with inventory, all of them, so I think there’s going to be a big reduction.

“Traffic is down dramatically in all of these stores — some insider estimates, people on the inside of these companies, place traffic down anywhere from 20 to 30 percent,” he said. “It’s going to be a very tough fourth quarter, at least on market.

“We may see the top line improvement because of the discounting and you’re going to sell more, but we may see that the margins erode and by the way we may see comps that are not that good. Luxury right is in a very tough place, nowhere near what it was in 2008, everybody is suffering.”

Source: http://www.luxurydaily.com/nordstrom-leads-retailers-in-overall-satisfaction-luxury-institute/?utm_referrer=https%3A%2F%2Ft.co%2FFFJxcMPESf%2Fs%2FAiXG&utm_referrer=direct%2Fnot%20provided

 

August 10, 2015

The Death of the Swiss Fine Timepiece Has Been Greatly Exaggerated

The Lilian Raji Agency
By: Lilian Raji
August 10, 2015

Late last month, Edward Faber, co-owner of Aaron Faber Gallery and author of  American Wristwatches: Five Decades of Style and Design,  Gary Girdvainis, editor of WristWatch magazine and AboutTime magazineand Jeffrey Hess, CEO of Ball Watch USAMilton Pedraza, CEO and Founder of The Luxury Institute, and Jason Alan Snyder, Chief Technology Officer of Momentum Worldwide reconvened Aaron Faber Gallery’s annual Watch Collectors’ Roundtable to debate the question, “Will Smartwatches Disrupt the Swiss Watch Industry?” The Roundtable was moderated by Eleven James CEO, Randy Brandoff.

With the recent  release of a report by market research firm Slice Intelligence announcing that Apple watch sales have declined 90% since their initial launch, the unanimous predictions of the Roundtable panelists has been proven accurate:  no, smartwatches will not disrupt the Swiss watch industry.

What the panelists couldn’t agree on, however, was if smartwatches would impact the industry in any way.

  • Jeff Hess, who also owns Hess Fine Art, noted his customers have been coming in wearing a smartwatch on one wrist and a fine Swiss timepiece on the other.  In this, there seems to be the possibility of harmony between the two types of watches.
  • Edward Faber asserted that a smartwatch will never seem as prestigious as walking into a boardroom wearing a Rolex Presidential or other high status watch.  Smartwatches will only be a gadget.
  • Milton Pedraza agrees on the novelty factor of watches, but didn’t dismiss that smartwatches could ultimately be more a fashion statement than a power statement.
  • Gary Girdvainis predicted that smartwatches would ultimately become gateways for the millennials who gave up watches for their smartphones to now begin entertaining the idea of wearing a watch.  When these same millennials reach their 30s, after spending the last few years wearing a smartwatch, graduating to a Swiss timepiece will be their next step.
  • For tech industry expert, Jason Alan Snyder, smartwatches are about functionality and features.  They are about advancing technology to make our lives easier. The debate shouldn’t be about smartwatches vs timepieces, they should be about smartwatches and all the major advancements going on in technology.

As Randy Brandoff moderated the panel, addressing such issues as the future of the watch industry for collectors, what future technological functions make sense for wristwear and Swiss watch manufacturers pursuing their own smartwatches, panelists made predictions and gave insights that will make many watch, technology and luxury industry people “wait and see” over the next few months as smartwatches set the stage for the evolution of how people tell time.

Click the link to watch the video of the roundtable for quotes by Milton Pedraza, CEO of Luxury Institute: The Watch Collectors’ Roundtable – Will Smart Watches Disrupt the Swiss Watch Industry?

To learn more about the Roundtable at http://smartwatches.lmrpr.com or contact The Lilian Raji Agency at lilianraji@lmrpr.com or (646) 789-4427.

July 10, 2015

Tesla Hires Ex-Burberry Executive to Lead North American Sales

Bloomberg Business
By: Dana Hull
July 10, 2015

Tesla Motors Inc. has hired former Burberry senior vice president Ganesh Srivats, adding a sales executive to help the electric-car maker extend its reputation for automotive luxury to an increasingly global audience.
Srivats, whose position as vice president for North American sales was confirmed Thursday by the company, will help Tesla deepen its already formidable brand into a premium lifestyle experience to go with its high-tech image, taking a cue from the kind of marketing BMW, Porsche and Ferrari have done.

“This makes all the sense in the world,” said Scott Galloway, a professor of marketing at New York University’s Stern School of Business, in a phone interview. “Tesla is not an automobile company, it’s a luxury company.”
Srivats joins the automaker from a British fashion house known for its heritage plaid cashmere scarf and trench coats as well as digital savvy. Apple Inc. hired former Burberry Group Plc Chief Executive Officer Angela Ahrendts as head of its retail operations in 2013.

The new Tesla executive held strategy and retail posts for Burberry starting in 2009 and most recently was senior vice president for retail in the Americas, according to his LinkedIn profile.

The North American sales job is a newly filled position for Tesla. The Palo Alto, California-based company said in March that it was reassigning Jerome Guillen, who was vice president of global sales and service, to a role focused on delivery and long-term customer care and would hire new executives to lead the sales operations by region.

Sales Target

Tesla plans to introduce its Model X SUV late in this quarter and says it will sell 55,000 vehicles worldwide this year. The automaker ended the first half with 21,552, about 40 percent of the target.
Tesla doesn’t have dealerships and sells its products directly to consumers via stores and galleries. It doesn’t pay for traditional advertising and relies heavily on free media and word-of-mouth among its customers, many of them tech-savvy early adopters.

“Srivats absolutely brings a client-centric approach to doing business,” said Milton Padraza, chief executive officer of the Luxury Institute, in a phone interview. “It’s about long-term relationships, not a transaction. Burberry is the master of client relationships.”

Digital Innovation

Burberry was one of the first luxury brands to embrace digital innovation, from live-streaming runway shows to launching on Periscope. The London-based company has had a makeover in the past five years, moving from conservative high-end fashion to haute couture, said Ken Harris, managing partner at Cadent Consulting Group in Chicago, which advises consumer and retail companies.

“If Tesla is thinking that they are selling a lifestyle and a way of thinking, then someone from Burberry could be the right choice,” Harris said in a phone interview. “Burberry gets lifestyle.”
The 159-year-old company with a “distinctly British attitude” has more than 4 million followers on Twitter and is led by Christopher Bailey, a 44-year-old designer who had been the company’s chief creative officer.

High-end automakers like to push expensive clothing and accessories to boost revenue and deepen their relationships with affluent customers. Besides T-shirts and messenger bags, Tesla has the Tesla Design Collection, which includes a $300 tote bag, $100 sheepskin leather driving gloves and a $40 iPhone sleeve.

Similarly, Porsche sells watches, luggage and other accessories under the Porsche Design brand. Ferrari also offers clothing, shoes and even a cigar box under its brand name. BMW and its Mini brand also sell pricey accouterments.

Source: http://www.bloomberg.com/news/articles/2015-07-10/tesla-hires-ex-burberry-executive-to-lead-north-american-sales

June 30, 2015

Online shopping? Wealthy still like going to store

Bloomberg News
June 29, 2015

Luxury Institute surveyed 1,600 wealthy people about shopping habits. They earn at least $150,000 a year with an average net worth of $2.9 million.

NEW YORK — Even as shoppers flock to the Internet to get the skinny on everything they want to buy, many wealthy patrons still prefer the traditional method. They want to go to shops, peruse the racks, and have a salesperson help them pick out the perfect item, according to a new survey.

Research and advisory firm the Luxury Institute surveyed 1,600 wealthy people about their shopping habits. The men and women earn at least $150,000 a year and boast an average net worth of $2.9 million. The study found that very few affluent shoppers research exactly what they want to buy, then go out and make the purchase. Instead, they’d rather walk around a store and see things up close. Plus, many insist on guidance from living, breathing humans.

“Luxury experts and luxury executives have bought into the myth that, whether its millennials or men or women, they’ve done so much research on the Internet that they can no longer be influenced in the store,” says Milton Pedraza, chief executive of the Luxury Institute. “This demonstrates the tremendous opportunity to create relationships based on expertise, trust, and generosity in the store.”

For instance, when buying jewelry, nearly half of women don’t do any research whatsoever before heading to the store, preferring to gaze at all the shiny baubles in glass cases and make their decisions on the spot. This number’s even higher when it comes to fashion accessories, with 60 per cent of women opting to forego online research before snagging a pricey handbag.

The only exceptions are men who want to buy a watch, with 28 per cent selecting the item beforehand, and women who are purchasing beauty products, at 26 per cent. That’s because buyers of pricey watches are often aficionados wholly familiar with the world of fancy timepieces, while makeup purchases usually occur to replenish items that were used up.

Though visiting stores without help is the most popular method of researching what to buy, many affluent shoppers prefer the guided path, with aid from a salesperson. Men especially want help picking out watches and jewelry, while women are most likely to want an associate’s expertise on beauty products. Perhaps those workers behind the counter may stay relevant after all.

As for salespeople, the perpetual quest to “sell” the customer is a model that no longer works, says Pedraza. Shoppers go to them for knowledge and guidance, not having products shoved in their faces. For this, luxury retailers must train workers to build real, human relationships over time.

“If you earn their trust, you earn the right to contact them again,” he says.

Source: http://www.thestar.com/business/2015/06/29/online-shopping-wealthy-still-like-going-to-store.html

 

June 24, 2015

7 Insights Into Today’s Jewelry Shoppers

JCK Magazine
By: Rob Bates
June 23, 2015

Even shoppers used to shopping online can be turned into loyal brick-and-mortar customers with the right experience, according to a new survey of high-income shoppers from the Luxury Institute.

Milton Pedraza, CEO of the Luxury Institute, says that retailers today need to focus on building relationships—both on- and offline. His survey quizzed consumers with an average income of $289,000, and $2.9 million average net worth.

Among its findings:

—Women still prefer to browse for jewelry at stores.

Forty-nine percent of female respondents prefer to shop in store before deciding what jewelry to buy, and are more likely to enter stores without a sense of what they want or looking online.

“Woman are still very open to having an experience,” says Pedraza. “Jewelry isn’t a commodity product. Jewelry and watches are more experiential than other luxury goods. Consumers may research online but they still want to experience your store. They place great value in the discovery process.

—That’s less true for men.

By contrast, only 21 percent of men relied primarily on in-store shopping to make a decision. Twenty-eight percent of watch-buying men said they entered stores knowing precisely what to buy. Still, 37 percent of men wanted assistance from sales staff for jewelry purchases; 33 percent felt the same way about watches. But 38 percent preferred to get the information online.

“Most men don’t enjoy the experience of buying in a jewelry store,” says Pedraza. “They are more tightly focused and less willing to change. Though that is mostly older men; I’d say young men are more likely to change their mind. Of course those are stereotypes but they are still valid.”

—The in-store experience is more critical than ever.

“Customers enjoy the in-store experience, but we have so many retailers that are drone-like and similar,” he says. “Retailers have to be Disney. A long time ago there were just amusement parks and then Disney reinvented them. Luxury retailers have to reinvent themselves.”

That means stocking unique products and upgrading your associates, plus trying to make your store look and seem different. He points to Warby Parker’s innovative new eyeglass shops, whose sales per square foot now rival Tiffany’s, as an example.

—A key part of your store experience: Your store associates.

One quarter of women shoppers say they want a sales associate to help them purchase. But the quality of the associate makes the difference, Pedraza says.

“The industry is hiring people as opposed to selecting people,” he says. “We need to help associates to build skills, and compensate them for the long-term. I was talking to someone and he was complaining his people leave. I said of course they leave, they don’t feel respected, they don’t feel they are valued. If you pay a little extra you can have them really engage with customers and help build the brand.”

—Customers want great service, regardless of channel.

“You can’t stop people from going online,” he says. “It’s all about building relationships, no matter what the channel is. It’s making people feel special. You can create wonderful long distance relationships with online shoppers, the same way we do in our personal lives.”

—There are no “tricks” to servicing Millennails.

“We say millennials are so different,” Pedraza says. “But increasingly they are the same, especially as they get into their 30s, and they have kids and aging parents.

“So it’s not as much about treating millenials differently,” he adds. “It’s about treating them as individuals. It’s about digging deep. I always ask millennials if they want sales associates to help them and they do. But they mostly see them as unprepared and not trustworthy.”

—Price is not the most important factor.

“There is still a tremendous opportunity not to sell on discount,” Pedraza says, “but to sell on value, craftsmanship, design, a story, and the engagement with another human being. All of those elements are not about price. There is still a tremendous opportunity for stores to really forge relationships with consumers.”

Source: http://www.jckonline.com/2015/06/23/7-insights-todays-jewelry-shoppers

June 11, 2015

Hotels Offer Luxury Shopping Inside Your Rooms

The New York Times
By: Shivani Vora
June 10, 2015

Luxury hotels are increasingly partnering with high-end retailers to give guests insider shopping experiences and perks. Many of these collaborations are at properties in New York.

The Mark Hotel on Manhattan’s Upper East Side has teamed with Bergdorf Goodman: Guests are ferried to and from the Fifth Avenue store in pedicabs and have access to shop before and after hours with Bergdorf’s director of shopping. Those staying in a suite receive a $500 gift card and a facial in the store’s beauty department. Rooms from $725, suites from $1,200.

The Quin in Midtown is also working with Bergdorf’s. The phones in each of the hotel’s 208 rooms have a direct-dial button to the store’s personal shopping team, which can set up appointments for a store visit and can order items to be delivered to guests. Terrace suite guests also receive a $300 gift card. Rooms from $499, suites from $2,000.

Travelers who stay three or more nights in a suite at the WestHouse in Midtown receive a $500 gift card to the online fashion retailer Net-a-Porter and can talk with the company’s personal shoppers by pushing a button on in-room phones. Suites from $999.

The St. Regis Washington, D.C. offers guests an opportunity to stock their room closets ahead of time with items from Neiman Marcus. Those interested answer a questionnaire about their style preferences and arrive to a find a customized wardrobe. The service is free, and guests can try on the clothes. There is no obligation to buy them unless the clothes are worn. Rooms from $395.

International hotels are also participating: Travelers staying a minimum of five nights in a suite at the Madinat Jumeirah in Dubai until the end of July receive a free pair of shoes from Harvey Nichols as well as a pedicure. Suites from $800.

These relationships are a way for stores to generate traffic and also appeal to travelers, according to Milton Pedraza, the founder of the New York-based luxury research and consulting firm the Luxury Institute. “Retailers and hotels assume that if you’re staying at a pricey property, you have the means and inclination to shop, and these partnerships give you an incentive to do that with a specific name,” he said.

Source: http://www.nytimes.com/2015/06/10/travel/hotels-offer-luxury-shopping-inside-your-rooms.html?_r=0

June 3, 2015

7 Rules for Peak Performance in Luxury Client Relationships

Posted in Uncategorized

Luxury Institute
By: Milton Pedraza, CEO of Luxury Institute, LLC
June 2, 2015

Through the first five months of 2015, luxury firms have reported operating results and issued forecasts for the remainder of the year that look dismal for the most part. Global economic growth has been underwhelming but it is certainly not the only culprit for disappointing performance. The luxury industry is also rife with self-inflicted wounds. Many brands cling to outdated management practices that prevent transformation of sales channels from low-loyalty transactions into centers of humanistic, high-performance relationship building. My experience advising executives at hundreds of luxury brands over the decade is that poorly performing firms fail to follow a set of true best practices for building better client relationships consistently, correctly, or at all. Those who have made the successful transformation from transactions to relationships have fundamentally changed the way that they approach their business in several key areas. Based on our successful Luxcelerate High Performance Client Relationships System, here are seven rules for changing the way you manage and measure your business if you want to create more loyal, meaningful, and profitable customer relationships.

 Rule #1: From Corporate Functions to Client Relationship Systems

Luxury brands are broken, literally. Despite all the omni-channel chatter you hear today, brands are broken up into departments and functions more fit for the factories and universities of the industrial era than fashion and luxury retailers of the digital age. Managers build fiefdoms at the expense of client loyalty and the company’s bottom line. All too often, executives from marketing, communications, retail operations and e-commerce fail to work together to deliver a coherent and optimized client experience. Instead they produce a dysfunctional set of activities. The solution is creating a mind-set of systems-thinking that recognizes how all parts and people in a company are organically interconnected and affect each other profoundly. To align competing interests, you can place all the silos that touch the client under one client relationship executive, and base compensation at all levels on achievement of relationship targets such as client data collection, conversion, recovery, retention, and referral rates.  A system cannot be divided artificially into independent parts and be effective, any more than a human body can be split into its parts, and still function.

Rule #2: From Competitive Benchmarking to Competitive Breakthroughs

Benchmarking is the process of comparing business processes and performance metrics to those of the best practitioners. Benchmarking has a small role to play in luxury; however, complex situations that involve creativity and human behavior call more for differentiation and efficiency than trying to emulate an imperfect comparison. Who did Apple benchmark in inventing retail stores, or the Apple Genius concept, or the iPhone? Who did Net-a-Porter benchmark when they invented edited luxury online shopping? One reason that the luxury industry is stalling is a lack of breakthrough innovation. The result has been the rapid commoditization of the industry. If you want your luxury brand to be highly valuable and profitable you need to move beyond benchmarking. Luxury brands need to go from continuous improvement to discontinuous improvement, which demands breaking the rules through innovation. If you are playing the benchmarking game your brand is destined to become a race-to-the-bottom commodity.

Rule #3: From Top-Down Leadership to Front-Line Empowerment

Most luxury executives believe that their job is to create a vision, communicate it, and convince their followers to execute it. If you work at a luxury brand, you need no examples to prove this; just step outside of your cubicle. The successful 21st century luxury leader knows how to engage and empower people to apply their talents and passions towards a worthy goal and recognizes that strong human relationships harness collective wisdom and innate genius to adapt and shape the future. Designing a client culture requires that leaders relax into success, and trust people profusely to adapt continuously. It is an imperfect process, but it works. Three leaders today who exemplify the best of luxury are Angela Ahrendts at Burberry (now at Apple), Natalie Massenet at Net-a-Porter (now at Yoox), and Marco Bizzarri at Bottega Veneta (now at Gucci). We could all do well to emulate these leaders in their capacity to trust front-line colleagues to achieve outstanding results, and provide them with the resources to do it.

Rule #4: From Big Data to Actionable Wisdom

Omni-channel client relationships are the coolest thing around now and they are fed by Big Data. Despite Big Data, Luxury Marketing campaign response rates have hardly moved from microscopic levels over the past decade, and offline client conversion and retention rates are stalled in the low teens. The problem is that Big Data is rarely transformed into actionable wisdom. Data is not information, information is not knowledge, and knowledge is not understanding, nor is understanding wisdom. Wisdom remains the domain of humans. Injecting human wisdom, and empowering your store and call center associates to use their judgment, along with data, to create appropriate one-to-one client communications might not be as sexy as developing an algorithm, or pushing a mass campaign button, but it can be far more effective in building client relationships. By leveraging Big Data with wisdom, one sales or call center associate, and client, at a time, luxury can finally go from doing the wrong thing right, to finally doing the right thing right.  

Rule #5: From Aggressive Selling to Genuine Human Relationships

With sincere love to Daniel Pink, author of “To Sell is Human,” whom I believe to be one of the most enlightened researchers on organizations, I completely disagree with the title and premise of his book. “Selling” even in its most well intentioned versions, is not human. As practiced today, selling reduces associates to being clerks ringing up transactions instead of brand ambassadors building long-term relationships. Selling is one key reason luxury brands, with their robotic “sales ceremony” concept, are so poor at client conversion and retention, never mind referrals. Thankfully, humans are wired to build relationships in order to survive and thrive. For the most part, we love the process. It does not require a game-face or pretension to execute. In Luxury Institute surveys over the past decade, consumers across all generations have repeatedly told us that they want three major over-arching qualities in a sales associate: expertise, trustworthiness and generosity. Without these, even a parent-child relationship falters. Let the mass brands do what they will, but luxury brands should immediately discard the aggressive selling playbook, and embrace the art and science of high-performance client relationship building, where value is created not from transactions, but from consistently and continuously outperforming and outbehaving the competition. Creating clearly measurable functional and emotional mutual value through a relationship is inherently imperfect, but alternative forms of selling are surely dead. 

Rule #6: From Front-Line Associate Training to Front-Line Associate Mastery

Top-tier luxury brands have instituted elaborate training programs and skyrocketing costs to prove it, but rates of client conversion and retention remain stuck in neutral. Luxury brands need direly to redefine training into education, and elevate education into mastery of building high-performance client relationships. Training is something you do to people, and people reject being trained into success, which is why all the talking-head training is ineffective. When it fails, brands keep adding more old-school training, but this only compounds the problem. It is often said that in a college classroom, the only one learning is the teacher, so part of the secret lies in transforming everyone from a trainee into a learner, and a teacher. It is also true that online education, when used in a humanistic and empowering way, such as is done by the Khan Academy, combined with daily one-to-one, metrics-based coaching, peer-to-peer learning techniques, and inspirational reinforcement, can make learners, teachers and relationship masters out of all your front-line associates.

Rule #7: From Front-Line Managers to Front-Line Coaches

The store manager is the spine of the luxury brand. Since 75% of the people who work in a luxury brand are front-line associates, the front-line leaders who engage them daily are critical in ensuring that employees consistently apply the brand’s relationship values and standards to drive results. How much time do store managers spend on the floor? In the more enlightened luxury brands, about 50%, and in far too many cases, they’re on the floor less than 30% of the time. That means that store managers are store administrators and back-of-house experts. Many who do spend a great deal of time on the store floor have absolutely no clue how to coach high performance client relationships. All they know is bossing and selling. Coaching is an art and a science backed by research. Coaching relationship building is a craft that requires expertise. The solutions are to hire experts to run the store operations, perhaps regionally, and to redefine the store manager job into coaching and client relationship building. The store manager should spend 90% of their time observing and coaching associates and/or engaging with top clients to develop experiences where they can bring their friends and family. Innovative, empirically-based coaching programs need to be developed to educate our armies of store managers in the art and science of coaching for client relationship building. Until that happens, expect your costs to go up while results falter because more of the same harder won’t work this time around.

Capture Opportunities With A Client-Focused Culture

Despite sluggish economic growth, the ranks of the wealthy around the world continue to grow. Luxury brands are faced with a tremendous opportunity, as the world’s wealthy people have the capacity and the desire to spend lavishly where they choose. The only companies that stand to capitalize, however, are those that approach their business from the perspective of these customers and create systems that cultivate relationships instead of simple transactions. No less than long-term survival for luxury firms depends on the ability to effect key transformations in the seven areas addressed here.

 About Milton Pedraza and Luxury Institute, LLC

Milton Pedraza is the CEO of the Luxury Institute. Over the past 12 years, Milton has established the Luxury Institute as the most trusted global luxury research provider, and the proven high performance luxury client relationships consulting firm. Known globally as the foremost resource for affluent and wealthy consumer insights and client experience best practices, the Luxury Institute has served over 1,000 global luxury goods and services brands across dozens of luxury goods and services categories.

Milton advises and coaches luxury CEOs and serves on the Boards of top-tier luxury and premium brands, and luxury startups. He is sought after worldwide for his practical, innovative and humanistic insights and recommendations on luxury and is the most quoted global luxury industry expert in leading media and publications.

Milton is also an authority on CRM Technology, Analytics and Big Data. Prior to founding the Luxury Institute, his successful career at Fortune 100 companies included executive roles at Altria, PepsiCo, Colgate, Citigroup and Wyndham Worldwide.

Milton was born in Colombia, raised in the United States, has lived in several countries, conducted business in over 100 countries, and speaks several languages.

 

For more information please contact:

CEO, Milton Pedraza

Luxury Institute, LLC

115 East 57th Street, 11th Floor

New York, NY 10022

mpedraza@luxuryinstitute.com

 

 

April 28, 2015

Luxury Panel: What Millennials Want

Previews Inside Out
Topic: Life & Style
April 27, 2015

When you hear the words “affluent millennial,” do you picture a 30-something tech mogul buying a trophy home in the hills of LA? Or a hashtag-happy celebrity starting a lifestyle brand? Clichés aside, millennials—more than 74 million adults ages 18 to 34 in the U.S.—are changing the luxury landscape as we know it. For our “Luxury: The Next Generation” issue, we decided to go straight to the experts—the Luxury Institute’s Milton Pedraza, Luxury Daily editor Mickey Alam Khan and Forbes’ millennial reporter Larissa Faw—to find out what this increasingly influential group really wants when it comes to luxury.

Previews Inside Out: What does the next generation of luxury consumers want from brands today?

Milton Pedraza: Across the generations, millennials, Gen Xers and boomers all want the best in design, quality and craftsmanship, along with great service.

Mickey Alam Khan: The next generation of luxury consumers want to build stronger emotional connections with brands. They not only want to experience the products in-store, but also via digital media such as online and mobile. They also want to feel good about their luxury acquisitions from an ecological standpoint. In other words, the next generation of luxury consumers want to see authenticity, digital savvy and environmental nobility from their favorite luxury brands.

Larissa Faw: The key words are “make them feel special.” They want to be the only ones able to experience that product or opportunity. The worst thing in the world is to be mass and beige. Everywhere and generic. Coach got itself into trouble because it opened up an outlet shop in every city. It became overly accessible to everyone. The worst thing for luxury buyers is when some downscale shopper has the same item. That is the kiss of death for affluent shoppers. That brand is no longer luxury.

Milton Pedraza: Hey, and also respect brand heritage! But only as long as the brand stays relevant to them.

Previews Inside Out: There was a recent survey published in Luxury Daily that found the majority of affluent consumers have a different definition of luxury than they did five years ago. What do you think the definition of luxury is today?

Mickey Alam Khan: One of the biggest changes in the last few years has been the shift in the luxury-consumption mindset from “I have” to “I experience.” So it’s gone from simply material acquisition to a collection of exquisite memories to be cherished for a long time from unique experiences. That said, as defined by Luxury Daily, luxury must have these time-proven qualities: exceptional craftsmanship and customer service, brand authenticity, limited distribution and high perceived value. That hasn’t changed.

Larissa Faw: Once upon a time, luxury meant price. You almost just knew something was a luxury product because it was insanely expensive. Now, luxury means exclusivity and authenticity. One-of-a-kind items that come from a true place. A product can be $5, but if it is the only one and rare, that is luxury.

Milton Pedraza: Today’s luxury consumers also demand demonstrated expertise, trustworthiness and generosity from the brand ambassadors. These days, they also prefer a brand with a social conscience that treats associates, clients, suppliers and the less fortunate in society like human beings. Along with the best product, that is what creates an extraordinary experience for most.

Previews Inside Out: Do you think millennials are partly responsible for this shift? How so?

Mickey Alam Khan: Yes, the millennial generation is quite responsible for the shift in luxury’s definition. This generation is digitally savvy and is responsible for the evolving approach in marketing and retailing. Presence on social media enables brands to stay connected with their younger customers and prospects, dialoguing with them in the lingua franca of the day.

Milton Pedraza: Yes, the millennials, with their more humanistic values, are influencing the business world to deliver extraordinary product innovations, but also extraordinary human empowerment with kindness.

Larissa Faw It is great that millennials have moved beyond the materialistic nature of what has been considered luxury. Many traits that typically define luxury—like fawning treatment or rich, indulgent services—are no longer acceptable or cool. Can you imagine being served by someone wearing a uniform and white gloves? I shudder at the thought.

Previews Inside Out: Beyond that, how are millennials transforming the luxury industry?

Milton Pedraza: They tend to take the design, quality, and craftsmanship and service for granted. They want customized, personalized solutions “now, now.” As Four Seasons says, “Show me you know me.”

Mickey Alam Khan: Four words would reflect the transformation in the luxury business: high touch, high tech. Millennials want that kind of experience with their brand, and so do Gen Xers and, to some extent, digitally savvy baby boomers. Luxury brands are being shepherded along a digital path where online and mobile are the start of the research process that may or may not culminate in a store sale.

Larissa Faw: They are making everyone rethink what it means to be a luxury brand. Just because you charge $5,000 for a bag does not mean you are luxury. Just because you operate a nice hotel does not mean you appeal to affluent millennials. What was once considered top-flight treatment—like that white glove treatment—does not necessarily align with younger generations. This presents opportunity, but it is also challenging, because what once worked, no longer does. You don’t earn five stars by doing what you did for decades. That said, I also think millennials take for granted a lot of what is known as luxury. Like top-sourced leather goods. They expect all brands, even discount ones, to offer that. They expect great service, like immediately tending to their demands. Those services used to separate luxury brands from regular ones.

Mickey Alam Khan: Also, for many young people, it’s not simply about flashy identification with a lifestyle or a product, but a reflection of their values. Hence, the importance of storytelling and codes for luxury brand and luxury retailers to get their message across.

Previews Inside Out: Let’s talk more about this push toward authenticity in luxury, which is an important value for many millennials. In what areas of the marketplace have you seen authenticity play out most dramatically?

Milton Pedraza: They require authenticity across the board. But let’s face it—many product offerings are copycats and commodities, even in some luxury circles. So the authenticity is more about the founders, the brand purpose, the brand ambassadors and “how” they do what they do.

Mickey Alam Khan: I’d say authenticity continues to play a key role in leather goods and accessories. Look at Hermès. While other luxury brands such as Gucci are suffering from logo fatigue and endless line extensions, Hermès continues to post above-industry growth. What does Hermès do differently that attracts all generations to its brand? Attention to quality, to its codes, to its heritage, to its line of products. Its messaging is consistent. The equestrian and travel themes are embedded in most ads. And, most of all, the product standards have been maintained over the decades. Hermès is France at its best, and that’s what millennials and other consumers are buying. Pedigree continues to matter to millennials.

Larissa Faw: Fashion and watch brands are really overplaying their histories and design backstories in order to capture that authentic hook. Upscale alcohol brands are also trying too hard. I don’t need to see another old-timer posing with his dog on a farm to tell me a brand is authentic—and that this makes it okay to charge $300, since it has been aged in a barrel for 100 years. This authenticity does matter to millennials, but I see it becoming too commonplace.

Previews Inside Out: Can you identify any luxury brands you think are already starting to make this adjustment in their marketing? You know—moving away from exclusivity to authenticity.

Mickey Alam Khan: Well, let me just point out that exclusivity and authenticity can’t be mutually exclusive. You have to have both to survive long term as a luxury brand.

Milton Pedraza: Bottega Veneta is a prime example of expertise, trust and generosity with all constituents. And they have the numbers to prove it. Burberry is there, too. We see Van Cleef & Arpels moving in that direction. Sephora, too.

Previews Inside Out: Why are some of the top luxury brands a bit stalled today?

Milton Pedraza: Their products are too common, too logoed, and they have disengaged brand ambassadors. So the customers become disengaged, too. The brands have become passive transactors rather than humanistic relationship builders.

Mickey Alam Khan: Gucci comes to mind for me. It’s had some turbulence over senior talent most recently with the departure of the CEO and creative director. While the successors are in place, what Gucci needs to do is rethink its positioning. It’s become rather common, which is the kiss of death for a luxury brand. If too many people have access to the product, it loses its allure. I foresee something similar with Louis Vuitton. Way too many people sport its handbags, thus diluting its exclusivity. It’ll end up catering mostly to aspirational consumers and risk alienating those with serious money. It pays to be slightly discrete in luxury. I know Louis Vuitton is working to scale back on plastering its logo everywhere. The wink-and-nod in luxury should be the styling that those in the know are aware of.

Larissa Faw: Millennials are like cats. If you try too hard, they don’t want anything to do with you. I know Honda isn’t a luxury brand, but its recent commercials featuring top toys from the 80s—like Strawberry Shortcake and Skeletor from He-Man—speaking to the camera to try to sell me a car were pathetic in how hard they were trying to appeal to millennials. My mom had no idea who that skeleton-looking toy was, since these toys were totally millennial-centric, but both my sister and I knew immediately. No one likes a desperate brand that is obvious with its advertising. Pretentiousness is another reason brands are toxic to millennials. Jewelry brands that continue to embrace that silly fairy-tale engagement proposal turn off a lot of millennials. That isn’t how our world looks, and we don’t want any part of it.

Previews Inside Out: When you look at the luxury market as a whole—travel, auto companies, fashion, jewelry—where are you seeing the most innovation when it comes to imparting authentic experiences?

Larissa Faw: I recently saw an ad for a jewelry brand that lets people create their own rings. That is exactly what it takes to reach millennials. Who wants a ring that his or her nemesis in high school might have? Everyone wants to brag he or she has the only one of something. Any company that is able to develop customized and personalized experiences will win them over.

Milton Pedraza: Electronics are the obvious answer. But since technology is invading every space, we see autos, apparel, accessories and really all luxury categories using technology online, in-store and after the sales to enhance the client experience and build a long-term relationship. The most interesting innovations, however, will come from empowering and enhancing the brand ambassadors to build human relationships with their clients. No algorithm can replace a powerful and kind human relationship.

Mickey Alam Khan: There is digital innovation across luxury sectors. Some of it is consumer-led, and some of it brand-driven. Travel and hospitality is a leader in the space. The sites, apps and social media are nonpareil—as are the unique culinary experiences, meet-and-greets with famous chefs and tours in the vicinity of hotel properties that respect the land and traditions. Fashion is also a leader in authenticity. See the abundance of live streams of runway shows that deliver the live experience to the desktop, lap or palm.

Previews Inside Out: In terms of real estate, where do you think the industry needs to move in order to cater to more affluent millennials?

Larissa Faw: Good question. The industry needs to make them feel special, by offering services that understand their life stage. For instance, maybe arrange for Uber accounts so they can have private car services. I recommend taking a page from luxury hotel brands and how they cater to them with dry cleaning, maid services, food delivery. If you come at millennials with the mindset to make them feel special, you can’t go wrong.

Mickey Alam Khan: I’d say real estate needs more digital moxie. Not just PC sites or mobile-friendly versions, but better social media and app executions. Younger luxury consumers are researching on tablets and smartphones, and real estate’s presence on those devices can be improved.

Milton Pedraza: Empower the agent through technology, data and coaching to enhance the client. Real estate is not a game of bricks and mortar; it is a game of hearts and minds.

Source: http://www.previewsinsideout.com/2015/04/luxury-panel-what-millennials-want/

 

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