Luxury Institute News

April 25, 2016

Inside the Hermès Birkin Bag That Sold For Record $298,000

Forbes
By: Eustacia Huen
April 26, 2016

It has only been ten months since an Hermès fuchsia Birkin bag was sold at Christie’s handbag auction in Hong Kong for record-setting $221,846. But earlier this month, an extremely rare 35cm Hermès braise shiny porous crocodile Birkin bag with 18-karat white gold and diamond hardware became the most expensive resold Birkin bag at $298,000.

Aside from being one of the rare few handbags that has ever been produced in the world, what makes this particular Birkin bag so special is how it represents the pinnacle of luxury handbag craftsmanship, according to Dirk DeSouza, Spokesperson of Privé Porter. Featuring the “finest crocodile skin treated with the most decadent, deepest red color imaginable, it takes a craftsman (with at least two years of apprenticeship experience at Hermès) about 50 hours to singlehandedly assemble this bag, perhaps even more when considering the diamond inlays and gold hardware,” he said. As for the condition, this $298,000-handbag which Privé Porter acquired in 2015 was unused, in “store fresh” condition and in its original packaging.

But beyond all the labor, material cost and exclusivity, another factor that could explain this hefty price tag may boil down to preference, according to DeSouza. “Marked by the fact that one could only buy a Birkin after developing a long, verified financial relationship with the brand, showing loyalty through spending roughly around $10,000 or $20,000, some of the notable challenges of landing a Birkin bag include the multi-year long waiting list and stringent quota that only allocates even Saudi princesses only two Birkin bags per year,” he said. And “with stores being allocated only a very small number of bags discreetly held in the back,” DeSouza continued, “odds are slim for customers to get a particular color, material, and size upon first try.” Hence, this may be why the anonymous buyer was willing to splurge much more for the exact bag he or she coveted.

Unlike previous record-breaking sales, this particular bag was not auctioned off at Christie’s ($221,846 in 2015) or Heritage Auctions ($203,150 in 2011). It was sold by Privé Porter—the world’s largest curator of unused Hermès Birkin bags which exclusively posts their inventory on Instagram. Typically, most buyers would review the inventory, request for additional photos, details, and verification of original documentation before making the purchase with Privé Porter. But the anonymous buyer of this $298,000-handbag actually first took note of the luxury bag in the press coverage of the World’s First Pop-Up Yacht that contained $2 million in Birkin bags during the 56th Fort Lauderdale International Boat Show in November 2015.

While this deviation from previous record-breaking auctions by no means indicate a shift in the way people shop for luxury goods, it does highlight how shoppers are more readily able to access coveted luxury items beyond notable auction houses and vintage stores. Nevertheless, Milton Pedraza, Founder and CEO of the Luxury Institute believes the increasingly fierce market would still have room for auction houses such as Christie’s and Sotheby’s, as consumers could generally trust them more for authenticity. Ultimately, Pedraza noted, “So long as you could trust the seller, ensure that the transferal of funds is safe and sound, and verify the product’s authenticity, it almost doesn’t matter whether you first gain knowledge of the product from an auction, a boat show, Instagram or Snapchat.”

Source: http://www.forbes.com/sites/eustaciahuen/2016/04/25/inside-the-hermes-birkin-bag-that-sold-for-record-298000/2/#34e3347f74ba

April 21, 2016

The Future of Luxury Is Now, as Heritage Brands Meet New Demands

Robb Report
By: Booth Moore
April 19, 2016

The world’s most exclusive brands—many of which cling to tradition—are reshaping their long-standing practices to provide smarter, more immediate, more sustainable, and healthier products and services. Yet technological advances and innovative new business models are not the only forces driving the rapid evolution of the luxury marketplace. At the heart of these changes are dramatic shifts in the values, attitudes, priorities, and expectations of you—the consumer.

It was one of the most exclusive fashion shows of all time. When Tom Ford debuted his comeback women’s collection in September 2010, he invited only 100 people to watch Lauren Hutton, Julianne Moore, Daphne Guinness, Beyoncé, and his other famous muses model sexy python-print gowns and fringed coats on the runway. The event took place months before the clothes would arrive in stores, and no photographs were allowed.

When Ford introduces his latest fall/winter collection this September, by contrast, anyone will be able to view the pieces online, and those with sufficient means will be able to purchase items as soon as they come down the runway. This is part of a new see-now-buy-now approach that Ford is testing. Burberry, Diane von Furstenberg, and several other fashion brands have launched similar programs.

“In a world that has become increasingly immediate, the current way of showing a collection four months before it is available to customers is an antiquated idea,” said Ford in a press release. “Our customers today want a collection that is immediately available.”

Ford’s about-face is telling. New technology, market trends, and changing social attitudes have brands and companies catering to customer demands in an unprecedented manner. Now you can acquire nearly any item (a new Zenith watch from Mr. Porter, for example) the same day or engage any service, even a private jet charter, immediately, with the swipe of a finger, and have practically anything customized to your preferences. Even so, we want more than that.

“People still buy luxury products,” says Claudia D’Arpizio, a partner at the management-consulting firm Bain & Company, which reports that the global luxury industry grew by 5 percent from 2014 to 2015 and surpassed $1 trillion in retail sales. “But they value the experience around them more than the products themselves, since the experience is more shareable.”

More of us, in other words, seek meaning from our means. “We have gone from ‘extra’ values to ‘intra’ values,” says Olivier Abtan, a partner and managing director at the Boston Consulting Group, another management-consulting firm. “That means spending good time, sustainability, health, and family.”

Thus, luxury could be a private meeting at the base of the Himalayas with an oracle ordained by the Dalai Lama, arranged by the travel company Cox & Kings; or waking up to sunrise yoga on the rooftop helipad of the Four Seasons Beverly Hills. It could be a Ralph Lauren necktie that warns you when your heart rate accelerates too rapidly, a Bentley whose interior is lined with a material made from non-animal protein leather, or your own mouse avatar, on which doctors can test cancer treatments to determine which would be most effective for you.

Technical Support

As Ford notes, you want immediate access to items, and digital platforms provide that. They also enable you to make informed purchases more easily and to engage conveniently with brands on a personal level. “Technology is a driver of shopping and customer experience,” says D’Arpizio.

According to Joshua Schulman, president of Bergdorf Goodman and NMG International at the Neiman Marcus Group, 75 percent of his company’s customers do research online before buying an item. Saks Fifth Avenue recently launched a service through which associates are available online around the clock, and they can curate personalized virtual boutiques for you on the company’s website.

E-commerce, once thought to be only for mass-market brands, is becoming critical to the luxury sector. “In the U.S., some fashion brands have 20 to 30 percent of their sales online,” says Abtan. He predicts that within the next year or two every luxury brand will be selling online, including such holdouts as Chanel and Harry Winston. Regardless of the nature of the purchase, it seems everyone enjoys the convenience of shopping online.

But as larger luxury brands proliferate on the web and open stores in every city, smaller boutique brands are filling a niche by providing individualized experiences and access. Human contact, when it’s on your terms, can be the height of luxury.

In February, just hours after his fall/winter-collection runway show in New York, the women’s-wear designer Joseph Altuzarra spent an entire afternoon at Bergdorf Goodman greeting clients as part of the store’s Right from the Runway initiative. He explained his inspiration for the collection (Jim Jarmusch’s vampire film Only Lovers Left Alive), described the work involved in the soutache braided embroidery on the back of a coat, and offered suggestions on how to style different looks. One woman, who was visiting from Europe, planned to buy a green ombré tie-dyed dress from the collection. After chatting with the designer, she purchased several additional pieces. “Women love having a relationship with the product they buy, and part of that is having a relationship with the designer,” says Altuzarra. “Some designers are able to do that through digital and Instagram, but usually that’s a relationship with a younger, more aspirational client. At the price point we’re selling at, with $5,000 dresses, our customers are digitally aware, but they are not influenced by it. They are not on Instagram 24/7 looking at runway shows.”

At his showroom in Manhattan, jeweler James de Givenchy works with each of his clients to create a one-of-a-kind piece. The average wait time for completion is eight weeks, and no one complains. “We have 12 manufacturers downstairs, and we serve a small market of people who want to have things made especially for them,” de Givenchy says. “It’s the experience of meeting and discussing what their needs are.”

Have It Your Way

The travel industry also recognizes the value of individual attention. Companies understand that you want to personalize trips and experience your passions. This could mean attending a sold-out baseball game in Osaka, Japan, or shopping for a Ferrari at the automaker’s headquarters in Maranello, Italy, according to Scott Wiseman, president for the Americas at Cox & Kings. “It used to be that luxury had to do with being first to a new property or destination,” he says. “Now people want to be part of something instead of watching it.” Wiseman says his clients can overnight in a Maasai mud hut, for example, and learn something of the local culture.

Neil Jacobs, CEO of Six Senses Hotels Resorts Spas, sees a demand for nontraditional travel experiences from his company’s clients. “We never talk about exclusivity,” he says, “we talk about inclusivity.” He cites the appeal of the organic free-range chicken farm at the brand’s Yao Noi property in Thailand, where you can collect your own eggs for breakfast. “It’s about experience and community engagement,” says Jacobs. “Customers who are spending north of $1,000 a night want more than just good service and a great bed.”

Community engagement can extend to guest rooms. Gone is cookie-cutter hotel design: “People are preoccupied with the personality of spaces,” says Ian Carr, co-CEO of the hospitality and residential design firm Hirsch Bedner Associates. “They don’t want generic or transient. They want curated, personal, locally connected.”

Hospitality companies also recognize guests’ desires for seamless service and freedom from awkward, time-consuming social interactions. Technology can help address those demands. “More and more, people don’t want to talk to anyone,” says Herve Humler, president and COO of the Ritz-Carlton Hotel Company, which has a GPS-enabled service in the works. It is expected to allow guests at the brand’s resorts to use their mobile devices to order lunch from the beach, for example, and have a server locate their chaise longue on the sand.

Sustainable Efforts

That lunch likely will not arrive in Styrofoam, and it could well include meat from animals that have been responsibly raised or produce that has been sustainably farmed. Cited in 2010 by the Harvard Business Review as a corporate mega-trend that would rival the impacts of mass production and electrification, sustainability is making its way into the luxury world. The luxury-industry conglomerate Kering’s first Environmental Profit and Loss report, published last year, set targets for reducing emissions and waste from its production and supply chain. Jewelry brands Chopard and Tiffany & Co. have begun using ethically mined gems and recycling gold, silver, and platinum, because an increasing number of customers demanded that they do so.

In the luxury-auto market, the SUV, with its relatively low mileage rating, has remained popular enough for Jaguar, Maserati, and Bentley to launch, or prepare to launch, their first models. However, according to a March report by Donatas Bimba of the market-research firm Euromonitor International, sales of plug-in electric vehicles are set to bounce back in 2016 and record solid growth from 2017 onward thanks to upgraded models and improved charging infrastructure. Bimba cited plug-in hybrid vehicles as “the most dynamic new car segment in the U.S.” and pointed to the BMW i8 and Mercedes-Benz S500e. He also noted the potential impact of the Model X all-electric SUV from Tesla, which is aiming to woo customers away from their Porsche Cayennes and Range Rovers.

“The electrification of the drivetrain is not a temporary phenomenon; it is the future of mobility,” says Gorden Wagener, the chief designer at Mercedes-Benz, which has plans to offer 10 plug-in hybrid models by 2017 and recently announced a new policy requiring top managers to drive electrified, as opposed to gas-powered, company cars.

In addition to offering more environmentally friendly models, luxury carmakers may begin adding sustainable materials to their vehicles’ cabins. “People on the top level of society—our customers—sooner or later won’t order a Bentley with 20 hides, because as a, say, vegan person, they will not accept it,” says Stefan Sielaff, director of design for Bentley Motors. “On the other side, they are not going to accept artificial leather, because it is oil based, so you really have to start experimenting with alternative, organic materials, such as textiles made of animal-free protein leather, silks, even stone.” Bentley is already offering stone veneers, made of rocks sourced from quarries in India, in its Mulsanne models.

The transition to autonomous-driving vehicles could have an even more profound effect on car design. “Maybe in the future, the car is a sitting room, a living room, a conference room, and you use the time in the car in a different way,” says Sielaff. “It becomes like sitting in first class of an aircraft.”

In BMW’s Vision Next 100 self-driving concept car, the steering wheel and center console retract so that the driver and front-seat passenger can turn toward each other. Another autonomous-driving vehicle, the Mercedes-Benz F 015 research car, is described as a “luxury lounge,” with chairs that can rotate to form a club-style seating arrangement.

The Balance Equation

Our own health is as important to many of us as the planet’s, and fashion and hospitality brands, along with hospitals and medical practices, are responding accordingly. Fashion labels are designing their own Fitbit devices (Tory Burch), activewear (Zegna), and connected clothing. Ralph Lauren’s PoloTech shirt works with an iPhone or Apple Watch to put real-time workout data in your hand. A smart suit or necktie that could advise the wearer on heart rate and body temperature may not be far off. “Living a luxury lifestyle isn’t just the dream of having a better life,” says David Lauren, executive vice president of global advertising, marketing, and communications at Ralph Lauren. “It’s also how technology can help you live a healthier, better life now.”

The country’s leading hospitals have long offered executive health programs that work with patients on preventive health care, nutrition, and stress management. The programs were initiated in the 1960s to protect C-level managers and board members considered valuable assets by corporations. “But now, the real growth segment has been in individuals motivated toward this kind of health-care surveillance,” says Dr. Benjamin Ansell, the director of UCLA’s Executive Health Program, which provides personalized, in-depth evaluations. Private practices offer similar programs.

Craig Venter, one of the first people to map the human genome, offers an executive physical at his latest venture, the La Jolla, Calif.–based Human Longevity. For $25,000, the company will sequence your DNA and run a full complement of tests to determine your risk for heart disease, melanoma, dementia, and other ailments. “Having the ability to control health and life outcomes is the ultimate luxury,” he says. (Some experts argue that genome sequencing alone may not be sufficient to detect health risks, and that further research is needed.)

Venter’s company is focused on advanced preventive care; others provide exclusive treatments. Champions Oncology is among the companies offering a mouse avatar to cancer patients. For a price starting at $10,000, Champions will remove a portion of the patient’s tumor, inject it into the mouse, and have the animal undergo different treatments to determine which will work best for the patient. (Doctors disagree on the efficacy of such practices when compared to human clinical trials.)

In the hospitality realm, hotels and resorts are providing health and wellness services that go far beyond facials and massages. The comforts of home on the road now include nutritious foods, fully equipped workout facilities, yoga, and spin classes. “It’s a luxury to have normalcy when you travel,” says Michael Newcombe, general manager for the Four Seasons Los Angeles at Beverly Hills. He oversees all 38 Four Seasons spas in the Americas and has partnered on services with local fitness professionals, dermatologists, and medical providers.

Health retreats offer increasingly sophisticated medical services, such as Alzheimer’s prevention through cognitive stimulation, sleep recovery programs, and couples counseling. “The old-fashioned notion of going to a health spa involves weight loss and plastic surgery,” says Alejandro Bataller, a vice president at the SHA Wellness Clinic near Alicante, Spain. “But now, it’s so much more.” The SHA experience includes classes at the clinic’s health academy, where visitors learn how to manage stress and cook healthy meals. And Bataller is working with a Spanish university to develop an app that will keep track of guests’ progress after they leave. “We are going to be able to support you through technology wherever you are,” he says.

But for all the ways luxury companies are employing new technologies to meet your demands and enhance your life—providing instant access to the latest fashions or seamless service at resorts and hotels or cutting-edge wellness programs—their ability to forge relationships with you and other clients may ultimately determine whether they succeed or fail, says Milton Pedraza, CEO of the Luxury Institute, a research organization in New York. “What wealthy people want is empathy, trustworthiness, the emotional elements of humanity,” he says. “It’s not a points program or Champagne when you walk in the store that matters. It’s doing little things that mean so much more.”

Accordingly, Pedraza says, the luxury industry is paying particular attention to women, and not just with marketing initiatives such as Bergdorf Goodman’s Right from the Runway. “[Women’s growing influence] is a big trend in luxury,” he says, citing Gucci’s Chime for Change charity campaign, supporting girls around the globe, and the LVMH-owned Champagne house Veuve Clicquot’s Business Woman Award as strategic outreach programs.

“Women have the say and the money,” he observes, “and we will see that grow as more millennial women get into higher levels of corporations. How will it manifest itself? Maybe a nicer world.”

Certainly that would be the most welcome change of all.

Source: http://robbreport.com/sports-leisure/future-luxury-now-heritage-brands-meet-new-demands#sthash.dNjDZXhF.dpuf

April 12, 2016

Travel Professionals Identify 15 Luxury Travel Trends For 2016 And Beyond

Travel Market
By: Harvey Chipkin
April 12, 2017

Luxury travel buzzwords like authentic, local, curate, and, of course, experience may be overused, but they have become buzzwords because of their phenomenal staying power. While some trends fade with time, some just seem to resound with customers from one year into the next. Here’s how a group of luxury travel professionals and other experts see the trends shaping up at the high end of the market for the rest of this year and into the next.

1. Doubling down on local
“Travelers want to be with locals,” said Jack Ezon, president of Ovation Vacations in New York. “They want to be immersed in a destination. Instead of guides who know a lot of facts, they want insiders who can really give them the lowdown. Or they want a nightlife host who can take them to the coolest bars and nightspots and tell the story from their own perspective.”

At The Nines Hotel in Portland, OR, director of sales and marketing Laura Van Daal said, “Everyone in the hotel is a concierge and a local expert. They are trained to listen to the specifics of what a guest likes or is looking for, because everyone wants a different experience. We have contacts all over the city, so we can get to visit the rare books department of Powell’s Books, or we can get people into the Nike or Adidas employee store where they can get great discounts.”

Milton Pedraza, CEO of The Luxury Institute, said, “It’s not just about getting a table at the best restaurant, but it might be getting the right table. There’s a popular restaurant in Paris where all the tourists are on the second floor and the locals are on the first floor. If an agent knows a concierge, he might be able to get the client to a first-floor table.”

2. Authentic, but maybe not too authentic
Authenticity can be taken too literally. Said Ezon, “You really have to be clear with clients about what they’re getting. When they say they want a ‘sense of place,’ that really means they want to be in a hotel they can use as a springboard from which to see their surroundings. If guests get to a ranch and there’s no air conditioning, they might not be happy.”

3. Personalization: It’s the little things that count
Personalization doesn’t have to be a big deal. Ezon said he had a couple going to Africa for a honeymoon. After a long week of travel, they arrived at their camp and entered their tent to find pictures of their family on the “walls” and their wedding song playing. “They couldn’t believe it,” said Ezon. “It’s the agent’s job to provide that kind of information to the people on the ground.”

Matteo Della Grazia, owner of tour operator Fuoritinerario — Discover Your Italy, said, “We are seeing increasing demand for local and authentic experiences that allow clients to create their own local product. For instance, they can work for a day at a top Tuscany vineyard with a wine- maker to create a personalized wine, which will then be aged, bottled, and shipped to them. We call it Adopt A Barrel. We have a similar program for perfume.”

4. Hip at the high end
Hotels brands like Ace prove that travelers will spend more to be around people and things they perceive as hip. Still, said Van Daal, while “hip and real luxury can go hand in hand, being hip is not enough. You still need great service to truly be luxury.”

5. Whimsical wandering
It may be a generational thing but there are travelers who like to arrive at their destination without any plans beyond their first hotel stay. Ezon, for example, has a couple spending $100,000 on their honeymoon and doing it day by day, consulting with him continuously about what to do next.

6. Speaking meaningfully
“Access is one thing,” said Susan Farewell of Farewell Travels, “but an experience that satisfies a greater sense of purpose is the ultimate luxury.” Farewell is putting together a trip for a family of five going to southeast Asia, for example, that will include an elephant encounter, though they are not interested in anything that exploits the animals for tourism. “They are interested in a non-profit ethical elephant experience, where they see the animals but are not riding them or enabling any exploitation of them.”

7. Unexpected pairings
Travelers are combining destinations and experiences that are very different from one another. Farewell is working on one trip where the couple is spending five days doing a cooking program in Tuscany and then moving up to Lake Garda for a few days of sailing lessons.

8. Fun with food
Everybody talks about cooking lessons or meeting the local chefs, but some want to go further. Farewell notes that in Ho Chi Minh City, you can take a Foodie Tour by Vespa, where a driver takes each traveler from one food venue to the next. It’s a high level of curated street food options, coffee houses, etc. The experience is off-the-charts fun but also informative and delicious.”

Della Grazia said some clients visit local homes where they cook and eat with the residents; sometimes those hosts act as local guides to explore the neighborhood.

9. Long-term trip planning
“I work with clients long term,” said Farewell, “seeing their travel needs in terms of five-year chunks. We develop a five-year travel plan for them, which we revisit every year. So I get questions like, ‘Where are we going this summer?’ They assume I have already thought it through for them based on their past trips, their kids’ ages, and the five-year plan we designed.”
 
10. Destination roulette
While everybody tries to figure out the “hot destinations,” sometimes it’s just random or based on a magazine article or news event, or even a shift in currency. Douglas Easton, managing partner at Celestielle Travel, said, “Maybe a new hotel will open or there’ll be an article in a travel magazine and suddenly bookings will come in. We had not a single Namibia booking last year and suddenly had four separate ones. That’s why you just have to be prepared for what comes up.”

Also, it’s long been known that even the wealthy like to get the best possible value in their vacations, and one way to do that is by staying on top of exchange rates with the dollar. Said Ezon, “If your client is going to spend $40,000 on a trip and there’s a big swing in the currency, they could save a third or more on that. That is why Europe has remained popular.”

11. Exotic emerges
Pedraza noted that younger travelers are heading for more exotic places, like Cambodia and Bali. “They have already been to the more traditional destinations so there is a real opportunity here.”

And Scott Wiseman, president of Cox & Kings, said, “Whether it’s requesting tickets to a sold-out baseball game in Japan, taking a motorcycle journey through Patagonia, textile shopping in remote India, or taking a private polo lesson in Argentina, today’s travelers are limited only by their imagination.”

12. Convenience is king
Luxury clients are flocking to buy ancillary services that make their travel experience easier. He Ezon said that over the past three years Ovation has had a 37.4% increase in ancillary travel products including: luggage shipping, airport greeters (to assist with connections, arrivals, and departures), and park guides (VIP guides in amusement parks to help deal with lines, logistics, etc.)

13. The human touch
“Even young people don’t just want to be digital beings,” said Pedraza. “They want to engage with other people—whether it’s tour guides, people on the street, or other travelers. It’s like when electricity was invented. You would flick the switch on and off because of the novelty. Now the novelty of digital has faded and people want emotional connections.”

14. It’s nice to share
The quality of sharing accommodations—whether it be Airbnb or sharing options introduced by hotel companies—is improving, said Pedraza. “This might lend itself to the local trend, as well, “because your sharing host might for a small fee become your local guide.”

15. Art is the new cuisine
While food has taken a central place in luxury travel, said Ezon, so too has art. “So many properties are recruiting an artist-in-residence and turning their public spaces into evolving galleries from local artists,” he noted, with revolving art exhibits. The new Faena Hotel in Miami Beach kicks up the art theme with a whole art district, art programs for guests, and a children’s art immersion experience where local artists inspire kids to create their own masterpieces. The Ritz-Carlton Toronto has an in-house artist who designs plates for the hotel’s restaurant and works with guests to design their own.

Source: http://www.travelmarketreport.com/articles/Travel-Professionals-Identify-15-Luxury-Travel-Trends-For-2016-And-Beyond

March 24, 2016

Younger affluents with higher incomes more willing to pay for fine wines

Luxury Daily
By: Jen King
March 24, 2016

As a consumer’s income bracket increases, the likelihood of drinking wine once per week also rises, according to a new survey by the Luxury Institute.

The “Premium Wine Luxury Brand Status Index (LBSI)” survey found that 90 percent of affluent consumers in the United States self-identify as wine drinkers, with 58 percent drinking wine at least once per week. How often an individual indulges in a glass of wine and how much they are willing to spend on bottles is directly linked to income, insights that may provide the oenology industry an understanding on how to best market to this demographic.

“Wine is experiential. Consumers are purchasing wine at higher volumes because they enjoy the restaurant and at-home dining experiences that include a great quality wine,” said Milton Pedraza, CEO of the Luxury Institute. “Consumers will continue to spend more on experiences rather than products. Not only will they consume more wine but they will consume wine of higher quality and at a higher price.

“Wine continues to be more popular than beer or spirits, and it is acquiring a greater share in the beverage market; this trend has been evolving over the years,” he said. “Women and millennials, in particular, are consuming at a much higher rate as their buying power and connoisseurship evolves.”

The Luxury Institute’s Premium Wine Luxury Brand Status Index surveyed consumers 21 and older from households with an income of at least $150,000 a year.

Wine or reason
For the survey, affluent consumers were asked to evaluate 21 premium domestic wine brands based on the four pillars of brand value. Luxury Institute defines these pillars as superior quality, exclusivity, enhanced social status and an overall superior consumption experience.

The survey also asked participants to share which winemakers they feel are worth paying a premium price for, those they would recommend to friends and family and which wines they plan on purchasing next.

Luxury Institute found that of the 90 percent of affluents wine drinkers, 58 percent drink wine once a week, and 78 percent drink wine at least on a monthly basis. Affluent women are also more likely to be wine drinkers, with 61 percent drinking wine at least once a week compared to only 55 percent of men, who also tend to spend more on fine wine.

As consumers age, the frequency of weekly wine drinking also increases, notably after age 55, and peaks at 65 and older. Of this older demographic, 63 percent consume wine at least weekly.

Puiforcat Sommelier
Puiforcat Sommelier collection 

Similarly with age, as income rises so does the likelihood of enjoying a glass of wine during the week. Luxury Institute found that 53 percent of respondents earning less than $200,000 drink wine weekly or more frequently, with the statistic rising to 67 percent for those earning $500,000 or more in annual income.

Understandably, the price a consumer is willing to pay for bottles of wine is dependent on their income demographic. Willingness to pay for higher priced bottles increases with income and surprisingly decreases with age.

Consumers earning less than $200,000 spend $24 on average, compared to an average of $41 per bottle for those with incomes of $500,000 or more. Additionally, consumers under the age of 45 years old spend $33 on average for fine wine, but those 65 and older purchase bottles at retail stores for $23.

These averages are also dependent on occasion, with consumers typically purchasing  $28 at retail stores, $36 for a casual weekday dinner at a restaurant and $48 for weekend dining or during a special occasion of some sort.

Silversea Culinary Arts & Wine Voyages
Silversea Culinary Arts & Wine Voyages

In regard to purchasing wine at a restaurant, the survey found that seven out of eight affluent consumers do so. Twenty-eight percent do so at least once a week, with 62 percent of purchases being by the glass rather than the bottle.

The higher the income, the more likely it is that a consumer will opt for a bottle. Those with $500,000 or more in income are 63 percent more likely to buy wine by the bottle in a restaurant, spending on average $70 for special occasions and $55 for a weekday dinner.

This is much higher than the average of $48 per bottle for special occasions and $36 for weekday dining spent by affluent consumers.

It’s okay to wine a little
Recently, increased attention has been placed on the wine industry from luxury brands.

Four Seasons Hotels and Resorts, for example, is pursuing a different kind of California dreamer with its latest property.

Alongside Alcion Ventures and Bald Mountain Development, Four Seasons will open 85 guest rooms and 20 private residence villas in Napa Valley, CA in early 2018. Napa Valley’s allure to cultured luxurians makes it an obvious destination for the hotelier, which already has several California properties (see story).

Four Seasons Napa Valley
Four Seasons’ Napa Valley, CA property 

Also, Hermès-owned silver maker Puiforcat is paying homage to the ritual of wine tasting with the help of a duo of experts.

Together with sommelier Enrico Bernardo and designer Michael Anastassiades, the brand created a collection intended to bring a new experience to those who revel in the tasting or serving of the beverage. Working with external creatives helped Puiforcat go outside the expected, traditional wine glass (see story).

Winemakers should rely on experiential storytelling and outreach to pull consumers in their direction.

“Quality and experience matter tremendously,” Mr. Pedraza said. “Winemakers should use their winery and membership experiences to create a client experience that makes them feel special.

“Wine companies should also use the on-premise platform, restaurants, hotels, etc., and off-premise platform, wine and liquor stores, to deliver beyond the product and create an experience that is focused on a great quality product with a compelling story and an experience that creates a long-term relationship,” he said.

Source: http://www.luxurydaily.com/younger-affluents-with-higher-incomes-more-willing-to-pay-for-fine-wines/

March 11, 2016

As Wall Street Bonuses Dip, New York Luxury Markets Are Feeling The Pain

International Business Times
By: Owen Davis
March 11, 2016

At Lane Jewelers in lower Manhattan, owner David Ostrow looked out the window. On the sidewalk, a man with a gray mustache peered intently at the necklaces in the display case. “This is his third time here this week,” Ostrow said. “He hasn’t bought anything.”

Business is down at the jeweler, a third-generation family-owned store just a block from Wall Street, whose clientele includes both C-suite executives and back-office bankers. The culprit: a lackluster season for big bank bonuses. “I can already tell you my numbers are down from last year,” Ostrow said.

When bonuses spike, Lane does brisk business on items like diamond earrings and tennis bracelets, purchases Ostrow called “pick-me-ups.” But the past few months have been a letdown. “Obviously there’s a trickle effect,” Ostrow said. “These guys’ whole year is their bonus check.”

Eight years after the financial crisis, Wall Street bonuses have yet to match the soaring peaks of 2006 and 2007, and recent gains in annual payouts have proved short-lived. The average New York investment banker’s bonus fell by 9 percent in 2015 to $146,200, the second down year in a row, according to New York Comptroller Thomas DiNapoli. And luxury markets are feeling it.

“The financial sector has been important for the New York economy since Peter Stuyvesant’s time 400 years ago,” said Lawrence J. White, professor of economics at New York University’s Stern School of Business. “There is no question there’s a ripple effect if bonuses aren’t going to be what they’ve been in the past.”

Of course, the smaller average bonus, which amounts to nearly three times the median American salary, is nothing to sneeze at. But in New York City, the world’s luxury capital, a wobble in bankers’ bonuses sends a shudder through markets for everything from Lamborghinis to $40 steaks.

Wages and salaries in the securities industry make up more than one-fifth of total New York City income, according to the comptroller’s office, although only 5 percent of New Yorkers work in finance. Overall, Wall Street bonuses add up to more than twice the incomes of all U.S. minimum-wage workers.

The total decline in 2015 year-end bonuses amounted to $1.7 billion, although not all of that sum will be felt immediately, since it includes deferred stock awards. But bonus season, which typically lasts from December to March, serves as a bellwether for luxury markets, according to Milton Pedraza, chief executive of the Luxury Institute, a high-end consulting goods and services consulting firm.

“Salaries are great, but bonuses are what really make the financial services industry,” Pedraza said. “It’s a performance-driven industry.”

Several factors combined to crimp bonuses in what DiNapoli called “a challenging year in the financial markets.” The seven-year bull market in stocks finally stumbled over the summer, catching some banks off balance. And the advance of new regulations has weighed heavily on some banking divisions, particularly bond trading, where revenue has fallen nearly 40 percent since 2010 at the 10 largest investment banks.

“The uncertainty that exists in the marketplace will make people store their nuts for the winter a great deal more this year than in previous years,” Pedraza said. The same global economic worries that battered the markets in the past nine months have also diminished high-end foreign demand, Pedraza said, estimating that luxury sales have dipped as much as 20 percent in the past year.

Robert Serrano is feeling the pinch. As manager of Manhattan Motorcars, Serrano sells the type of high-end cars financiers often splurge on: Bugatti, Porsche, Rolls-Royce. But in a disappointing Wall Street bonus season, few are moving. “We had an extremely slow January and February.” Serrano said. “If the market has any effect on high-end cars, then you’re definitely seeing it.”

Serrano, who said that around half his clients work in the financial industry, has had to accept multiple canceled orders already this year, a relatively rare occurrence. “The market has a direct effect,” Serrano said. “Our cars are wants, not needs.”

Wall Street weddings are also shrinking with the bonuses, according to Maya Kalman, CEO and creative director at Swank Productions, a luxury wedding planning and event design firm in the Chelsea section of Manhattan. Two clients who work in banking have recently approached Kalman to dial back on the number of wedding invites they can afford. For a Swank event, clients pay roughly $1,000 a head.

In a season that usually has clients looking forward to spring, sliding bonuses have put a slight chill on the planning business. “In March the weather gets better and people’s outlook gets brighter,” Kalman said. “But the first couple of months this year, bonus issues have definitely played a role in people being a little more skittish about their budgets.”

At Delmonico’s restaurant just off Wall Street, smaller bonus checks have meant fewer celebratory steaks for the bankers who work in the buildings towering overhead. “Naturally, when the bonuses are not what people expect them to be, we might see a slight decline,” said Carin Sarafian, the director of sales and marketing at Delmonico’s.

But business at the famed steakhouse, which opened in 1837, hasn’t suffered too greatly. The modest downturn in diners toasting big bonuses has been replaced by more morale-building team events, Sarafian said, as managers seek to assuage bankers whose payouts shrank in 2015.

And the restaurant has seen worse than this year’s disappointing bonus haul. “We’ve weathered all the ups and downs of markets, 9/11, Hurricane Sandy,” Sarafian said. “I don’t think the bonuses are going to really hurt Delmonico’s anytime soon.”

At Lane Jewelers, Ostrow expressed optimism that bonus season might end on a positive note. A smartly dressed man standing at the counter was hopeful, too. “I find out Friday,” he said, crossing his fingers.

Source: http://www.ibtimes.com/wall-street-bonuses-dip-new-york-luxury-markets-are-feeling-pain-2332717

March 2, 2016

Retail store system is broken: Luxury Institute

Luxury Daily
By: Sarah Jones
March 2, 2016

Bricks-and-mortar retail is still generally operating in an out-of-date fashion, creating obstacles for sales staff, according to the Luxury Institute.

The consultancy conducted a focus group with 40 store managers who oversee multi-brand, premium and luxury stores, and found that there are a number of improvements that companies could make to help their in-store staff be more productive and effective. From updating technology and CRM systems to reallocating employee resources, there is room for improvement that needs to begin at the top.

“Currently, stores are designed to be points of sale rather than relationship building centers,” said  Milton Pedraza, founder and CEO of Luxury Institute. “Stores need to be redesigned aesthetically and digitally to be spaces that make clients feel special and inspires them to buy.”

In-store solutions
Store managers frequently find themselves off the sales floor as they work to fulfill organizational tasks in the back of the house, such as sorting inventory, generating reports and communicating with the corporate office. This time they spend in their offices takes away from time they could be spending creating a relationship with customers.

In addition, sales associates may run into the back to open boxes, leaving them frazzled and potentially dirty when they return to meet clients on the sales floor.

Apple, for one, has changed this division of responsibilities, separating the functions of operations and consumer engagement into different positions. In place of the store staff, a specialized team could take care of back of house operations for a small region.

Hugo Boss New York Fifth Ave store 400
Hugo Boss store on Fifth Avenue

This frees up sales staff to focus on client retention, data collection and conversion, which will add up to sales in the long term. In this environment, Luxury Institute found store managers would feel more comfortable having higher sales goals set.

More than half of managers said they have absolutely no control over hiring and firing their employees, and none have complete control, creating an environment where up to 40 percent of workers are underperforming.

While they do not have the ability to build their teams to their specifications, store managers are still held accountable for the results generated by their employees. These managers would like corporate to enact educational outreach to train managers and associates in employee selection, helping them to assess a candidate’s fit for the job outside of their skills and experience.

Size of staff is also a concern, as the managers polled agreed that just raising their employee number by 10 percent could boost sales by 25 percent.

Most managers appreciate the annual meetings that bring together store employees and corporate representatives to discuss products and store challenges. However, most feel that this one-time meeting is not enough, preferring a biannual schedule or a meeting per new season.

Gucci_Store_ Montenpoleone_handbags
Gucci Montenapoleone store

Managers are also concerned about their coaching of employees, something that many say they never received any training on. The efficacy and frequency of coaching from a manager to a sales associate can have a great impact on sales.

Corporate should also give store-level managers a certain level of freedom to respond and react to opportunities in their local market to drive growth. This may mean sharing best practices with a non-competitive brand or using insights to innovate the store experience.

Typically, corporate chooses to dictate down to the stores, allowing minimal room for flexibility.

In-store technology has not caught up to today’s omnichannel shopping patterns. Retailers could be missing out on 10 to 20 percent of sales by not sharing inventory across channels, as they are unable to offer another option to purchase an out-of-stock item in their store.

Another investment that would change client engagement is the implementation of a customer relationship management platform. Many retailers have no CRM system in place, choosing to store data gathered at point of sale in clunky spreadsheets, and only half have a CRM that they like.

DFS shopper3
DFS shopper

CRM platforms allow associates to access data more easily, helping them to spot opportunities for client engagement. Technology is a big deal to staff, and stores without upgraded platforms may see their top performers leaving to join a competitor who does have the necessary technology to help them be more successful.

“Brands have spent millions of dollars on the best technology and digitization in their stores, yet are seeing no return on investment due to low usage of the technology,” Mr. Pedraza said.

“However, these tools cannot help the associates increase their effectiveness if they are not actively engaged in using them,” he said. “Training and education dramatically increase the probability that the front line will use these tools to build client relationships and drive sales.”

Another step toward retaining staff is through compensation. Bonuses, which can be anywhere from 15 to 20 percent of a base salary, are hinged on reaching what are often considered unrealistic goals, particularly in the face of turbulent economies.

Instead, managers suggest incentives based on exceeding the previous year’s results.

Millennial mindset
Millennials are growing into luxury shoppers, but despite having the same income levels as their boomer parents at their age, the more youthful set are saddled with more debt. In addition, this group favors experiences over things, making for a tougher sell for those marketing hard luxury.

One of the engagement tools that managers feel is underused is social media. Often, they are not empowered to use Instagram or Pinterest to communicate with a potential client by letting her know about new products or by sharing inspiration.

Consumers social media
Millennial consumers turn to social media for research

Social media has opened the world up for millennials and for the first time has allowed luxury brands to directly interact with tomorrow’s affluent consumers.

During Luxury Interactive 2015’s panel “Millennial Marketing — Tapping Into the Social-Obsessed Segment” on Oct. 15, executives from brands not typically associated with the millennial consumer discussed the importance of reaching out to this demographic while they are young to establish a connection and cement a bond that will mature as they age. Social media has emerged as the driving force behind these connections as various platforms allow the creativity and personalities of millennial consumers to flourish as they share and embrace their interests and passions (see story).

Leaders feel they do not have the resources or time available to effectively court millennials, either through special events catered to them.

“A common misconception is that millennials do not want human interaction,” Mr. Pedraza said. “Like other generations, millennials value relationships with those who prove to be experts on the product and are empathetic, trustworthy and generous. Luxury brands need to drive consumers to the stores through social media, outreach and events.”

Source: https://www.luxurydaily.com/the-retail-store-system-is-broken-luxury-institute/

February 11, 2016

Chanel, Hermès rank as top brands worth premium pricing: survey

Luxury Daily
By: Jen King
February 11, 2016

The popularity of a widely bought brand does not always sync with consumers’ perception of its value and luxury credentials, according to a new survey by the Luxury Institute.

For its Luxury Brand Status Index series, Luxury Institute surveyed affluent women from seven of the world’s wealthiest nations to gain insights on which brands hold the most clout in terms of quality, exclusivity, social status and overall ownership. Consumer opinion is tied to whether she feels the asking price of a premium product is worth it and correlates directly to the brand’s perceived value by those who shop it frequently and those who aspire to do so.

“Luxury and premium brands  provide their customers quality and expertly crafted products and deliver them with empathy, trustworthiness and generosity to build client relationships,” said Milton Pedraza, founder and CEO of Luxury Institute.

“The result is a compelling product paired with an experience that cannot be found within the mass market,” he said. “These brands have a compelling value proposition that appeals to affluent women.”

Luxury Institute’s “2016 Global Luxury Brand Status Index (LBSI) – Women’s Fashion” surveyed 3,999 affluent women from the United States, United Kingdom, France, Germany, Italy, China and Japan. The women surveyed gave more than four dozen brands a score of 0-10 based on the following prompts: This brand delivers consistently superior quality; This brand is truly unique and exclusive; This brand is purchased by people who are admired and respected and This brand makes its buyers feel special across the full customer experience.

Flexing credentials
The value of a luxury product is not solely based on market retail price, but rather a combination of quality, exclusivity and pride of ownership. If a brand is popular it is not a true representation of its luxury credentials.

For example, U.S. fashion label Calvin Klein is immensely popular among affluent women, with most consumers likely to have purchased from the brand in the past year. However, Calvin Klein’s popularity does not translate to a high LBSI score, with the brand placing at the bottom of Luxury Institute’s overall ratings.

Similarly, the most popular fashion brands among women in the U.S. are Calvin Klein, Polo Ralph Lauren and Michael Kors. While popular and on the lower end of the price spectrum in relation to higher-end brands, these labels are not always associated with the exclusivity of true luxury.

michael kors.resort16
Michael Kors, resort 2016

Familiarity and popularity status does not always translate to increased sales, either.

While France’s Chanel was the most familiar fashion house among respondents, the atelier only placed second when respondents were asked which brand they plan to purchase from next. Based on next purchase plans, Chanel placed behind Calvin Klein and ahead of Polo Ralph Lauren and Burberry.

If a consumer agrees that a brand is worth premium prices, it is often an indication of the brand’s overall value. As such, affluent women ranked Chanel and French leather goods maker Hermès as the two fashion houses most worth their premium asking prices, followed by Christian Dior, Louis Vuitton and Prada.

Hermes shoe fw 2014
Hermès fall/winter 2014

To highlight value and justify high price tags, luxury brands often communicate their message of worth through the use of craftsmanship. Chanel most recently took this approach to express the value of its most exclusive collection, its couture offerings.

To do so, Chanel took consumers inside its house to cultivate exclusivity and mystery.

The latest chapter of the ongoing Inside Chanel series focuses on the creation of the brand’s haute couture clothing. While the reveal will satisfy the modern consumer’s craving for transparency, the breakneck speed of the video and repeated use of Coco Chanel quotes maintains the brand’s more enigmatic aspects (see story).

Still from Inside Chanel Chapter 13
Still from Inside Chanel N°13 

Luxury brands are also adept in customer experience and making the consumer feel special. The LBSI results showed that a mix of well-established and newer brands are well-versed in this area, with Hermès, Temperley London, Chanel, Brunello Cucinelli and Proenza Schouler as the top five.

Despite an increase in digital communications, the luxury space still relies heavily on word of mouth recommendations. Word of mouth remains as the best measure of satisfaction if a consumer has enjoyed her experience with a brand’s products and services.

Globally, affluent women who partook in the survey are most likely to recommend Loro Piana, Chanel, Hermès, Akris and Brunello Cucinelli to family and close friends.

Smaller, boutique labels proved themselves within the survey responses as well, showing that a brand does not need a rich heritage to resonate with affluent consumers when considering value and standing.

“It was interesting to see that boutique luxury brands such as Temperley London, Brunello Cucinelli and Proenza Schouler scored nearly as high as well established luxury brands such as Hermès and Chanel,” Mr. Pedraza said.

“Specifically, Proenza Schouler received an overall 7.66 LBSI, higher than luxury veterans such as Louis Vuitton, Dior and Prada,” he said. “The luxury customer base is open to less recognized brands that are able to provide an exclusive and unique product paired with an exceptional customer experience.

“Brands can no longer rely heavily on their rich heritage and recognition to keep clients loyal as competition increases and customers recognize the value of boutique brands.”

Measures of desire
Having an understanding of which brands are most desirable within a particular market can help labels structure strategies in that location.

Exclusivity and desirability go hand in hand for China’s wealthy, with the same brands ranked in the top five for both characteristics in a new study by Promise Consulting and BNP Exane.

Hermès takes home top prize for exclusivity, which measures the consistent quality of goods, the brand’s prestige, the valuation of the brand’s customers and its ability to justify a high price point. Chinese consumers are generally becoming more sophisticated luxury consumers, making for tougher competition between labels for their attention and affection (see story).

Likewise, an in depth understanding of consumer behavior in different markets is also useful as brands navigate the likes and interests of various demographics.

As the luxury landscape continues to evolve and geopolitical turmoil affects emerging markets, the brands that will come out on top must be able to adapt to the resulting consumer behavior.

On Sept. 29 in New York, part of a 15-city world tour of sorts, Albatross Global Solutions shared insights from its annual research study “The Journey of the Luxury Consumer” to better understand motivators, the purchase journey and the consumer landscape on a global scale. A key finding has been the definition of luxury itself as consumer interest has developed from a desire for exclusivity to wanting ensured craftsmanship from the high-end brands they interact with (see story).

Raising a brand’s standing among the opinions of affluent consumers presents its challenges.

“Brands can only improve their LBSI by improving these factors in a genuine way that resonates with the customer,” Mr. Pedraza said.

“Luxury CEOs tell us that approximately 60 percent of the value derived by the luxury client is in the luxury product, and 40 percent of the value is in the relationship building capabilities,” he said.  “Brands need to continue to remain relevant, especially in this challenging environment.”

Source: http://www.luxurydaily.com/chanel-hermes-rank-as-top-brands-worth-premium-pricing-survey/

January 15, 2016

The wonderful, unexpected return of the luxury coupe

The Verge
By: Tamara Warren
January 15, 2016

If you want to win the hearts of cynical car journalists at an auto show, dazzle them with the unveiling of an unexpected luxury coupe concept. Buick, the GM brand that’s struggled with its old-guy image over the past few decades, opted to use the stage of the North American International Auto Show (NAIAS) this week to make a powerful statement about its identity. Last Sunday, Buick unveiled its vision for a luxury concept coupe — the Buick Avista, a classic two-door looker.

The “coupe,” a term with French origins, refers to a two-door body style and dates back to the turn of the 20th century. It is typically smaller and more svelte in proportion compared to a four-door sedan. In recent years, automakers have started to bend the definition of the word to include sporty four-doors, but the Avista is a true coupe in every sense of the word. “[The Avista] was purely a design exploration exercise,” says Liz Wetzel, director of interior design for Buick. “We used this project to take sculptural beauty and think about Buick and where it’s been in the past. The Buick Y-Job was the very first automotive show car. Buick used to use technology and beautiful sculpture together.” (GM’s first car design chief Harley Earl created the Y-Job, the first concept car at an auto show in 1938.)

But Buick isn’t the only luxury automaker to spark car crushes at the Detroit show this year — Infiniti is showing the Q60, and Lexus makes a powerful statement with the LC 500 production car. Both of these handsome coupes attracted considerable attention away from the more conventional crossovers and sedans.

At NAIAS, automakers’ design departments get to put their best foot forward, and the classic coupe is sure-fire way to drum up attention from admirers. “Luxury consumers have come to expect fuel efficient cars for both economical and environmental reasons,” says Milton Pedraza, CEO of the Luxury Institute. “Aerodynamics play a huge role in the fuel efficiency of cars and highly influence the design. The most aerodynamic designs are simplistic, chic, and timeless. The cars of 2016 will have a classic familiarity that comes with simplistic design, but with contemporary features that make them appealing and modern.”

Design departments are able to experiment at auto shows by pushing boundaries without the constrictions of practicality and safety regulations. When given the green light to make compelling concepts, the show fuels a sense of competition among car design studios. Buick’s exterior director of design, Holt Ware, describes Detroit as “the Super Bowl for car designers.”

“If you think about it like the race track, there are some really fabulous races around the world, but Le Mans is still Le Mans and everyone wants to go to Le Mans,” Ware says. And the Avista won this week’s Super Bowl: it took home the EyesOn Design Best Concept award.

The Avista, like most beautiful objects, started from a burst of creativity followed by an approval from management, not the other way around. “From the teams in the studio, it happened because they wanted to see themselves in a vehicle,” Ware says. “They didn’t all want to see themselves in a three-row SUV or a crossover.” Production designers worked on the car as a side project. “If you’re in a production studio, you have to justify your resources, because everyone runs on a budget. The justification for us was that it was our jam session. If a musician has a concert, you can’t mess up in a concert, but then you have the jam session where you go in the garage, throw down, and try to explore your instruments and working together as a band. That’s what we did on this vehicle as well.”

Both Wetzel and Ware says they’re shocked about the powerful response to the show car. No one at GM is saying this car, which is based off GM’s Alpha platform (the same one that underpins the Chevy Camaro) and boasts a 400-horsepower V-6, will be built. For now, the company is positioning it as a statement piece.”We’re getting the data points in North America right now, because everybody loves it. And so, when is the right time to do it?” says Mark Reuss, GM’s executive VP of global production development. “Is it three years from now; is it two years from now? Is it a year from now? When is that? That would be the next discussion. And so, it’s not out of the question, but the point of the car is, ‘here’s where Buick’s heading.’”

While Reuss fashions the presence of three big luxury coupes at the show a coincidence, I have to wonder if this splashy trio suggests that there is more space in the marketplace for new coupe buyers — particularly as Infiniti and Lexus invest in building the production versions of these cars. Pedraza suggests that automakers might be making cars that appeal to an aging population that has disposable cash. “A majority of current purchasers in wealth are baby boomers,” he says. “This age group is currently in a transition as their children move out of the house and they are left with an empty nest. They no longer need large cars and are able to buy more stylish, trendy, and fun vehicles such as coupes,” he says. Hence products like the LC and Q60 — and maybe, if we’re lucky, the Avista.

Source: http://www.theverge.com/2016/1/15/10772432/the-return-of-the-luxury-coupe-detroit-auto-show-2016

January 13, 2016

Brands need to focus on relationship-building, not selling: Luxury Institute

Luxury Daily
By: Forrest Cardamenis
January 13, 2016

For the first time since the economic crash in 2008, many top luxury CEOs are worried about the state of the industry, according to the Luxury Institute.

Issues ranging from the economy to the weather and internal service problems have contributed to a world in which nine of 10 would-be clients leave a store without a purchase and only 20 percent of the buyers return. Although the global economy and the weather are hard to control or predict, every brand has a chance to empower its sales associates to convert and retain sales.

“In the second half [of 2015] things turned ugly,” said Milton Pedraza, founder and CEO of Luxury Institute. “I had a CEO tell me she hasn’t seen so many negative factors working against the luxury industry since we recovered.

“Remember, after 2008, China decided it was going to go on a growth spurt–and I say ‘decided’ because they are a communist country–and that made up for all the other things in the rest of the world,” he said. “So it helped countries like the United States and it helped Europe to start recovering, but now all those things turned negative.

“There’s a dramatic slowdown in China; the dollar has strengthened so you are getting fewer tourists and exporting less out of the U.S.; Europe never recovered fully; you have luxury shifting toward experiences rather than goods; traffic is down in stores even in the U.S., and while stores are moving into online buying there is no way online buying is making it up, so a lot of companies are now discounting.”

Changing the game
In addition to complex economic issues rooted in global relations, a transition toward a digital economy and the buying patterns and behavior of both aging boomers and emerging millennials, uncontrollable factors such as weather are also capable of hurting stores. An unseasonably warm winter has made it so coats and other seasonal apparel is not selling as well this year.

luxury shoppers
Luxury shoppers

However, brands still have a chance to generate their own sales and ensure that those who do walk through the door make a purchase and return. Despite the hard emphasis on “selling,” sales and retention are a factor of relationship building first and foremost.

“There is a lack of empathy when you enter the store, a lack of trust when you enter the store and a lack of generosity you feel coming to you – when I say generosity I don’t mean ‘discounts,’ I mean ‘Champagne,’” Mr. Pedraza said. “We haven’t empowered our people. We are training them to be robots instead of being the good human beings they are and making connections in a good human way rather than saying, ‘I’m going to sell you stuff!’ Expertise is not being delivered with empathy.

“That’s not the sales associates faults, that’s an education thing,” he said. “It’s not ‘training’ – these are not puppies – you educate them and you empower them to reach out and retain those clients.

“Sometimes you don’t try to make a sale at all, you just say thank you. But if you have 20 sales associates and maybe three or five are doing very good outreach with genuine emails, thank you cards and calling the client with something relevant, that’s not enough.”

Michael Kors affluent couple car
Affluent couple; image courtesy Michael Kors

In addition to empowering sales associates to build relationships first and then let sales arise naturally rather than push hard for sales right away, brands need to put ego aside. Employees at all levels cannot keep up with or recognize the best practices and innovations because of internal politics and relationships and the responsibilities of their own jobs. As a result, independent, trustworthy outsiders need to become a part of the service model.

When sales associates are trained in workshops, the share of associates that use the best practices after six months is a mere 10 percent. With ongoing support and weekly training sessions of half an hour to an hour, the number jumps to 95 percent.

This extends to high-performing sales associates. Although top performers or their supervisors may feel like their performance means they would not benefit from training compared to others, this is not the case. On the contrary, the return from training and continuous coaching is often best with these employees, because a 20 percent boost for an employee who sells $1 million of merchandise per year is a bigger gain in revenue than a 20 percent increase for an employee who sells half as much per year.

Bloomingdale's shopper
Image courtesy of Bloomingdale’s

Even with the introduction of continuous coaching, CEOs note that a sizable 40 percent of success depends on this kind of relationship-building expertise, but that leaves 60 percent for products, and many brands are stumbling on that front as well.

“I think that right now there’s a feeling there’s no compelling product,” Mr. Pedraza said. “There’s not an ‘it bag’ no ‘it product,’ just a lot of ‘me too’ and very little innovation.

“A lot of people are redesigning their stores, and that’s great, or trying to innovate, and that’s great, but very few have gotten there – Gucci on the women’s side, but not much,” he said. “Not many have had the courage that makes people say ‘I need this, I gotta have it,’ and brands need to create the things that people say they want.”

Getting younger
Brands must also keep in mind the habits of their consumers, as baby boomers and millennials do not have the same priorities and concerns.

Understanding demographics is the first step to effective marketing, according to a report by Unity Marketing.

Affluent consumers, defined in the study as those who make over $100,000 a year, slightly more than a fifth of households, are the fastest growing income bracket. Although economic factors are often foregrounded when discussing changes in wealth and buying patterns, understanding shifts in generations and the ratios of different age groups over time can help brands build long-term strategies without the uncertainties related to predicting the economy (see story).

Affluent consumer shopping Rolls Royce
Affluent consumer with a Rolls-Royce

In addition to how to reach consumers, some of those changes might include rethinking of what it means to be a “luxury” brand.

For millennials, the “luxury” label does not carry the same mystique as it has in the past or that it might for older consumers. Instead, the word connotes over-priced and unaffordable goods even more than it defines craftsmanship or value. For these consumers, the values associated with the brand as well as the relative value in cost-per-use are more important.

Indeed, millennials do not abide to the traditional hallmarks of luxury. Rather than marking themselves by wearing the most expensive brands they can afford, they look to brands that reflect who they are, opting, for example, for an Ironman Triathlon watch instead of a Rolex and preferring to foster their own identity through their clothing, accessories and other goods rather than harnessing the brand’s (see story).

“Clients are less loyal, which means they have a lot more options, and they are being bribed by lots of discounting so they are going to where they find the best deal,” Mr. Pedraza said.

“Baby boomers are today far less interested in goods as they were before, and less interested with consumption in general,” he said. “As they get older they’re more concerned with ‘what experiences do I need in what’s left of my life, what legacy do I leave in the world, what do I leave my children, what contributions have I made?’

“Luxury brands have to contend with all those factors and I don’t think there’s ever been a period where we need to contend with so many factors. The luxury industry is going to need to go through transformation and needs to adapt but nobody is exactly sure how. How do you get the traffic back in the store so you can convert them? How do you capture relationships online?”

December 18, 2015

Luxury travellers have dim view of Trump brand: survey

Marketing experts weigh in on how to do a hotel rebranding properly
Business Vancover
By: Glen Korstrom
December 17, 2015

The Trump brand is weak among luxury travellers, according to a new survey – a finding likely to fuel more controversy over whether Vancouver’s Holborn Group made a wise decision by contracting with Trump International to put the Trump brand on its under-construction hotel.

Trump ranked 40th out of 40 luxury hotel brands when wealthy travellers who were familiar with the brand were asked whether they would recommend the brand to family or friends, according to the 2016 Global Hotels Luxury Brand Status Index, which the Luxury Institute released December 17.

Strict privacy laws in Canada meant none of the survey respondents were Canadian, CEO Milton Pedraza told Business in Vancouver in an interview.

Instead, the New York-based Luxury Institute found its 3,900 respondents by buying lists from reputable companies that were able to determine income for those who live in the U.S., U.K., Japan, China, France, Germany and Italy.

Luxury brand Maybourne Hotels ranked No. 1 in each of four metrics, for which respondents were asked to grade hotels on a scale of 0 to 10:

•delivering consistent superior quality;

•being unique and exclusive;

•being visited by people who are admired and respected; and

•making guests feel special.

Trump ranked No. 34 for quality, No. 30 for exclusivity, No. 31 for having admired and respected guests, and No. 37 for making guests feel special.

“The survey was in the late summer,” Pedraza said. “This was before [company owner and Republican presidential candidate Donald Trump] started making all of the super-vile statements.”

In fairness, the sample size for those who graded Trump hotels was lower than those who graded much larger brands, such as Ritz-Carlton, Four Seasons and JW Marriott, because participants were only allowed to grade brands that they were familiar with or had experienced.

This was the first year that the Luxury Institute included the Trump brand because, in previous years, the nine-hotel brand was considered too small. Trump representatives then lobbied the Luxury Institute to be included, Pedraza said.

Trump is expected to open hotels in Baku, Azerbaijan in early 2016 and then one in Rio de Janeiro before Vancouver opens in July to make the chain a complete dozen.

Trump International Hotel & Tower Vancouver general manager Philipp Posch told BIV that he would not comment on the survey because he was not familiar with it.

Marketing for his hotel has not yet started.

“We’ll wait out the holidays and probably by January or so, we’ll reach out to clients and start the marketing process and machine,” Posch said December 17.

Click here to read a profile of Phillip Posch

How to do a rebranding properly

Branding experts say Holborn likely wishes that it never hitched its horse to the Trump cavalcade and that the situation underscores the need to have an escape clause in contracts.

“People who do these masthead deals for hotels might want to look at sports sponsorships,” said Brandever principal and branding expert Bernie Hadley Beauregard.

Those deals often end the day after a sponsored, star athlete does something objectionable.

A recent spate of hotel rebrandings in B.C. has experts pointing out both how to do a rebranding properly and what to avoid.

(Victoria’s Hotel Zed has won awards for its rebranding of what was previously known as the Blueridge Inn | Crazyintherain.com)

Branding experts’ biggest lessons are to keep the name short and catchy while making sure that the brand is consistent across the chain so guests will know what to expect.

Keeping a brand consistent across properties is a lesson regardless of the sector.

“The art form of branding is to bring the name down to be something that is usable and memorable to the consumer,” Hadley Beauregard said.

He pointed to Portland, Oregon-based Ace Hotels, which has seven hotels around the world in cities as varied as London, Panama City and Seattle.

“Always artistic, eclectic and hip, Ace Hotels often redefine their host city’s magnetic centre,” he said. “Their brand aura is such that you want to make a pilgrimage to see their properties, even if you aren’t staying there.”

Victoria-based Accent Inns’ rebranding of its secondary, economy hotel to Hotel Zed from Blueridge Inn, in 2014, similarly aimed for a hipper image and a short succinct name.

Rooms at Hotel Zed in Victoria have modern elements such as flat-screen TVs, which have media hubs to project iPhone screens onto the TV monitor.

Basically, however, the hotel’s shtick is that it is made to look retro – complete with rotary-dial telephones and furniture and lamps that appear to be out of the 1970s. A multicoloured 1967 Volkswagen van is parked outside and typewriters in the lobby are for guests to use.

“Because Accent Inns starts with an ‘A,’ we can also say that we’ve got brands that go from A to Zed,” Accent Inns marketing director John Espley told BIV.

The rebranding was such a success that Accent Inns plans to open a second Hotel Zed, in Kelowna, next summer. Accent Inns won recognition for the rebranding at the Victoria Real Estate Board Commercial Building Awards in the hotel category. Destination British Columbia then highlighted the hotel when it unveiled its new $2.6M marketing strategy late last year.

Beauregard, however, is less enthusiastic about Vancouver-based Pinnacle International’s rebranding of its longtime Renaissance Vancouver Harbourside Hotel as the Pinnacle Hotel Vancouver Harbourfront.

“Too many words,” Hadley Beauregard said. “My head hurts.”

Making the rebranding more puzzling, he said, is that the new Pinnacle Hotel Vancouver Harbourfront is virtually across the street from a second hotel that also has “Pinnacle” in an even wordier name: the Vancouver Mariott Pinnacle Downtown Hotel.

(Kyle Matheson is director of hospitality marketing at Pinnacle Hotel Vancouver Harbourfront | Rob Kruyt)

What’s worse than simply having two hotels extremely close together, with both carrying the distinctive word “Pinnacle” somewhere in the brand, is the fact that the two hotels are managed by two different companies – Marriott International and Pinnacle International – even though they are both owned by Pinnacle International.

The two hotels therefore have different offerings for guests.

The Marriott Pinnacle, for example, requires guests to join a loyalty program to get free Wi-Fi whereas the Pinnacle Harbourfront provides guests free Wi-Fi with no need to join any program.

“This creates confusion in consumers’ minds,” Hadley Beauregard said.

“Brand consistency is key.”

Rationale for recent Pinnacle’s rebranding

Pinnacle International has contracted Marriott to manage the Marriott Pinnacle for the past decade.

Paying a management company a fee up to about 5% of revenue to be able to use a global brand such as Marriott is called “flagging” a property.

The common practice is exactly what happened when Holborn Group agreed to pay Trump International to be able to use the Trump brand on Holborn’s hotel.

The point of this strategy is to coast on the brand recognition of a well-known manager such as Marriott or Trump.

Pinnacle International, which is best known as a real estate developer, ended its management contract with Marriott’s Renaissance Hotels earlier this year. That meant that it had to come up with a new name for the property.

Its director of hospitality marketing, Kyle Matheson, told BIV that the new Pinnacle Harbourfront name makes it clear that the hotel is near Vancouver’s harbour.

Using Pinnacle in the name was done because Pinnacle International both owns and manages two other B.C. hotels: Pinnacle at the Pier in North Vancouver and Pinnacle Hotel Whistler.

“The goal with rebranding the [former Renaissance] property as Pinnacle Harbourfront was to broaden our hospitality and hotels and restaurants portfolio under our own Pinnacle name,” he said.

 Source: https://www.biv.com/article/2015/12/luxury-travellers-have-dim-view-trump-brand-survey/

 

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