Luxury Institute News

October 27, 2015

Relationship building critical to luxury retail: Luxury Institute CEO

Luxury Daily
October 27, 2015
By: Sarah Jones

LONDON – The human element is going to be the top differentiator among luxury brands going forward, according to the CEO of Luxury Institute at Luxury Interactive Europe 2015 on Oct. 26.

As consumers increasingly experience the world through screens, they will come to crave the now-rare human connection. Here is where luxury brands can help themselves stand apart by outperforming their peers at relationship building and delivering a worthwhile personal touch.

“As consumers are more sophisticated, and as products become more commoditized, it’s the delivery of an optimized experience across channels that is critical and that high performance client relationships are our differentiators,” said Milton Pedraza, CEO of Luxury Institute, New York.

Brand image
Brands are struggling to define themselves, especially as they bleed into more affordable price points. For instance, a representative from an Italian jeweler told Mr. Pedraza that his brand does not know its own identity anymore, after a move down market left it straddling premium and exclusive.

Luxury Institute client Nordstrom now makes half of its sales via outlet stores. Recognizing that the customer retains a level of mystery, Nordstrom similarly remains ambiguous. Despite this non-specific label, the retailer still scores first in customer service in surveys conducted by the consultancy.

Nordstrom Anniversary Sale
Nordstrom heavily promotes its anniversary sale on social media

Consumers are becoming more sophisticated, and brands need to optimize their user experience for their requirements.

Across channels, brands in the luxury space are struggling to connect the dots between policy, procedure and system to deliver a rewarding customer experience.

While 37 percent of men and 49 percent of women find browsing without help from a store associate to be most effective, this does not remove a brand’s place in the process. For brands to guide consumers’ exploration, they should include signage in an on-brand way or have store associates communicate with the shopper to help them find what they are looking for.

Valentino Rome store women
Valentino store in Rome

Even in the digital space, which tends to be thought of as a do-it-yourself shopping channel, the human element cannot be entirely removed. Walmart might be able to automate and take out that the personal interaction from the buying experience, but for luxury brands, the relationship is everything. It is especially important to invest in this personal approach for top tier clients.

Therefore, sales associates should be taught interpersonal skills, such as trustworthiness. While often thought of as innate, these can be learned. Ensuring that all associates are pulling their weight will also help to retain top frontline employees over time.

For best practices, Mr. Pedraza suggests looking outside of the luxury industry rather than studying peers. Those that excel at relationship building are within the military, medicine and airline industries. For instance, brands can look to the military, which has developed successful methods of empowering soldiers, to gain insights on store associate education and guidance.

Making a connection
Mr. Pedraza asked each of the tables to discuss what changes they would make to their organizational structure, front line associates and compensation to help foster strong client relationships.

Ideas from around the room included rotating employees within roles to develop empathy, looking at the company from the consumer’s perspective and empowering sales associates with access to technology and a CRM system. Other suggestions included new roles, such as a customer information officer, which would span sales and marketing.

After hearing from the room, Mr. Pedraza shared his suggestions. These include empowering employees by shifting the organizational structure from a top-down management style to one where individuals are self-managed.

Milton Lux Int Europe
Milton Pedraza

On the same note, employees should be educated rather than trained, with the focus on ideas for creative relationship building rather than delving out a strict formula to follow.

Associates should be compensated for their actions, such as messages sent and appointments booked, rather than their sales results.

Brands should also make sure that each and every member of their team fits the culture. For many companies, this would mean eliminating employees who do not want to talk to anyone.

In addition, brands should ensure that the technology they are providing their staff with is up-to-date. Ineffective systems are often a dealbreaker for associates, particularly younger employees, and they will take their talent elsewhere.

While technology can help to deliver a high-touch experience to consumers, data and automation cannot replicate the level of engagement that a salesperson can create with shoppers, according to an executive from Moda Operandi at Luxury Interactive 2015 on Oct. 13.

Moda Operandi employs stylists, who work with its most valued consumers to provide personalized recommendations and one-to-one communications, but the process being used to deliver this service was tedious. Keeping the same human touch business model, Moda Operandi built a new platform to help its stylists deliver more relevant, visually appealing messages to the most important customers (see story).

“The key is that we’ve created these great channels, but we haven’t connected the dots,” Mr. Pedraza said. “And that I think is the critical issue.

“It’s not that we’re not innovating in each of those channels. It’s that we have not connected the dots to the point where, for example, a sales associate is empowered and inspired and maybe incentivized to send the client online,” he said. “Or that when the client buys online, the sales associate reaches out with a thank you card and a follow-up.

“We haven’t figured out those little basics that really create realtionships. Today we are very digital, very technical, we’ve disempowered the people in the stores, is one of my premises. We haven’t connected the dots, as simple as they are to connect, whether it’s technologically or humanistically, we haven’t figured out the policies, the procedures, the systems yet.”


October 22, 2015

Tesla, Musk shine from free celebrity marketing, but will it last?

Automotive News
October 22, 2015

SAN FRANCISCO (Bloomberg) — When “The Late Show With Stephen Colbert” debuted on CBS last month, the host chose Tesla CEO Elon Musk as one of his first guests.

Colbert, who commutes into Manhattan in a Model S sedan, took his enthusiasm for Tesla Motors Inc. one step further in an episode last week. He spoke for almost six minutes about his car’s latest autopilot features, the march toward self-driving vehicles and efforts by competitors Apple, Google and Uber.

“I love my Tesla — it’s so fast, it’s all electric,” he told viewers. Comparing his car to a laptop computer on wheels, he said that with the company’s latest over-the-air software update, “Tesla owners woke up to find their cars could drive themselves.”

That glowing Colbert report shows how Tesla benefits from celebrity enthusiasm — for free, from customers that include Oprah Winfrey — to promote the brand. Throw in some viral Internet clips, test drives and customer referral programs, and Tesla is able to spend money on developing products instead of on marketing. In stark contrast to other automakers, Tesla doesn’t currently pay for traditional media such as television, radio or print advertising or celebrity sponsors.

“The Colbert segment was amazing because it was so long, it was Colbert, it was Colbert’s new show and instead of being playfully sarcastic he was overwhelmingly positive,” said Lincoln Merrihew, senior vice president of client services for Millward Brown Digital in Boston, who first watched the Colbert clip on YouTube. “The magic of a celebrity evangelist is that they love a product so much that they will talk about it for free. It was more than a simple endorsement; it was more like a commercial.”

That air time is valuable. On average, 30-second spots on the “Late Show” will average $38,400 from Colbert’s debut through the end of the fourth quarter, according to media-cost forecaster SQAD Inc. It helps, of course, that the 44-year-old Musk is a brand and a celebrity in his own right — making him a worthy guest — as well as a deft user of social media.

Stock decline

At the moment, Tesla can use a little extra fan love. Its once high-flying stock has fallen to the low $200s from its July peak at $282 in the wake of last month’s long-awaited introduction of the company’s Model X SUV. Three analysts have cut their price targets amid concerns that Tesla, which aims to deliver at least 50,000 vehicles this year, faces a steep production ramp in the fourth quarter.

On Tuesday, the Model S lost its recommendation from Consumer Reports after owners complained about quality issues as mundane as a squeaky sunroof to major issues like the electric motor needing to be replaced, the publication said in its forthcoming December issue. The Consumer Reports news sent shares tumbling 6.6 percent to $213.03, its biggest drop since Aug. 6.

Musk has pushed back on Consumer Reports via Twitter, saying the publication’s reliability survey “includes a lot of early production cars. Already addressed in new cars.”

Fan power

The auto industry already is also legend with celebrity ads, from Matthew McConaughey’s oft-parodied commercials for Lincoln to Clint Eastwood’s two-minute “It’s Halftime in America” spot for Chrysler, a hit of the 2012 Super Bowl.

For Tesla, the celebrities do the work on their own accord, not for a paycheck. Stars such as actress Alyssa Milano, director Jon Favreau, and Teller, the silent partner in the magic duo Penn & Teller, have praised Tesla or promoted the brand to their social-media followers in an increasingly fragmented media market.

Teller’s “customer story” is one of several that can be read in full on Tesla’s website. Oprah shared photographs of her recently purchased white Model S with her millions of followers on Instagram and Twitter. Colbert talked in detail about autopilot — a Tesla product announcement — just as it came out.

“On a daily basis, Stephen brings a smart comedic voice to all types of topical issues,” said CBS in a statement. “We don’t tell him what to say, but we certainly enjoy it.”

Automotive advertising

Other automakers usually have to rely on traditional marketing. General Motors, Ford Motor Co. and Fiat Chrysler Automobiles all rank among the top 10 advertisers in the U.S. in terms of money spent, according to Advertising Age, an affiliate of Automotive News. In 2014 alone, GM spent almost $1.7 billion on advertising in the U.S., according to Kantar Media; Ford spent $841 million and Fiat Chrysler spent $1.1 billion. Those figures are just from the manufacturers and don’t include the vast millions that dealerships spend as well.

In its annual report filed earlier this year, Tesla notes that “we have been able to generate significant media coverage of our company and our vehicles, and we believe we will continue to do so.” But the Palo Alto, Calif.-based company also notes that “to further promote our brand, we may be required to change our marketing practices, which could result in substantially increased advertising expenses.”

For now at least, Tesla’s strategy is working.

“Colbert benefits from talking about Tesla, because it’s a brand that his millennial audience associates with,” Milton Pedraza, CEO of the Luxury Institute, said in an interview. “It’s a massive multiplier effect that is equivalent to spending tens of millions of dollars on media. Tesla doesn’t advertise: They are playing the game of not playing the game, and you win by that. They are doing it brilliantly.”


Women neglected by marketers despite making two-thirds of household purchases

Luxury Daily
October 22, 2015
By: Staff Reports

Brands in the apparel, personal care and footwear sectors are among the best at marketing to affluent women, according to research by Luxury Institute.

The best industries targeting affluent women through advertising and social media do not come as a surprise, but it does shine a light on the sectors that are not doing well at focusing their attentions on this demographic of wealthy consumers. Survey respondents felt that the industries doing the least to target affluent women include insurance, liquor, consumer electronics, banks and brokerages and transportation including automobiles and private jets.

Luxury Institute surveyed women ranging in age from 21-years-old to more than 65-years-old with a household income minimum of $150,000 per year. The respondent pool’s had a reported average household income of $289,000, and a $2.9 million average net worth.

A battle of the affluent sexes
When it comes to marketing to a female demographic, brands in apparel (75 percent), shampoos and conditioners (74 percent), fragrances and cosmetics (72 percent) and footwear (72 percent) unsurprisingly fared the best.

In regard to the industries that are failing at capitalizing on the purchasing power of affluent women, each had an approval rating of less than 5 percent. This approval rating has continued to fall since 2012.

Efforts put forth by automotive brands, for instance, have only impressed 6 percent of the female respondents. Although traditionally associated with a masculine culture, the auto industry should expand its marketing efforts to cater to the sentiments of its female consumers, especially those with families, by touting the safety of high-end vehicles.

On the corporate side, automakers have made strides in being more inclusive of females in general. For instance, British automaker Aston Martin looked to close the gender gap in engineering by teaming up the Royal Air Force to introduce female students to various career routes (see story).

Sectors improving outreach to female consumers include the jewelry and watch sector, which has seen the largest improvement over the past three years. Sixty-two percent of respondents felt that these brands do a good job marketing to their demographic, a 53 percent increase from 2012.

In addition, department stores are listed sixth, with 60 percent of affluent women appreciating the efforts put forth by retailers.

Lux institute.womens marketing graph
Graph provided by Luxury Institute 

Across the board, older affluent women aged 45-64 felt that brands across industries are doing well when marketing to their demographic. This response was much more likely from the older age group than it was for women 45-years-old and under.

But, 25 percent of women 21- to 44-years-old felt that the wine industry is not doing enough, or not marketing to them well enough. This propensity decreases with age, with 21 percent of 45- to 54-year-olds, 16 percent of those between the ages of 55 and 64 and 12 percent ages 65 or older approve of the wine category’s marketing efforts.

In a statement, Luxury Institute CEO Milton Pedraza said, “Married women tell us that they make two-thirds of all household purchasing decisions. Women maintain huge economic power and it is a necessity for companies to step up marketing and how they connect with affluent women regardless of industry. Research that includes speaking directly with these women about what appeals to them and what turns them off removes much of the guesswork in making marketing decisions.”


October 16, 2015

Authenticity, engagement make for stronger social media presence

Luxury Daily
October 15, 2015
By: Forrest Cardamenis

NEW YORK – Any brand can create a social media account, but using these platforms to create a natural extension of the label and leverage social clout to generate sales and loyalty is another matter, according to a speaker at Luxury Interactive 2015 on Oct. 13.

Social media has shrunk the distance between brands and consumers, but bringing these parties closer together has also destroyed traditional business/customer relationships. To be successful on social media, consumers need to be treated like equals and people, otherwise social presence could, counterproductively, push consumers to competition.

“A lot of brands think ‘We have to do this, we have to create content, we have to get out there,’” said Aliza Licht, also known as “DKNY PR Girl,” former public relations executive for DKNY. “A lot of times the need or the urgency to create content is overshadowing the importance of staying true to your brand’s DNA.”

Social engagement
Establishing your brand’s DNA is crucial to creating an authentic and admired social media presence. Brands must identify their core values and ideas and set up boundaries on what topics they will and will not get involved in online.

Tweeting and posting only about promotions and new products creates an inhuman distance from the consumer’s standpoint, but getting involved in serious sociopolitical discussions could alienate those with differing viewpoints.

DKNY Scandal tweet
DKNY PR Girl often tweeted about social happenings to build authenticity

Any active user on social media will inevitably find themselves in some sort of a crisis, but that only makes it more important to engage with consumers as equals. When communication is this direct, the traditional positioning of the brand being above the consumer no longer works, and it won’t create a network of loyal consumers and defenders when that crisis comes along.

“When you’re friends with a customer you create respect and create a situation where, when you make a mistake – and we all do – you are more easily forgiven,” Ms. Licht said.

In addition, when trying to reach international consumers, the same tricks that work in one country might not work elsewhere, so international partners are crucial in helping brands find effective ways to engage. That said, there are common denominators. People all around the world want to be heard.

dknyprgirl twitter
DKNY PR Girl twitter

In one case, Ms. Licht tweeted about the 100 percent humidity in New York on a summer day. “Of course it’s a hair-wash day,” she added. By doing so, she found a natural and enticing way for followers all over the world to share their thoughts with the weather, and retweeting replies from different countries showed that DKNY listened to global consumers.

Search functions also make it easy to “listen” on social media. Users talking negatively about a brand may not be tagging that brand in their posts, but they can easily be searched, and the findings can be used to make changes that will satisfy doubters before competitors steal them away.

As it is in everything else, self-reflection and self-criticism is crucial to creating a strong social presence. A brand should examine its output to ensure it is putting forth the best version possible of itself in terms of message and attitude.

Youth movement
With millennials growing into affluence and becoming a key market, social media presence will only grow in importance.

Social media has created a unique environment that allows for personal engagement between consumers and brands, according to the creative director of Loewe at the Condé Nast International Luxury Conference April 23.

Social media allows consumers to be involved with brands on an instant basis. The stories that can be told and the people that can be reached through modern mediums change the face of the luxury industry (see story).

The genuine and personal connection that social media lends itself to is more attractive to consumers who want more from businesses than constantly being sold to.

Consumers are split on their willingness to download luxury brand applications, but when dispersed into generations, 72 percent of millennials are inclined to download a branded app, according to a report from The Luxury Institute.

Digitization of the luxury world is slowly evolving as younger generations grow into being affluent consumers. Luxury clients differ across more than just generations, but understanding the prime and upcoming consumer can prepare marketing teams for the future (see story).

“A lot of brands still maintain that position of ‘We’re up here, you’re down here, we’ll push content to you when we feel like you need to know something, we’re not going to respond to you, but we’ll let you know what is important,’” Ms. Licht said. “I don’t agree with that approach. I think being likable and being an engaging platform makes a huge difference in growing a community.

“The anti-elitist mentality is a winning mentality,” she said.


September 14, 2015

Battle of the Bling: Nordstrom heats up Vancouver’s retail war

The Province
By: Paul Luke
September 13, 2015

Upscale merchants are going to war to push Metro Vancouver deeper into the lap of luxury.

When Nordstrom’s flagship outlet in downtown Vancouver opens its doors this Friday, it will intensify a battle of the bling between high-end department stores keen to tap the high-income spending power pulsing across the region.

The region’s surging shopping wealth has been fuelled by growth in affluent tourists, deep-pocketed immigrants from Asia and “aspirational consumers” who selectively splurge on luxury goods. The global luxury goods market will expand two to four per cent this year, according to U.S. consulting firm Bain & Co.

Metro Vancouver has been getting more than its share of that increase, says retail analyst Craig Patterson.

Toronto has more wealthy consumers than Vancouver but Vancouver’s luxury retail merchants often out-perform their Ontario counterparts. One Vancouver luxury boutique insider told Patterson that his Vancouver store routinely out-sells the same brand’s larger Toronto location.

“That holds true for a lot of luxury brands in Vancouver,” says Patterson, editor-in-chief of online publication Retail Insider.

“It is a fact of retail that Vancouver punches far above its weight. The Vancouver retail luxury pie will grow in both the number of shoppers as well as stores.”

A desire for retail luxury is about more than just an appetite for Saint Laurent Paris jeans that cost $1,070 at Nordstrom, observers say. Retail analyst David Ian Gray, founder of DIG360 Consulting, says the world of retail has been polarizing into a desire for “utility or delight.”

Utility means cheap prices and easy shopping at dollar stores or online retail sites.

At the “delightful” end of the spectrum is careful service in an attractive retail environment, he says. Gray’s argument is supported by findings from research firm Luxury Institute, which reported that 47 per cent of luxury consumers say customer services defines an upscale brand.

Few affluent shoppers do online research before going out to make on-the-spot purchases, according to the institute. But they also want informed guidance from staff before deciding to buy.

One of Nordstrom’s strengths is the money it invests in ensuring that customers of all incomes are well cared for, Gray says.

“All of the processes Nordstrom has built converge on creating the ability for their people to offer great service,” he says. “Their product knowledge is outstanding.”

Battle-hardened retailers in the U.S. and Europe are used to scrapping for upscale consumers but the intensity of the retail fight will be new to Vancouver, Gray says.

Nordstrom co-president Erik Nordstrom says Nordstrom’s product range will overlap with those of Hudson’s Bay and Holt Renfrew. But Nordstrom’s range of prices is greater than any of its competitors, according to Nordstrom.

Jolt Jeans at Nordstrom cost a modest $58. Watches start at $26 and range up to $5,000 for a Montblanc time piece.

The Vancouver store that bears his family name should by no means be called a luxury retailer, Nordstrom insists.

“Luxury implies exclusivity,” Nordstrom says. “We want to be an inclusive store.”

Nordstrom’s arrival in Vancouver has prompted rivals Holt Renfrew and Hudson’s Bay to expand their stores, renovate and introduce new lines of merchandise, experts say.

Hudson’s Bay already offers Nordstrom-like service in its luxury womenswear department “The Room,” which is located on the second floor of its downtown store, Patterson says. But there’s room for improvement in the store as a whole, he says.

“If Hudson’s Bay wants to keep up with Nordstrom and an expanded Holt Renfrew, it will need to hire more staff and ensure they are motivated enough to provide customer service comparable to the competition,” Patterson says.

Despite local consumers’ robust appetite for luxury, the number of glitz merchants washing into Metro may bring too many high-end stores, making the retail dogfight even more ferocious, observers say.

“We will be a little over-supplied and that means people will be slugging it out,” Gray says.

“There are only so many dollars to go around. Nordstrom, by definition, will have to take from the others. It’s not like there’s unmet demand with money sitting there waiting to be spent.”

But Nordstrom isn’t the only new luxury kid on the block. Several high-end brands opened their doors in July at the McArthurGlen designer outlet centre in Richmond.

Hudson’s Bay-owned luxury merchant Saks is expected to land in Vancouver in the near future — and Saks will compete nose to nose with Holt Renfrew, analysts say.

Not to be overlooked is the swelling high-end retail parade centred on Vancouver’s Alberni Street — what Patterson calls “the luxury zone.” Among the brands Patterson says are coming to the luxury zone over the next few months are Brunello Cucinelli, Moncler, Versace, Stefano Ricci, Prada, Jaeger-LeCoultre, Lao Feng Xiang and Strellson.

“It’s not just the department stores. It’s all the boutiques, the chains, the global luxury brands with their own stores ­— you’ve got to throw it all into mix,” says Gray of the luxury retail onslaught.

“There is a sense that Vancouver is a location where you want to have your luxury brand, whether or not it’s a rational economic decision. You don’t want to be seen as the one who has been left behind. Vancouver has become a focal point of luxury.”

And in the case of luxuries, retailers don’t need to sell many of their highest end products to have a good year, Gray says.

Darren Dahl, a marketing professor at University of B.C., says department stores and boutiques can’t afford to rely just on purely affluent shoppers.

They also need aspirational consumers, the mid-tier or mainstream shoppers who sacrifice and scrimp so they can enjoy the perceived status of owning a certain luxury good.

These opulence aspirants, however, may not immediately know how much luxury they can afford — and that’s where good service comes in. “There is a luxury pyramid and a store will give you an opportunity to figure out where you fit,” he says.

The democratizing of retail means these occasional luxury buyers may shop in Holt Renfrew one day and Wal-Mart or Costco the next, Dahl says.

There is another a group of affluent B.C. residents who will never set foot in a Nordstrom or a Holt Renfrew. These are the folks who prefer quiet wealth, rejecting the notion of flaunted affluence, Dahl says.

Unlike Target, whose Canadian venture burned out when it opened too many stores too quickly, Nordstrom is carefully opening one store at a time in Canada. But it won’t be a slam dunk for Nordstrom, analysts say.

If Nordstrom disappoints or is unable to create manageable expectations, “the buzz” among consumers could quickly turn against it, Gray says.

Even in bling-hungry Vancouver, luxury will not guarantee success, whether it’s a department store or a boutique.

“Vancouver has a history of luxury brand openings and closures, though these stores were typically franchised,” Patterson says.

“I’m referring to Nina Ricci, Istante, Versus, Furla, Goldpfeil, Valentino Boutique, Celine, Alfred Dunhill, Hugo Boss Woman and a few others which have opened and closed in downtown Vancouver over the years.

“It will be interesting to see if incoming brands survive.”


Luxury department stores and boutiques can be dangerously attractive places for people who can’t afford them.

“There will be people who really should not be in there and they know they should not be there,” says Scott Hannah, CEO of the non-profit Credit Counselling Society.

“They should not be allocating funds for that purpose and they know it. Yet they’ll still make a purchase and some will worry afterwards about how they’re going to make ends meet.”

High-end stores are good at appealing to “those who are up and coming in their own minds, especially young professionals,” Hannah says.

Over the years, the counselling society has helped many people in debt who have maintained a lifestyle beyond their means because they acquire things to look successful, Hannah says.

“We have difficulty saying, ‘Look, I’m not prepared to go into debt to look a certain way and impress people.’”

Millennials, the generation born between the early 1980s and the early 2000s, often think of short-term wants rather than long-term needs, he says.

“They have a perspective that ‘I’ll never own a home but, darn it, I’m going to look nice,’” Hannah says.

Hannah worries that some of those who flock to Nordstrom when it opens won’t find the discipline to keep their credit cards in their wallet. People who go with friends who buy high-end items may feel pressured to do so themselves, he says.


September 9, 2015

LVMH swipes Apple exec for head of digital role in a bid to boost online presence

Cosmetics Design USA
By: Lucy Whitehouse
September 9, 2015

The announcement of the hiring of former Apple executive, Ian Rogers, as LVMH’s new head of digital confirms the luxury goods multinational is rising to meet the promise of e-retailing in the luxury sector.

August 28, 2015

A Place to Lay Your Bread

The Way That the Rich Travel is Changing
The Economist
August 29, 2015 (Print Edition)

At the Burj Al Arab hotel in Dubai, one of the world’s most luxurious (pictured), guests can avail themselves of 24-carat gold iPads and caviar facials. The cheapest rooms cost $1,000 a night; those interested in the royal suite can expect to pay nearer $25,000. Such ostentation is not to everyone’s taste. But it illustrates a trend: the way that the rich spend their money is changing.

Once, the well-heeled bought fancy stuff. Nowadays they spend more on things to do and see. A report last year by the Boston Consulting Group (BCG) found that of the $1.8 trillion spent on luxury goods and services worldwide in 2012, nearly $1 trillion went on “luxury experiences”. Travel and hotels accounted for around half that figure.

This partly reflects the growing weight of rich folk from developing countries. Wealthy Chinese spend 20 days a year travelling for leisure, according to ILMT, a travel agency. The most popular destination was Australia, and nearly half made it as far as Europe. On average, affluent Americans went on holiday 3.9 times in 2014, says Resonance, a consultancy, up from 3 times in 2012. Around half travelled more than 1,000 miles (1,600km) for their most recent trip. They favoured Europe, especially Italy, Britain and France.

Antonio Achille of BCG says luxury consumers have distinct spending styles, depending on how old they are and whether they were born rich or became so later. The young and the recently affluent tend to buy visibly costly items that will impress their peers. Soft Living Places, an Italian luxury hotelier, recently filmed an advert to educate newly rich Russian tourists. It offered such advice as “don’t show off by ordering the most expensive bottle of wine on the list.” By contrast, the longer someone has been rich, the more likely he is to value quality over ostentation.

When they travel, rich 20-somethings are drawn toward gregarious pleasures that can be shared on social media to make their friends jealous. But plenty also view holidays as a time to learn something and broaden their cultural horizons, says Chris Fair of Resonance. Though older travellers to India still frequent the Taj or Oberoi hotels, younger ones are more likely to plump for a homeshare—albeit a posh one. The established wealthy spend relatively more on travelling to five-star hotels.

Tapping into this more traditional market is not easy: in some respects, the luxury-hotel business has become commoditised. As the standard at the best establishments has risen, high-paying guests have come to expect a level of service that is ever harder to exceed. “There is only so much caviar and champagne you can throw at them,” says Milton Pedraza of the Luxury Institute, a consultancy. Opulent bathrooms, world-renowned chefs and state-of-the-art technology are now the norm at the poshest hotels.

So differentiation must come from more personalised service. Value is added by “being generous in small ways”, says Frank Marrenbach, the chief executive of the Oetker Collection, a luxury-hotel group. Attentive service means remembering customers’ every preference, either because they have visited before or because the hotel has gathered data from previous trips elsewhere. Equally important is knowing when to step back, says Mr Marrenbach, because for rich guests downtime is also a luxury. At Villa Stephanie, a spa the group runs in Germany, guests can flick a switch in their rooms that blocks all wireless signals to their phones and computers. (Fortunately for paupers who stay in cheaper joints, many of these devices already come with a handy off-switch.)

The established rich, because they own so much stuff, place a high value on doing or feeling something new. According to BCG, they claim to gain three times the emotional reward from an experience, compared with owning something with the same price tag. For luxury-travel retailers, this means that selling fancy add-ons to trips is one of the most lucrative parts of the trade.

Abercrombie & Kent, an upmarket travel agency, for example, arranged for its guests in Egypt to view Queen Nefertari’s tomb, even though its doors had been sealed to the public for decades. In Moscow its clients can attend a private opening of the Kremlin grounds and have lunch with an ex-KGB agent who worked as a spy in London during the cold war. Even when shopping, the experience can matter as much as the acquisition. For some it is important not just to own a Burberry raincoat but also to have bought it from the brand’s flagship London store.

The biggest concern of rich travellers, according to Resonance, is safety. As crime levels have fallen in cities such as London and New York, they have become more appealing to affluent visitors. Metropolitan travel is now as popular as traditional “drop-and-flop” resorts with well-off Americans, says Resonance. Hotels and tour operators catering to the rich must be able to prove their security credentials. Abercrombie & Kent owns its own “destination management companies” in many African and Asian countries, which can respond quickly to problems, including by evacuating guests caught up in Nepal’s recent earthquake.

For the very richest travellers, there is another consideration. Many will go to extraordinary lengths to make far-flung destinations feel like home. Kevin Johnson has worked as a chief-of-staff and palace manager for several billionaires. Some of his employers would even take their favourite bed on their travels, he says. When arranging a holiday on a remote island, his bosses also insisted on their own IT infrastructure, often sending someone ahead to install it. This was partly to ensure security, he says, but also to be sure they could watch their favourite television channels. For the traveller who has everything, the familiar can be the biggest luxury of all.


August 24, 2015

Affluent Millennials Setting Their Own Pace

U.S. News and World Report
By: Mallory Hughes
August 20, 2015

Chris Beauregard, 25, recently found himself at a chic rooftop pool party in Washington. With the Capitol dome in the background, young professionals watched an exclusive Dar Be Dar by Tala Raassi summer fashion show while sipping complimentary DeLeón Tequila cocktails.

“I brought seven other friends with me,” says Beauregard. “Everybody had a blast.”

It’s a setting that is becoming common for a subset of the Millennial generation known as the “affluent Millennials.”

The 6.2 million 18- to 34-year-olds who report annual household incomes of more than $100,000 are acting out the aspirational lifestyle of their cohort because they have the financial means to do so, said Leah Swartz, a content specialist at FutureCast, a marketing firm focused on Generation Y.

“It’s not that they’re so different from Millennials,” says Swartz. “It’s that they’re acting on these aspirational trends that we see take shape in the general population.”

Many among the 80 million Millennials say that they eat organically and travel frequently, but a majority still live on a limited budget, hitting up big retailers for bargain prices.

Rather than focusing solely on what they can buy, Millennials create experiences and “shareable moments with friends,” Swartz says.

It’s a generation that was the first to embrace trends like going digital and using social, but it is the affluent among it that have more impact because they’re the ones commenting on review sites and engaging with brands on social media.

“We’re seeing them take on the influential role among the Millennial population,” she says, adding that affluent Millennials are 10 percent more likely to participate in online rating sites than their non-affluent peers.

“It’s likely because they can do more and because their budgets allow for it,” Swartz said.

Business and finance are the most common career paths for these people, but affluent Millennials are shifting post-graduate educational trends.

The research found that 44 percent of the 6.2 million affluent Millennials did not graduate from college. Of those that completed college and went on to graduate school, nearly 4 percent didn’t complete that education. While these numbers are high, affluent Millennials still graduate from college and grad programs at higher rates than their non-affluent counterparts.

“When you think of Boomers or even a little bit Gen-X,” Swartz says, “money was very much linked to degrees and higher education.”

But these Millennials don’t necessarily see the connection. FutureCast researchers in Kansas City found that young adults in the affluent subset are more interested in quickly putting the knowledge gained in their undergraduate programs to use in the workforce.

“They’re seeing more value in entrepreneurialism rather than continuing education,” Swartz says.

Billy McFarland, a 23-year-old tech entrepreneur, began his undergraduate education at Bucknell University planning on studying computer engineering. He dropped out after a year.

“I never really focused on school the way I should,” McFarland said in a phone interview. “But I finally went to college, I was living alone, and realized I could start companies full-time and not worry about school. It was an easy decision.”

Most recently, McFarland founded two companies: Spling, a tech-driven advertising platform, and Magnises, a mobile concierge app geared toward Millennials.

Magnises, McFarland says, has nearly 7,000 members stemming from 25,000 applicants. Approximately 90 percent of members using the app are 21 to 35 years old, with self-reported annual incomes of $50,000 to $250,000.

The $250 per year membership comes with a black metal membership card, a community hangout out and the concierge app with recommendations on what to do with one’s free time and the ability to make a reservation at a suggested place.

This generation travels more and values events, services and experiences over goods, says Milton Pedraza, CEO of the Luxury Institute, a global research firm focusing on luxury goods.

One example is SoulCycle, the trendy New York City-based fitness company hosting 45-minute spin classes that feel more like being on a dance floor than in a cycling studio. Millennials aren’t buying the expensive bike so they can go cycle the hillsides outdoors; they’re buying the experience.

Pedraza says he thinks Millennials are drawn to events they can share with “people who are their peers, who share their values, who share their standards of living and who share their tastes.”

But if Millennials are trendsetters, don’t they want to find the best places to go — and be first ones on the scene? Isn’t an app, such as Magnises, that suggests the hottest hangouts in some of America’s biggest cities and sends 20-somethings flocking in that direction kind of, well, mainstream?

“I think there’s recognition that that’s going to inevitably happen,” Pedraza says. “If something’s really good it’s going to be swarmed—Millennials swarmed.”


August 14, 2015

Millennials’ wealth management preferences differ from boomers: report

Luxury Daily
By: Kay Sorin
August 14, 2015

Millennial investors have different preferences compared to their baby boomer parents when it comes to wealth management, according to a new report by Luxury Institute.

While baby boomers and older generations prefer to work with full-service brokerage firms, wealthy millennials and members of Generation X are showing an increased preference for working with private advisors. Independent financial advisors can offer a more individual approach that is often appealing to younger investors who are accustomed to personalization.

“Independent financial advisors are able to do more things for their clients, because they are not working for a firm that has rules and regulations about what they can or can’t do,” said Milton Pedraza, CEO of Luxury Institute, New York. “The IFA is the fastest growing industry in wealth management.”

Different strokes
Luxury Institute surveyed investors earning at least $150,000 and found that at least 46 percent used some form of advisor to help them manage their finances. Among respondents aged 65 and over, this number rose to 59 percent.

Michael Kors affluent couple car
Wealthy millennials are inclined to prefer independent wealth managers

Respondents varied in their preferences for an independent wealth manager versus a full-service brokerage firm such as Morgan Stanley or Merrill Lynch. Interestingly, this preference strongly correlated with age.

“A full service firm doesn’t have a fiduciary relationship with the client, meaning that they are not legally obliged to serve the client’s interests only,” Mr. Pedraza said. “They can recommend an investment in which they will make a bigger commission.”

Millennials and members of Generation X and Y, defined as those 45 and younger, showed a significant preference for independent wealth managers compared to full-service brokerage firms. Thirty-eight percent chose to work with individual advisors while 27 percent preferred a big brokerage firm.

Michael Kors case
Millennials have access to more information and are well informed

Investors over 65 were much less likely to work with an independent advisor and only 28 percent reported doing so. They strongly preferred to go full-service with 56 percent using large firms to manage their wealth.

This difference between the generations is likely a result of their upbringing. Baby boomers were raised to expect to work with a big brokerage firm, while millennials may be more wary and distrustful after the recession of 2008.

Sotheby's London Property
Financial advisors can assist in major life decisions such as purchasing a home

Additionally, millennials have more information at hand, which allows them to be more selective with their advisors.

“Millennials are so much more informed that they depend less on a brokerage firm providing them with research,” Mr. Pedraza said. “Millennials don’t need as much because they are so informed.

“They know that very few financial advisors can outperform the market in the long term.”

One way in which individual advisors often distinguish themselves is by providing a more personal connection for clients. Luxury Institute found that expertise, trustworthiness and generosity were the most valued traits in financial advisors.

Affluent family
As millennials age they are in greater need of financial advice

More than numbers
Investors looking for both a personal relationship and a full-service brokerage firm may seek other solutions to find the ideal compromise. Ultra-affluent consumers often appreciate the relationship-building culture fostered at boutique wealth management firms, according to a report by the Luxury Institute.

The New York-based Rockefeller Wealth Management firm received the highest score in the report, followed by Atlanta-based Atlantic Trust Private Wealth Management and Convergent Wealth Advisors. As wealth management firms continue to repair their reputations following the financial crisis, prioritizing relationships over transactions will be important (see story).

Regardless of the size of a firm, relationships are often the deciding factor when it comes to choosing a financial advisor. To differentiate themselves from competitors, wealth management companies must make crucial changes that will only work if the alterations are part of the company’s core DNA, according to a speaker from the 2012 Forrester Customer Experience Forum.

It is no longer enough to just return calls and give a great customer experience, since clients at wealth management companies are not even thinking about those that do not require this. Instead, Morgan Stanley Smith Barney was forced to bolster its customer service in terms of technology, getting to know the customer and its consultants (see story).

Looking forward, it is essential for wealth management companies to take personal relationships into account in order to appeal to wealthy millennials.

“Millennials will be keen to stay with those who deliver and will dispense with those who don’t,” Mr. Pedraza said. “They will choose advisors based more on the client’s experience than on the client’s return.

“The baby boomers are kind of exiting the stage. Millennials will demand a far more objective and independent metric.

“Advisors need to be completely trustworthy and very responsive,” he said. “They need to go above and beyond to make the client feel special.”


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 or contact The Lilian Raji Agency at or (646) 789-4427.

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