Luxury Institute News

July 21, 2016

Global Tourism Takes Massive Hit After Spike in Terror Attacks

NBC News
By: Ben Popken
July 21, 2016

When a Tunisian truck driver launched an ISIS-inspired attack on July 14th in Nice on the French Riveria, he didn’t just mow down 84 people, he widened a wound in the global economy.

Now, no tourist destination appears safe after the attack on the boardwalk in Nice, a glamorous and family-friendly seaside city popular with tourists from all over the world. While full of “soft targets,” it broke from the recent pattern of terror attacks in Europe.

“It was a watershed moment,” said luxury consultant Milton Pedraza. “You thought it was just capitals and where those guys live and congregate, now it’s everywhere.”

As ISIS has lost its physical territory, there have been an uptick in attacks in Western Europe for which the group has later claimed responsibility said Alex Kassirer, a senior counterterrorism analyst at the global security firm Flashpoint Intelligence and an NBC News consultant.

“This is a strategy they’re honing, and one we’ll see more often, with little attention paid to city of attack, as long as it’s in the West,” said Kassirer. “No city is immune to attacks.”

The increased cadence in terror attacks targeting European tourist destinations both major and minor has dealt double-digit blows to travel, with global tourism spending down 14 percent in June, according to a recent report by UBS.

Image: Minute of silence the Promenade des Anglais
An aerial view of the Promenade des Anglais boulevard where thousands gathered to observe a minute of silence in tribute to the victims of the Nice truck attack, in Nice, France. VILLE DE NICE / HANDOUT / EPA

In the immediate aftermath of the Nice attack, cruise lines canceled trips and ports of call to the city. Rihanna canceled a concert scheduled for the day after the attack, and the prestigious annual Nice Jazz Festival canceled its four-day event.

A spokesman for the Provence-Alpes-Côte d’Azur regional council, which includes Nice, declined to comment.

“Economic consequences, though important, are meaningless compared to the tragedy many families and the nation are experiencing,” said spokesman Eric Lorrain. “The Regional Council is assessing the economic consequences and trying to figure out how to help the professionals that are to face losses in their activity.”

But it’s clear that in Nice, as seen in other targets of terror, tourism will suffer. Across the board, fearful tourists are canceling or changing travel plans to avoid attacked cities and countries.

Fearful Tourists Change Itineraries

Egypt, France, Tunisia, and Turkey have all seen drops in visitors from 11 to 20 percent following terror attacks, some of which specifically targeted tourists.

31-year-old travel entrepreneur Jared Kamrowski said that he initially stuck with his plans to visit Turkey following a terror bombing there in January 2016.

Image: People walk away from Istanbul Ataturk airport, Turkey
People walk away from Istanbul Ataturk airport, Turkey, following a blast June 28, 2016. Goran Tomasevic / Reuters

“We told ourselves we weren’t going to let the terrorists win by canceling our plans,” he said. But, after another bombing there in March, he did cancel his plans, opting to visit Dubai and Spain instead.

“After the first bombing….we weren’t going to let the terrorists win…after the second bombing…we decided to cancel our plans”

Many travelers are avoiding mainland Western Europe entirely, switching to places seen as safe, like Scotland, or Latin America.

Esther Roskam, a 31-year-old law student from Baltimore, Maryland, was discussing with her friend whether to take a trip to Amsterdam because of terror concerns. Besides the general miasma overhanging Europe, there had been an attack on the Amsterdam to Paris high-speed train in August 2015.

“As we were debating, there was another attack,” said Roskam. Instead, they opted for Cancun. She couldn’t recall which attack specifically changed her mind. “Possibly France? It’s incredibly depressing that I’m having trouble keeping track.”

Some travelers even prefer what they say is the relative safety of Western Africa.

Valerie Bowden, a 28-year-old American who regularly backpacks and hitchhikes through Ethiopia said she was in the Istanbul airport shortly before the attack June 29 that killed 45 and injured more than 200.

Later, watching on TV screens the aftermath she avoided by only a few hours, “was eerie and scary,” she said.

She finds African countries to be safer than the U.S. and Europe. In fact her biggest concern is pickpockets.

“While Africa isn’t immune to terrorism, most violence occurs in small villages that a tourist would never visit. Thanks to ISIS, terrorism across Europe takes place exactly where tourists would end up,” said Bowden.

Travel Industry Scrambles to Coax Back Customers

Sentiments like that have helped send down stock in companies that sell packaged vacations to major cities in Europe, with Thomas Cook down 47 percent and TUI down 32 percent since the beginning of the year.

The travel and lodging industries have been forced to make steep discounts in an attempt to coax back customers.

Experts note that the price wars started after a 14 percent drop in Chinese demand following stricter rules in the country on “gifting,” or bribing officials with foreign-bought luxury items. But tourists frightened by terrorism have exacerbated the downturn.

Image: French police officers at Charles de Gaulle Airport on May 19, 2016
French police officers stand guard at Charles de Gaulle Airport near Paris on Thursday, May 19. ETIENNE LAURENT / EPA

Across Europe, hotels are offering discounts of up to 20 percent. Airfare to Europe from the U.S. is near record lows for recent decades. The cost of a ticket to Paris is down 15 percent from a month ago compared to being up 10 percent last year, according to deals surveyed by PromotionCode.org.

For some travelers, like company CTO Mike Catania, who is heading to the Bordeaux region of France next month, the savings are worth the risk.

“Fear isn’t a great enough motivator to deprive our families of cultural experience beyond our borders,” said Catania. “And the deals were too good to pass up.”

But nothing lasts forever, especially when it comes to airline ticket prices. Later this year some airfare deals will evaporate as airlines begin removing capacity after the start of their winter schedule on October 26.

History Repeats Itself, But the 70′s Were Worse

The recent spate of terror is a decided spike for events in recent memory. But it pales in comparison to the thousands of terror attacks seen in the 70′s, 80′s and 90′s, which saw an average of 10 attacks per week.

Terror attacks Western Europe chart
Terror attacks in Western Europe from 1970 to 2015.

There have been over 16,000 attacks in Western Europe since 1971, according to the Global Terrorism Database. That’s an average of 350 per year. The highest number of deaths came in 1988, a total of 440, largely due to the Pan Am flight 103 bombing over Lockerbie, Scotland. And 2004 saw the highest number of wounded, 1,853, after the attacks in Madrid, Spain.

So, if history is a guide, tourism will come back, said Yeganeh Morakabati, an associate professor at Bournemouth University in the U.K., who studies the relationship between tourism and terrorism.

Her data shows predictable dips in annual arrivals following attacks in years past in Egypt, the U.K., and Spain. Numbers there eventually recovered to what they were before, then surpassed them.

“Tourists have short memories and people tend to forget,” said Morakabati. “As long as there is no other attack.”

Source: http://www.nbcnews.com/business/travel/global-tourism-takes-massive-hit-after-spike-terror-attacks-n614111

July 18, 2016

Why luxury retailers are losing their luster

USA Today
Hadley Malcolm and Chris Woodyard
July 18, 2016

NEW YORK — Bling appears to not be as much of a thing.

Luxury retailers, which were flying high as the wealthy thrived, are starting to look more like diamonds in a pretty rough spot.

Threats to global stability — including terrorism, the United Kingdom’s withdrawal from the European Union and China’s slowdown — are rattling international shoppers of high-end goods. At the same time, luxury retailers are losing share to online sellers, an issue bedeviling mainstream chains. They’re also suffering at the hands of discounters and fast-fashion luxury lookalikes.

Investors are taking note. The S&P Global Luxury Index, which tracks the value of the stock of dozens of companies that deal in luxury goods including automakers, has lost 15.06% in the past year, compared to a 2.58% rise in the S&P 500, an index of the 500 largest publicly traded companies.

“If you’re tied to international consumers, you really have not had any sense of relief in the past several quarters,” says Simeon Siegel, equity research analyst with Nomura Securities.

As second-quarter earnings reports unfold, purveyors of luxury goods who noted some stress, such as jeweler Tiffany and apparel sellers Ralph Lauren and Burberry, will be watched to see if the trouble they reported in the first quarter is continuing or worsening.

Brexit creates a whole new level of uncertainty for some of the world’s wealthier spenders. It’s another shock that, combined with terror attacks in France, the U.S., Bangladesh and elsewhere, adds up to trouble for luxury firms because it scares off tourists — and tourists are some of the best customers for luxury companies.

“A few years ago, tourists would come buy empty luggage and fill it up and send it back home,” says Arnold Aronson, partner and managing director of retail strategies at consultancy Kurt Salmon. That’s not necessarily happening anymore

The drop in tourism is the biggest reason luxury retail traffic is down 20% from a year ago, says Milton Pedraza, CEO of The Luxury Institute, a consulting firm.

It’s a strange turn for luxury, which looked unstoppable when the world’s wealthy were riding high. Globally, the luxury market is growing. Personal luxury goods purchases have tripled in the past 20 years to more than $270 billion, according to a 2015 report from Bain & Co. North and South America combined have become the largest market for personal luxury goods purchases.

But that growth has slowed in recent years. Last year, sales in the Americas were flat on a constant exchange rate basis, according to Bain.

Besides global economic pressure, even the most tony retailers are feeling the same heat from discounters and online sellers as the mainstream retail industry.

A recession-era boom in outlet and off-price stores had everyone from Coach to Prada hawking their once-coveted goods at a discount, or department store offshoots such as Nordstrom Rack and Saks Off 5th doing it for them. Fast-fashion players such as H&M and Zara churn out luxury lookalikes at a fraction of the price.

When it comes to online, some shoppers are turning to luxury-for-less sites such as Gilt or The Real Real.

“The story with luxury is it’s just not as exclusive and it doesn’t justify the price like it used to,” Pedraza says. “Too many of them are discounting, and there’s not enough consumer demand.”

Source: http://www.usatoday.com/story/money/2016/07/18/luxury-retail-hurting-from-over-distribution-lack-of-tourist-spending/85872502/

July 13, 2016

How will Burberry’s changing leadership impact the brand?

Luxury Daily
Sarah Jones
July 13, 2016

British fashion label Burberry’s terminated experiment of having Christopher Bailey serving as both chief creative and CEO holds lessons for others in the luxury sector.

On July 11, the house announced that Mr. Bailey would be stepping down as chief executive, taking on the role of president in 2017, when Marco Gobbetti will join the brand as its new CEO. With the luxury industry facing challenging times due to geopolitical and economic turbulence, Burberry is not likely to be the only brand to see changes in leadership.

“There’s no question that Christopher’s skills as it turns out lie in being a great creative as opposed to operational,” said Milton Pedraza, CEO of the Luxury Institute.

“Luxury has not had such a difficult moment with so many factors affecting it on the downside in a generation,” he said. “Even the 2008 recession, everybody knew that if real estate came back and the stock market came back, people would go back to their old buying habits.

“This is uncharted and unpredictable territory now, where there are so many factors working in such as chaotic way on the luxury industry…I think it’s not only Christopher not having the operational skills, not having what we call adaptive expertise, the ability to adapt in a complex environment.”

New era
Mr. Bailey took on the role of CEO in 2014 in addition to his creative duties when Angela Ahrendts left for Apple.

The luxury landscape in 2014 looked very different than it does today. Between China’s bubble, Brexit, the pound’s deflation, changing consumers habits and the shift toward digital and ecommerce, the industry is much more uncertain than it was just a few years ago.

This era of uncertainty requires more complex decision-making and leadership than was needed before, when strategy was more direct and obvious.

“It was unfortunate that he took on both jobs at a time when things are so complex, and where you need more operational expertise right now than perhaps creative expertise,” Mr. Pedraza said. “Maybe you need both, but clearly one person cannot do both. I think that’s what was proven out.

“Maybe in easier times, he might have been able to do it, but this is so complex,” he said. “I don’t even look at it as a demotion. I look at it as a change that was necessary and he graciously accepted.”

Burberry, as with a number of other brands, is being stretched.

Burberry SoHo, 131 Spring Street New York, New York - Main Entry
Burberry store in New York’s SoHo neighborhood

The company’s revenues dipped 1 percent for the 2016 fiscal year, leading the public company to unveil a three-year plan aimed at improving profitability.

Burberry’s 2.5 billion pounds, or $3.655 billion, in revenue for the year was slightly behind 2015’s figures, but the brand remains optimistic about the future. The label is establishing a three-year strategy that will cut costs by 100 million pounds, or about $146 million per year by 2019, enhance productivity and spur revenue growth (see story).

“Burberry’s challenges are more operational than creative,” said Chris Ramey, president of Affluent Insights, Miami. “They’ve made strategic mistakes in China and the United States that have to be fixed.

“Keeping Bailey was in their best interest,” he said. “There is value in continuity.”

Burberry is not alone, with Ralph Lauren designing a similar plan to restructure for growth (see story). Hugo Boss’ CEO also stepped down, ending his eight-year tenure amid the German fashion label’s dimmed profit outlook (see story).

“You can’t just cut your way into success,” Mr. Pedraza said. “Yes, you need to restructure, you need to cut costs, you need to slim down that organization, and then you need to get creative.

“You need a plan to innovate on product, and you need to dramatically shift your front line people from being transactors to expert relationship builders,” he said. “So they need to build true relationships with their clients, not transactions.

“And they need to make those two—the product and relationship building—into competitive advantages, which means that they need to sit way up on the bell curve because they are high performers. They need to be experts at learning and execution, and very few companies right now are prepared for that task.”

Mr. Pedraza predicts that other brands may be “casualties” of an inability to adapt, estimating that about half of CEOs are not prepared to deal with the complexities of today’s market. According to him, Burberry’s position is a sign of a larger trend in the industry that extends beyond hard luxury goods into other services and products that target the wealthy, such as yachts and real estate.

With Burberry’s revenues in decline, this leadership shift will enable Mr. Bailey to focus on where his talents lie most: in design. Taking over for him will be Mr. Gobbetti, an industry veteran with 20 years of experience, who is currently at Céline.

Burberry Christopher Bailey
Christopher Bailey

“The board firmly believes that these new leadership roles coupled with actions, identified in the recent business review, will significantly enhance our ability to deliver long-term sustainable growth and sector outperformance over time,” said Sir John Pearce, chairman of Burberry, in a brand statement.

“Since taking on the combined role of chief executive and chief creative officer, Christopher Bailey has done an excellent job set against a backdrop of challenging market conditions,” he said.

“The review that he has led into our ways of working is the blueprint for the next phase of Burberry’s evolution. To maximize our ability to successfully implement these plans, Mr. Bailey identified the need for a new chief executive for the business who could partner with him as we execute on the new strategies and I am excited to see what they will do together.”

Digital divide
For years, Burberry has been known for its digital prowess and as an early adopter of everything from Snapchat to Apple TV.

Burberry scored the highest in L2’s Digital IQ test for fashion brands. In addition to success on emerging platforms, updates to its mobile site have tripled while legacy investments such as “Art of the Trench” continue to find success with regional updates (see story).

On the other hand, Mr. Gobbetti’s employer since 2008, Céline, is almost the complete opposite, with no ecommerce, no social media accounts, a simple Web site and limited digital marketing.

Given that Burberry’s modern brand positioning partly hinges on its innovation, it is unlikely to regress within digital. However, this may be a case where Mr. Gobbetti’s experience driving a brand with mostly traditional channels will need to mix with digital expertise within the Burberry team.

“Looking at things through a digital lens, Burberry’s decision to name Gobbetti as CEO was an interesting one, considering that he comes from a brand with little digital prowess,” said Elizabeth Elder, L2 research associate.

“The managerial movements can be perceived as indicating a shift in priorities, from digital engagement to fiduciary responsibility,” she said. “It remains to be seen what will happen with Burberry’s place as an industry leader in digital, as it will depend upon Burberry’s ability to not only maintain—but continue to grow—it’s digital footprint. 

“In the luxury fashion space, Burberry has established itself as a trailblazer in the digital sphere. This has undeniably contributed to the brand’s success.

“We will have to wait and see how Gobbetti’s leadership unfolds with respect to digital, however the brand shouldn’t rest on their laurels. It will be necessary for Burberry to maintain their innovations in digital if they hope to increase profits moving forward.”

Leadership and strategy should not be limited to the CEO and creative director, but rather spread among a team of individuals with specific abilities and expertise. With the changing luxury industry, decades of experience does not always translate to preparedness for today’s market.

“Gobbetti will dissect every initiative including digital,” Mr. Ramey said. “Its existence doesn’t mean it is successful. Nor does Gobbetti’s lack of digital experience predict its demise.

“Each position requires a specific skill set,” he said. “It’s rare when one person possesses the necessary left and right brain processes for a billion dollar brand.”

Source: https://www.luxurydaily.com/how-will-burberrys-changing-leadership-impact-the-brand/

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/

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