Luxury Institute News

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.”

 Source: http://www.luxurydaily.com/millennials-wealth-management-preferences-differ-from-boomers-report/

June 8, 2015

Cadillac to Sponsor First-Ever New York Fashion Week for Men ‘I Am Very Much Interested in Taking Cadillac Into the World of Fashion’

Advertising Age
June 5, 2015

While the New York womens’ collections have failed to land a car company to replace longtime title sponsor Mercedes-Benz, Cadillac has signed on to become the first-ever automotive backer of New York Fashion Week: Men’s.
The agreement, signed to last two seasons, includes producing a variety of related events and providing Cadillac vehicles as shuttles for attendees. Shinola, Amazon Fashion, and Dreamworks have also been confirmed as sponsors for the fashion week focusing on menswear.

“I am very much interested in taking Cadillac into the world of fashion,” Cadillac President Johan de Nysschen said. “The whole idea of beginning to strengthen Cadillac’s position as a lifestyle brand is very much central to our mission. This is a good start.”

“It should be interpreted as a clear statement of intent that we will walk with a heavy footstep in the fashion world,” he said.

In addition to the role during men’s fashion week, Cadillac will continue as a presenting sponsor of New York Men’s Day, a special day formerly set aside during the womenswear-heavy New York Fashion Week to highlight emerging menswear designers. This year, that day will move to July in order to align with NYFW: Men. This will be the second season that Cadillac participates.

The new deal is a telling move from a 113-year-old brand that was reportedly considering the title sponsorship of what was formerly Mercedes-Benz Fashion Week, which primarily showcases womenswear. Mercedes-Benz ended its title role there earlier this year; the twice-annual event has suffered a deficit of energy since moving from Bryant Park to Lincoln Center in 2010. Many fresh, new fashion brands started showing their wares at off-site locations — often involved with Made Fashion week.

Earlier this year, Cadillac hosted arguably the hottest ticket during New York Fashion Week, when it allowed Public School to show its Autumn/Winter 2015 menswear and womenswear collection in the automaker’s new offices, situated between Tribeca and the West Village.

“We evaluated New York Fashion Week, and we continue to think it’s a worthy property,” Mr. de Nysschen says. “But we weren’t ready to figure out how to fully integrate that into our overallmarketing strategy.”

Cadillac’s decision to sponsor men’s fashion week (which is backed by the Council of Fashion Designers of America), rather than New York Fashion Week, speaks to its desire to return to the cutting edge of culture. In recent years, the automaker has struggled to revitalize its fuddy-duddy image; last year the average buyer of a Cadillac was 59.5 years old, according to the global information company IHS Automotive — much older than the thirties to early forties age range most desirable to luxury brands.

The men’s week sponsorship is totally new — a first. It’s an essential first at that, industry insiders say.

“Cadillac needs that cool, fashionable, ‘gets it’ association to appeal to all consumers, especially Gen Xers and Millennials, who still have a perception of an older brand,” Milton Pedraza, chief executive officer of the New York City- based Luxury Institute, said via e-mail from Stockholm.

New York Fashion Week: Men’s runs July 13-16 at Skylight Clarkson Square in downtown Manhattan. A spokesman for Cadillac declined to disclose the amount of the new sponsorship.

Source: http://adage.com/article/cmo-strategy/cadillac-sponsor-york-fashion-week-men/298907/?utm_campaign=SocialFlow&utm_source=Twitter&utm_medium=Social

June 5, 2015

When is Luxury not Luxury?

PYMNTS
June 4th, 2015

When Lilly Pulitzer released an exclusive line for Target in April, the entire collection sold out at some physical locations within hours. Good for the designer, good for the store, good for the buyers. A resultant Target website crash aside, good for everybody…right?

“No target shouldn’t collaborate with Lilly just no ew ew ew keep Lilly Pulitzer classy people” – Katherine (@kathhlambert)

“lilly pulitzer collaborating with target is probably the worst news I will get in all of 2015” – Marisa Lyn Friedman (@marisalynnnn)

“Lilly pulitzer for target?! Holy hell What’s next?! the apocalypse??! affordable clothing for the masses!? Disgusting” – Pamela Beesly (@trillprincess47)

Those tweets (the third of which, c’mon, has to at least be partially sarcastic) went out not after “Lilly Pulitzer for Target” was released, but actually when the line was first announced, back in January.

The perception among Lilly Pulitzer devotees outspoken in their disapproval of the Target collaboration, then and now, seems to be that the value of Lilly Pulitzer clothing (and other items) is directly related to their cost. And if the cost goes down (Lilly Pulitzer dresses, which often sell for $200, were available at Target for $40), the brand itself diminishes in value.

It wasn’t only semi-anonymous Twitter users who expressed their disdain for Lilly Pulitzer’s availability to bargain shoppers. In an op-ed for Bloomberg, columnist Megan McArdle – having expressed her belief that Lilly Pulitzer clothes are in fact quite ugly and worn only as a statement by people too rich to care – wrote that “actually wearing Target’s Lilly Pulitzer line…signals the exact opposite of what it is supposed to.” That is to say, if you had to make an effort to buy those clothes, you don’t really deserve to wear them.

Crossovers between high-end brands and mass-market retailers – and the potential image risk to the former – are by no means a new phenomenon. In 1983, the designer brand Halston released a collection exclusive to J.C. Penney, and lost some luxury partnerships as a result.

Halston’s experience aside, the particular backlash to the Lilly Pulitzer/Target collaboration seems a bit out of step with the norm, as Target’s own partnerships with brands like Isaac Mizrahi and, as recently as this year, Missoni, or the recently-announced deal between H&M and Balmain, did not raise such a volume of ire among self-appointed consumer protectors of the luxury ideal.

While there is a risk of brand dilution in partnerships, a study from the Luxury Institute (which, you have to figure, knows a thing or two about this topic) showed that affluent shoppers are not turned off by luxury brands partnering with mainstream brands.

With specific regard to the Lilly Pulitzer/Target hookup, the Harvard Business Review crunched the numbers and viewed the outcome as purely positive.

“Unlike the market saturation and brand extension strategies that have de-valued other luxury brands like Michael Kors and Coach,” states the HBR’s report, “the Target collaboration was a smart move for Lilly Pulitzer. The limited-item, limited time collection allowed the company to expand the brand while maintaining its exclusive appeal.”

Given the success of the arrangement on almost every count (save, again, that unfortunate website overload), it is more than likely that more collaborations between high-end brands and mainstream retailers are on the horizon. Will there be outcries from those who, holding luxury in high regard, look down their noses at mass-market consumers? It’s likely. But it’s just as likely that such complaints won’t have much an impact on the bottom line.

After all, haters gonna hate.

Or, as Lisa Birnbach put it more eloquently in New York Magazine, Lilly Pulitzer herself “would not have approved of her ‘defenders.’” Referencing the Alexander Theroux quote, “Hypocrisy is the essence of snobbery, but all snobbery is about the problem of belonging,” she concludes that “Pulitzer, despite her last name, was no snob.”

Source: http://www.pymnts.com/news/social-commerce/2015/when-is-luxury-not-luxury/#.VXGbUs9Viko

May 12, 2015

Niche marketers target the 1% – at their peril

Crain’s New York Business
By: Anne Field
May 11, 2015

Last year, Steven Abt decided to overhaul the business model of Caskers, his five-employee craft-spirits company in Manhattan. He focused his marketing on two segments: the original customers who bought curated spirits on Caskers’ website, launched in 2012, and new, even more affluent buyers, who would receive one-on-one, concierge-style service.

A significant portion of his higher-end clientele was interested in such an approach. “It seemed like an opportunity to tap the luxury market, which is growing in general,” he said.

Five months later, the new offering generates about 2% of the firm’s annual revenue, which is just under $10 million, according to Mr. Abt. He expects that figure to increase to as much as 15%, with pretax margins of 20% to 30%, compared with 10% to 20% for the original service.

Mr. Abt is one of a growing number of small-business owners in New York City who are embarking on a two-tiered strategy in their marketing. That’s the result of a variety of factors: healthy demand for high-end goods and services, postrecession changes in the spending habits of affluent consumers, capabilities made possible by digital technology and the need to ramp up volume.

In some cases, it means branching out into a more upscale market, as Mr. Abt has done; in others, expanding from an affluent clientele to the mass market. Regardless, said Daniel Levine, a consumer-trends expert and director of the Manhattan-based Avant-Guide Institute, “these businesses are just following the money.”

Certainly, there’s a time-honored tradition in such sectors as fashion to bring a luxury brand to a mass audience. Take Lilly Pulitzer—known for its connection to Jacqueline Kennedy Onassis and the very rich—which recently began selling a line of clothing in Target stores.

But such a strategy can be a gamble. The premium brand that expands to a less-affluent market may dilute its cachet. Even trickier is going after a higher-end customer. Companies often are reluctant to admit to doing so, fearing they’ll alienate potential buyers in either market. And it can be difficult to convince more elite customers that their product or service is top of the line.

“It’s always harder to go upmarket,” said Milton Pedraza, CEO of the Luxury Institute, a consumer-trends research firm in Manhattan. He points to British-based Mulberry, a maker of high-end leather bags. It recently stumbled, with declines in profits, during an international expansion that included a flagship store in SoHo; it also increased prices to an ultraluxury level.

Many factors are contributing to the two-tier trend. For small businesses in New York pursuing wealthier customers, one of the most important is postrecession spending by upper-income households. From 2009 to 2012, the total growth in U.S. consumption, adjusted for inflation, happened mostly at the higher end, according to Steven Fazzari, an economist at Washington University in St. Louis.

Two ways to grow

Among those at the bottom 95% of income distribution, there was 2.8% growth during that time period, compared with a 16% increase among the top 5%. That trend has likely continued in recent years, according to Mr. Fazzari. “Growth in consumption has been exclusively driven by the top,” he said.

Companies have also been reacting to significant changes in the buying habits of affluent customers since the recession, according to Jim Taylor, a senior adviser at YouGov.com, a Waterbury, Conn., firm that conducts surveys aimed at better understanding public views about products and current affairs. He is the co-author of The New Elite: Inside the Minds of the Truly Wealthy.

He divides the affluent into two categories: those who seek “worth” and are willing to pay a premium for the things they buy, but go through a rigorous vetting and shopping process. Others are “discounters,” focused more on price. “They derive pride from squeezing their vendors,” he said.

Using technology platforms strategically has also helped some companies expand smoothly from a premium-only service to a larger market. Kofi Kankam co-founded Manhattan-based Admit Advantage seven years ago to provide advice to graduate-school and college applicants. He charges about $200 an hour, with packages running as high as $10,000.

About three months ago, the company launched Admit.me, an online platform that is more affordable to a wide audience. It allows applicants to interact with current students and alumni at schools where they are applying and for admissions offices to search for potential recruits. The basic service is free, but customers can pay about $10 a month for additional capabilities.

“We want to build a scalable business,” said Mr. Kankam, whose profitable, five-employee company has $2 million to $4 million in annual revenue.

The big benefit of expanding to a mass audience is increased volume—especially for small-business owners who have made their name providing time- and labor-intensive, hands-on service. Take Joey Healy, founder of a three-year-old company in Manhattan that bears his name. At Joey Healy Eyebrow Studio, which provides eyebrow-shaping services, Mr. Healy spends about an hour working with each client. He charges $135, up from $85 three years ago.

More recently, Mr. Healy formed a partnership with hair-removal specialist Spruce & Bond to train eight employees in his eyebrow-shaping techniques. They were placed at all four Spruce & Bond stores (three in Manhattan, one in Scarsdale). Called Browlab, the service at the stores costs clients $50; customers also can buy from Mr. Healy’s line of products. “It brings me a new audience,” he said.

Underwriting expansion

About 10% of Mr. Healy’s total revenue, which is “just under $1 million,” now comes from Browlab, but that should increase as Spruce & Bond expands to more locations in Manhattan. Also, in October, Mr. Healy plans to move from his 500-square-foot studio to a bigger space, which will serve as what he calls “more of a flagship” for the profitable company.

In some cases, small businesses regard their premium market as a way to underwrite expansion to a larger mass clientele. Four years ago, Kim Caspare, who has a doctorate degree in physical therapy, opened PHlex Health and Wellness Studio in Manhattan, where she treated patients who were able to pay out of pocket and were mostly referred by doctors.

Since then, she has added such services as acupuncture and meditation and expanded from 1,500 square feet to about 2,200, with plans to increase to 4,600. She recently started treating a new group of patients with insurance coverage, too. Her premium clients, who pay from $160 to $300 an hour for a variety of services, “subsidize everyone else,” said Ms. Caspare. Her profitable, nine-employee company has $1 million to $3 million in annual revenue.

For those adding a higher-end tier, the key is retooling the product or service to make it attractive—and worth the price—to a wealthier clientele. That generally means not moving too far upstream from the company’s original segment.

At Caskers, Mr. Abt had already sold pricey spirits, usually in the $40 to $60 per-bottle range, to affluent buyers. Although his concierge clients have paid as much as $27,000 for an order, “moving to the high end has been a natural extension of the business,” he said.

Another notable example is concierge medicine, through which doctors provide extra services to their patients, who pay an annual fee. About a year ago, Dr. Herbert Insel, a cardiologist and internist in Manhattan, introduced this option.

He charges a $2,500 annual fee to cover services, such as a lengthy physical exam not reimbursed by insurance, longer visits and a direct telephone number to the office. So far, 10% to 15% of patients have signed on. Many of them “are very busy executives in their 40s and 50s who are used to this type of approach,” said Dr. Insel. “They were champing at the bit.”

Source: http://www.crainsnewyork.com/article/20150511/SMALLBIZ/150509841/businesse

April 20, 2015

Changing Tactics, Apple Promotes Watch as a Luxury Item

NY Times
By: Brian X. Chen
April 19, 2015

SAN FRANCISCO — Apple has scrapped its usual routine for releasing products with its new device, the Apple Watch. The company is instead taking a page from the playbook of another industry: luxury goods makers.

Gone are the long lines in front of Apple stores that would accompany a typical iPhone release. Gone is the flooding of a vast worldwide distribution network where Apple would make a new iPhone available. The company is selling the Apple Watch, which goes on sale on Friday, in just nine countries and exclusively through its own channels, not through third-party retailers like Best Buy. In contrast, Apple unveiled new iPhones in September in more than 30 countries and in numerous retail outlets.

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For the first time, Apple is also bringing personal attention and tailoring into the mix through a process for trying on the watch. While consumers typically couldn’t touch a new Apple device until it was publicly available, the company this month began inviting customers into its stores to see, wear and feel the watch.

Evan Weissbrot, a 33-year-old watch collector, experienced the sneak preview firsthand. After he arrived at the Apple Store in SoHo on April 11, an Apple employee took Mr. Weissbrot to a station and unlocked a drawer containing a variety of the watches. In between small talk, the employee showed Mr. Weissbrot different straps and cases — and even let him check out the gold watch, which costs more than $10,000 and typically requires a separate appointment to try on.

The amount of personal attention and the allure of the process “was a rip directly from a high-end watch store,” Mr. Weissbrot said.

All of this echoes the tactics of luxury goods makers like Burberry and Hermès. Giving consumers an early peek before they buy things is a familiar strategy in the fashion industry — as, increasingly, is tempting early adopters with the bonus of circumventing the shop. When Burberry shows new lines of clothing and handbags on the runway, the company lets customers order select items immediately after the show for delivery even before the products arrive in stores.

Apple also appears to be mimicking the scarcity-creates-desire approach, one that has served Hermès well with items like the Birkin and Kelly bags. They are rarely in stock, and customers sometimes wait months to receive one. That strategy has also worked for companies like Ferrari, which has loyal customers who pay thousands of dollars just to get on a list to wait as long as a year to own the next hot Italian sports car.

“They’re definitely treading on new territory,” Milton Pedraza, chief executive of the research firm the Luxury Institute, said of Apple. While high-end fashion brands, jewelers and luxury car brands often use selectivity and personal attention to generate interest when a product makes its debut, it is new for Apple, a company whose products typically speak to an enormous consumer audience as opposed to a privileged few, he said.

The strategy is a deliberate move by Timothy D. Cook, chief executive of Apple, and Angela Ahrendts, the company’s retail chief and a former chief executive of Burberry, to lay the groundwork for a successful introduction of the watch. The watch is the first entirely new device Apple has introduced under the leadership of Mr. Cook, who took the helm in 2011, and brings the company into the fashion market, as well as the luxury market, with the 18-karat gold version of the watch.

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In a recent letter to Apple’s retail employees, Ms. Ahrendts said the company needed to come up with the preview approach for selling the watch because “there’s never been anything quite like it.” In the memo, which was cited by the blog 9to5Mac, she said it was unlikely that people could buy the watch at Apple stores before June because of supply constraints.

An Apple spokeswoman, Amy Bessette, said Ms. Ahrendts was not available to comment on the retail strategy for the watch.

Apple’s top brass has been energetically promoting the watch over the last seven months, granting interviews about the creation of the device to The New Yorker and Wired. Apple has also invested significantly in advertising, spending an estimated $36 million since March 9 on a television campaign for the smartwatch, just slightly less than the $38.5 million that it spent on TV ads for new iPhones since mid-November, according to iSpot.TV, an analytics firm.

The watch’s success remains far from assured. Mr. Cook said on Apple’s financial earnings call in October that the company would report sales of the watch in a group with other products, rather than breaking it out into a separate category.

“I’m not very anxious in reporting a lot of numbers on Apple Watch and giving a lot of detail on it, because our competitors are looking for it,” Mr. Cook said.

Sales estimates for the watch are modest compared with Apple’s past best sellers. Toni Sacconaghi, a financial analyst for Sanford C. Bernstein, predicts Apple will ship 7.5 million watches in the second half of the company’s fiscal year, while tens of millions of iPhones fly off the shelves every quarter.

For now, Apple’s luxury experiment with the Apple Watch appears to be bringing in mixed results. At Apple’s London flagship store nine days ago, employees asked people if they wanted to sign up for personal appointments to get hands-on with the product. Several people were bemused that they could not handle the watches without appointments.

At an Apple store in Hong Kong, a Chinese tourist from Beijing, Scott Sun, took photos of the gold watches to send to his friends but said every version of the watch — which starts at $350 — was too expensive for him.

“There’s no way I’m going to buy one,” he said. “But for rich people, this gold one will definitely be popular.”

Another question raised by Apple’s luxury experiment with the watch is whether customers will believe it is worth the wait. While the watch will begin shipping to customers on Friday, some customers have reported that their shipping times have slipped to May or June.

For Mr. Weissbrot, the watch collector in SoHo, the wait was not a deterrent. He placed an online order for an Apple Watch Sport, which is the least expensive model and has an aluminum case, before the session in which he tried one on. The estimated date of arrival for his watch is May 13.

“It’s kind of a bummer,” he said, before adding that he was still excited to be among the first to have the device.

Source: http://www.nytimes.com/2015/04/20/technology/personaltech/changing-tactics-apple-promotes-watch-as-a-luxury-item.html?_r=0

March 30, 2015

Digital channels influenced $1.5T in-store sales in 2014: report

Luxury Daily
By: Nancy Buckley
March 30, 2015

More than 70 percent of consumers expect brand digital channels to have knowledge of in-store product availability, according to a new report by L2.

Accommodating both digital and in-store trends requires brands to adapt to e-commerce expectations of click-and-collect or free shipping, but also adhere to in-store demands. Many traditional brands face pressure from online retailers to offer better options for consumers turning to digital for both browsing and shopping.

“While luxury fashion in the past required a high touch, in person sale, things have changed,” said Eleanor Powers, director, Insight Reports, L2. “Overall fashion brands are still focused on online e-commerce conversion (e.g. by providing free shipping options).”

Channel options
Prior to interaction with a sales associate, 80 percent of United States consumers know what they want and how much they plan to spend. This knowledge stems from Web rooming, a concept that should be encouraged by brands because it leads to 40 percent higher conversions.

Digital channels effect 50 percent of in-store sales, despite direct-to-consumer ecommerce only accounting for 4 percent of sales.

Ecommerce is being challenged by larger online retailers. When British retailer AllSaints began accepting Amazon Payments there was concern among fashion brands, which escalated with the rumors surrounding Amazon and Net-A-Porter.

Amazon may be in talks to purchase Net-A-Porter, if reports that have been rumored are true.

The etail giant has been unsuccessful in entering the luxury industry in spite of attempts in recent years, and this potential acquisition could be significant for the future of both companies. The impact that this purchase could have on Net-A-Porter is unclear, but the retailer has been not been profitable despite its popularity (see story).

Amazon Prime’s rewards encourage consumers to shop online and receive free shipping for an annual fee. The Prime membership concept has been adapted by ShopRunner, a platform used by one-fifth of luxury brands.

Without ShopRunner, consumers are shopping to a minimum spending level to receive free shipping, but even with that many consumers are pulled away from luxury brands to find less expensive items online.

Some brands, especially in Europe, offer click-to-collect. Without these options, consumers are Web rooming for products and then purchasing in-store. Even with this option, consumers expect brands to have easily accessible information about store availability.

Generational thing
Difference in digital options also vary across generations.

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).

Changing to adapt to generational and technological changes requires brands to look internally and adapt within every channel.

“Brands also need to support the hand-off from digital to in-store to support a seamless shopping experience,” Ms. Powers said. “This requires investments in infrastructure for local inventory visibility and providing options for click-and-collect and in-store returns.”

Source: http://www.luxurydaily.com/digital-channels-influenced-1-5t-in-store-sales-in-2014-report/

March 10, 2015

Generational shift to luxury digital

Data sourced from Luxury Daily; additional content by Warc staff
March 10, 2015

NEW YORK: Affluent consumers in the US prefer to buy luxury goods in store but there is a discernible generational shift taking place as fewer millennials are concerned to shop this way with more inclined to explore options via an app.

A report from The Luxury Institute surveyed wealthy consumers in the US with a minimum household income of $150,000 per year and found that only 40% of millennials wanted especially to shop in store, while 72% would download a branded luxury app.

“There are clear generational differences where the boomers are less digital and millennials are extremely digital,” Milton Pedraza, CEO of The Luxury Institute told Luxury Daily.

“There is no one size all client experience,” he added, “and we have to understand the consumer not as a segment but as one individual, as a human being, in order to build a long-term relationship.”

That said, the differences leapt out in a number of statistics. Overall, 53% of luxury consumers did not download apps, while 47% did so, with most of these being in the younger generations.

Another instance came in social media, where almost two thirds (64%) of wealthy consumers didn’t follow any brands. But among millennials a similar proportion (68%) followed at least one brand and among Gen X the figure was 58%.

But more than one third (38%) of baby boomers also claimed to have downloaded branded luxury apps.

“Boomers are behind in digitalisation, [but] they are by no means not digital,” said Pedraza, “especially the highly educated global traveller.”

The Luxury Institute drew attention to the role of fashion bloggers in reaching and influencing the younger generation.

It found only 15% of boomers followed a fashion blogger compared to 62% of millennials. And followers had made an average of 4.2 purchases from blogger suggestions.

Even if these bloggers can find it difficult to maintain a leading edge position, Luxury Daily observed that their followings can compare favourably with magazines, the traditional influencer in luxury fashion.

The influence of technology is inexorably influencing purchase decisions in some way: 61% of all affluent consumers said it allowed them to make more purchases, while 65% said it was changing the way they shop with luxury brands.

Can Apple Sell Wealthy Shoppers on a Luxury Watch?

The New Yorker
By: Vauhini Vara
March 9, 2015

Because Apple first unveiled its smartwatch six months ago, and little has changed about the product since then, there wasn’t much for the company’s C.E.O., Tim Cook, to tell his audience on Monday, when he took the stage at a theatre in San Francisco for a follow-up event. Everyone already knew about the watch’s cool, if not necessarily essential, features and its stylish design. Cook did reveal one bit of news, though: the price of a high-end version of the watch, encased with a special kind of eighteen-karat gold that is, according to Apple, twice as hard as regular gold, will start at ten thousand dollars.

Apple had previously explained that there would be three different versions of the watch—Apple Watch Sport, Apple Watch, and Apple Watch Edition—but hadn’t disclosed how much each type would cost, beyond announcing that pricing for the least expensive model would begin at three hundred and forty-nine dollars. The Apple Watch Edition, with its gold casing, was expected to be expensive, but the ten-thousand-dollar starting price still took people by surprise; John Gruber, who runs Daring Fireball, a popular and authoritative Web site about Apple, had guessed that Edition watches might begin at seven thousand four hundred and ninety-nine dollars.

As I have written in the past, smartwatches are a bit confounding, as tech products go. People tend not to gravitate toward gadgets unless they fulfill some unmet need. But smartwatches don’t do anything that existing devices, like smartphones and fitness trackers, aren’t capable of, and it’s unclear whether the convenience factor—having the device strapped on your wrist rather than stuck in your pocket—will make up for that fact.

Apple executives seem aware of that pitfall, and so, while they have pitched the Apple Watch as a tech product, they have also taken another tack, as if to hedge their bet: marketing it as a high-end fashion item. Last year, when the watch was still only a rumor to the outside world, Apple hired Angela Ahrendts, the well-regarded former C.E.O. of Burberry, as its head of retail; the year before, Apple had convinced Paul Deneve, a former employee who had gone on to become the C.E.O. of Yves Saint Laurent, to return to the company. Ahrendts and Deneve were surely influential in guiding the development of the deluxe watch, but so were more long-established Apple executives; in Ian Parker’s recent Profile of Jonathan Ive, the senior vice-president of design at Apple, a friend of Ive’s told Parker that Ive had “always wanted to do luxury.”

It’s relatively rare for a single watchmaker to simultaneously sell a three-hundred-and-forty-nine-dollar watch and a similar ten-thousand-dollar version; for the Apple Watch to be successful, the company will have to market to a mass audience and a luxury one at the same time. Some tech bloggers, accustomed to seeing high-end products priced at most in the hundreds of dollars, immediately balked at the ten-thousand-dollar price tag on the Apple Watch Edition, especially given that the guts of the watch—what’s inside the gold casing—are the same as what’s in the other, less expensive versions. But people from the luxury-fashion world were not particularly surprised; by their standards, the price was somewhat modest. Milton Pedraza, the C.E.O. of the Luxury Institute, a consulting firm, told me, “At ten thousand dollars, I would call that more of a premium watch”—that is, something less than a luxury watch, a term reserved for the highest-end watches that sell for six figures. The luxury-goods business model relies on selling exorbitantly priced items to small numbers of people, which means not having to persuade the masses (tech bloggers included) that the price tag is reasonable. Profit margins for luxury watches tend to be around thirty per cent, compared with ten per cent or less for mass-market watches.

To Pedraza, the ten-thousand-dollar price tag seemed eminently justifiable. For one thing, the gold casing adds significant cost—in the high hundreds of dollars, at least—to the Edition watches. Perhaps more important, though, is that no one expects luxury products to be priced based on the value of their components; what’s being sold is cachet. “With the first caveman or cavewoman, the one who found the shiniest shell to make a necklace had an advantage, and ever since then people have been trying to one-up themselves,” Pedraza said.

Selling cachet, of course, requires special tactics. Pedraza noted that Apple’s marketing has tended to focus on the possibilities of achievement that are contained within a computer or a smartphone. The finest luxury brands, he said, draw their prospective customers’ attention, instead, to what a product suggests about the owner’s acquired achievement. In other words, he said, Apple might do well, with the Edition watches, to focus less on what the watch allows its wearer to do than on what it conveys to others about what the wearer has already done. “It’s about how people look at me and see me and how I want to be seen in the world,” Pedraza said. To an extent, Apple seems to appreciate that message; at Monday’s event, Christy Turlington, the supermodel, appeared onstage to show off her watch.

Apple will face another challenge with its Edition line. The luxury watchmaker Patek Philippe advertises its watches with the tagline “You never really own a Patek Philippe. You merely look after it for the next generation.” The point, of course, is that Patek Philippe watches—many of which are priced at twenty thousand dollars or more—are investments. Like art, they don’t lose value as time passes; they may even gain value. It’s hard to make the same case with an Apple Watch; at best, new technologies last for three years or so before they are seen as obsolete. “If you spent ten thousand dollars on an Omega gold watch, theoretically, in two years time, it should hold most of its value,” Bassel Choughari, a luxury-goods analyst at Berenberg, told me. “What are you going to be left with in three or four years time with your fifteen-thousand-dollar Apple Watch?”

Apple executives are surely aware of this issue; it could be one of the reasons the Apple Watch is built with removable straps, which can, at least theoretically, be removed from an obsolete watch and attached to the next version when it comes out. There is also some precedent for attempting to sell luxury tech products. A British firm called Vertu makes high-end smartphones that sell for tens of thousands of dollars. “A phone is more, in a way, like a car,” Vertu’s creative director, Ignacio Germade, told Sam Byford, of the Verge. “You don’t buy a luxury car because you want to buy it for the next 10 years or 20 years or 100 years; you buy a luxury car because even if you use it for two hours every three days, you want to have the best experience that you can have. If you look at the difference between when you buy a car and when you sell a car, you will realize that it’s actually a huge investment for a product that you use a few times a week.” Notably, in his Profile of Ive, Ian Parker quoted Ive’s friend as saying that Ive was “very interested” in Vertu.

Source: http://www.newyorker.com/business/currency/apple-watch-luxury-shoppers

March 9, 2015

68pc of millennials follow luxury brands on social media: report

Luxury Daily
By: Nancy Buckley
March 9, 2015

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.

“There is no one size all client experience and we have to understand the consumer not as a segment but as one individual, as a human being, in order to build a long term relationship,” said Milton Pedraza, CEO of Luxury Institute, New York.

“There are clear generational differences where the boomers are less digital and millennials are extremely digital,” he said. “If you want to look to the people with the most money, you want to cater to the older individual, who are not digital, but as you cater to the digital and the millennials.”

The Luxury Institute has conducted research on consumer attitudes and behaviors by surveying wealthy consumers in the United States with a minimum household income of $150,000 per year.

Technology changes all
Adapting to changes in technology can be difficult, but when looking at statistics, over half of affluents prefer to buy luxury products in-store. However, this number is about 40 percent when it comes to millennials and generation X.

Millennials also change the numbers when it comes to following brands on social media. Sixty-eight percent say they follow one or more brands on social media, while 64 percent of wealthy consumers follow zero brands.

Generation X also follows brands, with 58 percent reporting to follow at least one.

When it comes to brand apps, luxury consumers are about even among those who download and those who do not. Fifty-three percent do not download apps, but 47 percent do. The majority of these consumers are in the younger generations, but 38 percent of baby boomers claim to download branded luxury apps.

“As boomers are behind in digitalization, they are by no means not digital,” Mr. Pedraza said. “Especially the highly educated global traveler.”

When it comes to fashion bloggers, baby boomers are even more separated from the younger population. Fifteen percent of boomers follow a fashion blogger whereas 62 percent of millennials say the same.

These bloggers are having influence upon the luxury consumer with the average of 4.2 purchases made from blogger suggestions among those followers.

Overall, technology is influencing decisions. Sixty-one percent of all affluent consumers believe that technology allows them to make more purchases, and 65 percent report technology changing the way they shop with luxury brands.

Blogging influencers
Since fashion bloggers arrived on the scene about a decade ago, they have gained influence and grown to be leaders in the industry, says a report by Fashionbi.

As these bloggers gained an audience, brands began to partner with them for advertising campaigns, events and other marketing efforts. While it may seem that fashion bloggers are losing their luster, they still have large followings that can rival magazines, creating an opportunity for luxury brands to reach a large, fashion-focused audience (see story).

Department store chains increasingly partner with fashion bloggers to promote new initiatives and publicize their stores.

Fashion bloggers often have a large degree of influence and many followers, making them the ideal spokespeople for high profile marketing campaigns and events. Retailers such as Bergdorf Goodman, Harrods and Bloomingdale’s have recently partnered with a variety of bloggers to promote their products (see story).

Digital is slowly immersing into luxury, and eventually it will alter the consumer’s experience entirely.

“[In the future,] there will be digital aspects that help the sales associate be a far more effective relationship builder,” Mr. Pedraza said.

Source: http://www.luxurydaily.com/68-pc-of-millennials-follow-luxury-brands-on-social-media-report/

March 4, 2015

Why C. Wonder, Kate Spade Saturday spiraled down

Crain’s New York Business
By: Adrienne Pasquarelli
March 2, 2015

New York’s mass-market retailers are paying the price for the country’s stagnant middle-class wages.

Selling to the middle-class shopper has rarely been so tough.
Last week, Macy’s lowered its 2015 earnings forecast, amid sales-growth slowdowns resulting from shopper malaise. The department store giant’s troubles follow the January shuttering of Kate Spade Saturday, C. Wonder and Gap Inc.’s Piperlime—three businesses aimed at young, fashion-conscious professionals who can’t yet afford true luxury—and a spate of middle-market retail closures in 2014. And the hatchet is expected to continue falling.

“Being average in the middle is death,” said Kevin Mullaney, president of retail consultancy the Grayson Co. “The high end and the low end—those two businesses are thriving. If you’re in the middle, you’d better have a darn good reason for being there based on product and freshness.”
Hundreds of store closings

Unfortunately, many stores ­didn’t get the memo. Though fast-­fashion players such as H&M and Forever 21 are in expansion mode, and luxury brands from Ralph Lauren to Tory Burch continue to roll out new products, midtier retailers are struggling.

Bankrupt chains Delia’s, Wet Seal and Caché have all closed hundreds of stores since the fall, and 1,700 RadioShacks will follow. Though retailers are dealing with the oversaturation and decline of shopping malls, there’s a more widespread problem at play. Worried about an uncertain global economy and rising prices, middle-class spenders are seeking deals, such as a $6 T-shirt, or splurging on truly special, must-have merchandise, like a $1,200 Canada Goose jacket. Stores such as J.Crew, Gap and Aéropostale are getting squeezed as a result.
For the quarter ended Nov. 1, J.Crew reported that same-store sales declined 2%. In January, long-ailing San Francisco-based Gap announced it was letting go of its creative director, who had been with the company since 2012, and axing the position altogether.

Meanwhile, brands such as Aéropostale and Sears, which occupy the lower end of the midtier, are closing underperforming stores left and right. And Macy’s is investing an additional $100 million in capital spending this year for new store concepts and international growth, in order to ramp up sales amid sluggish traffic.
“We had another good year in 2014,” said a spokesman, noting that Wall Street always wishes for higher projections. Many of these brands are offering steep discounts to reverse the downward slide.
“You either have to be lighting people on fire and getting them excited about product, or you find yourself like J.Crew and Gap, running 30% to 40% off your entire store,” said Mr. Mullaney.

In addition, middle-market apparel sellers are also faced with increased competition from specialized online players such as Bonobos and Asos—buzzy brands that often don’t have the same overhead associated with large brick-and-mortar chains.

“There is such a wealth of options, particularly with the Internet,” said Kelly Tackett, research director at Planet Retail. “It’s really hard to stand out among that crowded field.”
The consumer buying these brands is part of a shrinking middle class whose wages nationally have stagnated. Median household income in the U.S. was $51,939 in 2013—adjusted for inflation, that’s 8% lower than in 2007 and 9% less than the 1999 peak, according to the most recent available U.S. Census Bureau data. For many retailers, this means marketing to customers who now care more about price than brand.

Though gas prices are down and the dollar is strong, many shoppers are dealing with inflation on everyday essentials like groceries, housing and education. The New York-area consumer price index for food rose 3.5% during 2014, for example.

Any extra income accumulated from gas pumps is being used to pay off bills or stored in savings, or spent on luxury items that are now must-haves, experts said.

“There’s not as much consumption as you might expect,” said Milton Pedraza, chief executive of research group the Luxury Institute. He noted, however, that technology is still thriving because consumers now consider such purchases essential. “They will stretch for iPhones, but may not stretch $70 for a J.Crew pair of pants when you can get them at Uniqlo for two-thirds of the price.”

Some of the recent closures can be attributed to timing. C. Wonder and Saturday were barely out of their infancy—C. Wonder was founded in 2011, Saturday two years later—and expanded too quickly out of the gate when consumers began tightening their purse strings.
Overextended brands

These brands tried to be everything to everyone at once, rather than focusing on doing a single product right and expanding into other categories over time.

Ralph Lauren started with ties when he founded his namesake brand nearly four decades ago, and eventually grew it into a $7.4 billion lifestyle label. C. Wonder has closed its 32 stores, which included three local shops. Saturday, a lower-priced label that lacked an identity distinct from its parent, will shutter its Spring Street store by July, along with 18 other locations.

“There were a lot of new entries at a time when retail wasn’t really flourishing,” said Rebecca Duval, a retail analyst at BlueFin Research Partners. “It wasn’t the best time to come into the market or try to develop a growth story.”

To attract spending, retailers need to introduce more eye-­catching products, experts say, though there are few trends right now to bet on. Athletic looks have already become ubiquitous; consumers can find the same me-too jogger pants at H&M that they can find at J.Crew.

“We have a plethora of retailers with that same weak message in terms of the trends they’re getting behind, and eventually they’ll continue to lose market share,” said Ms. Duval.

A version of this article appears in the March 2, 2015, print issue of Crain’s New York Business.

Source: http://www.crainsnewyork.com/article/20150302/RETAIL_APPAREL/150229843/why-c-wonder-kate-spade-saturday-failed

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