Luxury Institute News

July 15, 2014

What’s The Best Investment Piece?

By: Laura Milligan
Vogue UK
July 15, 2014

The Real Real- which is on track to do $100 million in sales this year, The Fashion Law reports – has evaluated the 500,000 designer items from 500 brands on its database to find what holds its value, and what depreciates faster than a supercar. And some of the results may surprise you.

Most of the brands that hold their value probably won’t come as a shock – Chanel, Louis Vuitton, Hermès, Christian Louboutin, Cartier, Alaïa and Van Cleef & Arpels among them – but those that lose value are more unexpected. Tod’s, Versace and Etro are among those that lose their value fastest, while Marni, Alexander Wang, 3.1 Phillip Lim and Marc Jacobs are among the labels that retail for the furthest from their original retail price. Although they are relatively young labels, Victoria Beckham, Charlotte Olympia and Alexander McQueen all resale for very close to the original value. Whether they will have Chanel or Hermès’s longevity when their pieces become vintage, however, remains to be seen.

Aside from buzz about a new designer (Phoebe Philo having rejuvenated the resale value of Céline, for example), the most important factor in a piece holding its value is availability.

“Brands have to be careful where they allow their product to be sold,” Milton Pedraza, CEO of the Luxury Institute, a industry research group, told Fortune- adding that brands that hold their value generally do not discount or sell widely online. “In that sense, it creates a perception of purity, [which the brand will then] back up with design quality and heritage. If I buy something, I will think, ‘Wow it has long term investment value.’”

One little footnote though before you go forth and shop: no piece is actually an “investment” unless you plan to ever sell it. Just saying.

Click the link to read the entire article which includes a quote from Milton Pedraza, CEO of Luxury Institute: http://www.vogue.co.uk/news/2014/07/15/investment-buys-hermes-chanel-cartier-christian-louboutin

July 7, 2014

The Value of Luxury Poseurs

By: Paul Hiebert
The New Yorker
July 7, 2014

Bellezza mentioned Tiffany & Co. as a good example of a company executing the policy outlined in her and Keinan’s report. Some store locations offer side entrances and private viewing rooms to physically separate the élite shoppers from those looking to purchase a seventy-five-dollar Heart Tag Charm. The core Tiffany users, Bellezza says, are therefore defined by their access to privileged retail space, while the company can still grant a degree of access to the masses without tarnishing the brand. In 2013, the Luxury Institute, a research and consulting firm, conducted a survey that revealed that Tiffany was the jewelry brand most widely purchased by American women with a minimum net worth of five million dollars.

As Amy Merrick noted in April, Burberry recovered from its overexposure problem. Following the arrival of Angela Ahrendts as its C.E.O., in 2006, (who has since left for Apple), Burberry began scaling back its licensing agreements and removing its signature check from about ninety per cent of its items. A sense of sustainability has returned, thanks to a clear balance of insiders enjoying their cachet and outsiders looking in.

Click the link to read the entire article: http://www.newyorker.com/online/blogs/currency/2014/07/the-value-of-luxury-poseurs.html

Used Chanel bags are worth a lot, but Marc Jacobs? Not so much

By: Erin Griffith
Fortune
July 7, 2014

They’re all considered investments, but which luxury brands hold their value the best may surprise you.

There’s a reason they call them “investment pieces.” At $22,000 for a Proenza Schouler tote or $9,000 for a Ralph Lauren dress, luxury goods are meant to last a lifetime and hold their value. That’s why the market for used designer goods is the most attractive category for online consignment.

One such marketplace, a website called The RealReal, is on track to do $100 million in sales this year. (The company takes a cut of each sale.) The RealReal recently tapped its database of 500,000 luxury goods from 500 designer brands to find which brands have the highest resale value, and which ones hold their value the longest. The startup found that Chanel, Christian Louboutin, and Hermès hold their value the longest. Tod’s and Versace lose their value the fastest.

Perhaps more surprising is which brands carry the highest and lowest resale value. Items from Givenchy, Victoria Beckham, Charlotte Olympia and Alexander McQueen all sell for much closer to their original price than goods from Marni, Alexander Wang, 3.1 Philip Lim, and Marc Jacobs.

Resale values of fashion or luxury goods can fluctuate depending on buzz around a certain designer, particularly if a fashion houses hires a a new creative director or chief executive, according to Rati Levesque, Chief Merchant at The RealReal. “When Phoebe Philo joined Céline as the creative director, it added more resale value to the brand,” she says.

But more important than buzz is availability and discounting. If a luxury brand frequently discounts its goods at outlet stores or online via flash sales, consumers will perceive that they don’t have to pay full price for that brand, says Milton Pedraza, CEO of Luxury Institute, a luxury industry research group. While baby boomer shoppers tend to research something online and then buy it in the store, millennials do it the other way around. They “showroom,” the term for checking out an item in the store before finding the best deal for it online.

“These days you can find ways to arbitrage the brands, because you have so much information and the market is inefficient,” Pedraza says. “Brands have to be careful where they allow their product to be sold.”

For example: Chanel and Hermès do not hold sales in their stores and they have a limited number of outlet stores. Chanel doesn’t even sell its goods online, with the exception of beauty products. “In that sense, it creates a perception of purity,” Pedraza says.” The brands then “back it up with design quality and heritage,” he says. “If I buy something, I will think, ‘Wow it has long term investment value.’”

Below are some luxury brands that fall on both sides of the spectrum.

Click the link to read the entire article which includes quotes from Milton Pedraza, CEO of Luxury Institute:http://fortune.com/2014/07/07/which-luxury-brands-have-highest-resale-value/

July 4, 2014

America becomes absolutely fabulous

By: Laura Chesters
The Independent
July 4, 2014

Striding down Fifth Avenue clutching a monogrammed black Gucci leather satchel, François -Henri Pinault stands out among many of the trackpant-clad visitors to America’s most expensive shopping street.

Americans might still be better known for their casual fashions but Mr Pinault, the chief executive of Gucci’s owner, Kering, is betting that the millions of domestic and international tourists who descend on New York each year want to snap up European labels on their shopping sprees.

The Frenchman, who is married to the Mexican-American actress Salma Hayek  and whose family owns more than 40 per cent of the Paris-based luxury goods giant, says: “Over the last few years we have talked about the growth engine of luxury being in Asia – but it is important to remember the size and potential of America.”

According to market research from Bain/Alta­gamma on the luxury goods industry, the Americas actually passed China as the growth leader last year. The researchers estimate that the continent’s luxury goods market will grow 4 per cent, and the US alone is valued at €66bn (£52bn) this year.  Other European brands, including the UK’s Burberry and Mulberry, have also been steadily building up their presence across North America.

Mr Pinault is in the US to visit Kering’s American luxury division, which launched three years ago, and its flagship Gucci store in New York, the biggest in the world.

Kering, which owns 17 luxury brands including Saint Laurent and Christopher Kane, now plans to invest huge sums renovating some of its 180 US stores and expanding into new areas, as well as into Mexico and South America. Sales at it luxury division rose 8 per cent last year.

Mr Pinault is also betting that wealthy Americans are beginning to change their habits.  “The way of life here has been to not dress up, but the US shopper is becoming more sophisticated.”

Sarah Willlersdorf at ­Boston Consulting Group  agrees that the wealthy millionaires and billionaires in the States have traditionally spent their cash on cars and experiences rather than expensive clothes, but that now what BCG calls the “personal goods” sector is about to enter a boom period.

She says: “The aspirational masses here do want to spend on luxury – they want to spend on brands, and it is growing. There is a huge change in the desire to buy brands.”

BCG expects that by 2020 the US will have more than a third of the luxury market and  will still be bigger than China’s high-end sector. Japan will account for 7 per cent and the rest of Asia about 23 per cent of the global luxury market. Milton Pedraza, chief executive of the Luxury Institute, a consultancy, agrees: “There are big opportunities for European luxury brands in the US.”

America already makes up 18 per cent of Kering’s group sales, and Mr Pinault is keen to make sure its brands have the best stores in the best locations across the US – not just in New York, which has always had Sex and the City-style fans of European labels.

Ms Willlersdorf adds: “It is not just about East and West coast. The middle and south are very wealthy. European brands are under-represen-ted, particularly in second-tier cities.”

Click the link to view the entire article which includes a quote from Milton Pedraza, CEO of Luxury Institute: http://www.independent.co.uk/news/business/analysis-and-features/america-becomes-absolutely-fabulous-9585525.html

June 26, 2014

Flying the Flagship

By: Simon Brooke
Sphere Magazine
June 26, 2014

Those waiting for the long-predicted explosion of luxury retailing onlines are still holding their breath. While some reports have estimated that global online retail sales have increased by as much as 17 per cent a year since 2007, growth in the effete world of luxury goods is nothing like as fast. Having viewed e-commerce with suspicion for many years, several successful brands have dipped a well-manicured toe in the digital waters-many prompted by the success of Net-a-Porter-but most have held back. Miuccia Prada summed up the sector’s attitude to web sales and e-commerce last year when she declared: “We think that, for luxury, it’s not right…Personally, I’m not interested.”

The new area for growth in luxury retailing is still not internet-based-it’s in the streets and shopping centres. Yes, bricks and mortar are back. In the luxury shopping capitals of the world-London, Paris, New York, and increasingly cities such as Shanghai and Dubai-well-established brands alongside up-and-coming names are opening new locations as well as expanding and refurbishing existing stores. Many are making significant investments: Versace, for instance, has recently sold a 20 per cent stake to private equity house Blackstone so that the brand can develop new venues.

“Luxury brands recognize the reality that only at most 10 to 15 per cent of sales are conducted online and the store, adapted for the future, will always be the main channel of customer engagement,” says Milton Pedraza, CEO of New York-based boutique research and consulting firm The Luxury Institute. “There are many cities across the world that present opportunities in growth for luxury brands and they are selectively opening stores there.”

The Italian trade body Fondazione Altagamma estimates that although online luxury shopping rose by 28 per cent last year, compared with 2012, it still only comprised 4.5 per cent of overall global luxury sales, further evidence that the luxury industry prefers “on street” to “online”. In an industry worth $300 billion, an estimated 90 per cent of luxury purchases still take place in stores.

Click the link to read the entire article which includes quotes from Milton Pedraza, CEO of Luxury Institute: http://edition.pagesuite-professional.co.uk/Launch.aspx?EID=915643ec-109b-4ba4-a154-fc2360651b30

May 7, 2014

The $99,000 Aston Martin: End Of An Era Or New Beginning?

By: Hannah Elliott
Forbes
May 7, 2014

Change has shifted into a new gear at Aston Martin, the 101-year-old bastion of posh British motorsports. And a decade from now the manufacturer of James Bond’s most famous automobile may more closely resemble its counterparts in Munich and Stuttgart than its English forebears.

Last month at the New York Auto Show the company unveiled its 2015 Vantage GT, a 430-horsepower variation of the bestselling Vantage line. What made Aston Martin’s debut so memorable was neither the strength of its V-8 engine nor the pleasing slope of the GT’s hood. It was the sticker shock.

Aston’s latest toy is the first model in decades to cost less than $100,000–in the base version, at least–and is positioned to open up a new customer for the Gaydon-based automaker. The $99,000 Vantage GT will presumably appeal to those who might have previously thought Aston Martin was out of reach.

“We’d like to sell a few more cars, and we believe this will offer an opportunity to broaden our appeal and bring more customers to the brand,” Julian Jenkins, Aston Martin’s president of the Americas, said at the show. (Last year Aston Martin sold 4,200 cars, an increase of 11%.)

The new GT, slated only for North America, is a more athletic version of the Vantage that skips luxury ornamentation and saves buyers $20,000 in the process. It maintains the sleek sculpture, halogen headlamps and interior technological trappings of the main Vantage line (those cars start around $120,000) but offers a new 4.7-liter V-8 engine that gets 10hp more than the standard Vantage and races to 60mph in 4.6 seconds, with a top speed of 190mph. Buyers can choose between a 6-speed manual transmission (an ever increasing rarity) and a 7-speed automated manual gearbox. Sport exhaust and sport suspension come standard.

The Vantage, which was launched in 2005, has been Aston Martin’s most successful line, having sold more than 30,000 units to date–not a lot compared to BMW and Mercedes and not enough to keep Aston Martin exactly flush with cash. (It reported an operating profit of a mere $1.5 million in 2013.) But that hasn’t deterred the company from moving full-speed ahead into new markets. “Vantage was a tremendous success for us,” Jenkins said. “So we wanted to create another really sporty car which would appeal to the sportier buyer.”

The real trick, though, will be to position the new Vantage as a less expensive Aston without making it seem like a lesser Aston. The automaker certainly isn’t chasing the masses, but it is targeting a larger group in order to double its sales.

“You can offer an entry-level product, but you also must revamp and enhance your higher-level offerings as well,” says Milton Pedraza, founder of the Manhattan-based Luxury Institute. “Your upper-tier-level offerings must be extremely competitive, and then you’ve got to throw that halo effect continuously on your entry-level sports car.”

Click the link to see the entire article: http://http://www.forbes.com/sites/hannahelliott/2014/05/07/the-99000-aston-martin/

May 4, 2014

Derek Lam Believes in Fashion for the Masses He’s part of a breed of hot designers making luxury more accessible

By: Emma Bazilian
ADWEEK
May 4, 2014

Derek Lam remembers a time when it would take years before an apparel brand was established enough to spin off a secondary line aimed at catering to the masses.
But Lam, one of the hottest designers around, is not a man who likes to wait.
He is one of a breed of contemporary fashion stars—including Alexander Wang, Jason Wu and Prabal Gurung—for whom accessible luxury is not just an afterthought but part of their DNA.

“Traditionally, the plan would have been to just stick to high-end,” Lam explains one April afternoon at his company headquarters and studio near New York’s Madison Square Park. “But I went into it saying, ‘I want to do as many different levels as possible because I want to reach a wider audience.’ It used to be that designers could sit and wait for the audience to come to them—now, they have to go to the audience.”

Lam’s lower-priced 10 Crosby line bowed in 2011, eight years after his runway debut. Lam made sure to adhere to one of the crucial tenets of a successful diffusion line: maintaining a brand identity. “I think that before, designers would do secondary lines that were maybe more derivative of their main collections,” he says. “I recognized that 10 Crosby couldn’t be just a knockoff of what I was doing [at Derek Lam]. So when we started marketing the line, we built an ideal of this 10 Crosby woman, and that was really key.”

With dresses in the $400 to $700 range, 10 Crosby is not cheap. But compared to the $3,000 to $4,000 dresses in the core Derek Lam line, it’s practically a steal. As a result, 10 Crosby is growing considerably faster than its pricier parent, says Derek Lam International CEO Jan-Hendrik Schlottmann. The number of stores carrying 10 Crosby has increased 150 percent in the last year, and the brand recently expanded into footwear. “I think the overall potential is much larger because you can sell in places where you can’t really sell [the main] collection,” Schlottmann says. As sales of luxury goods have slowed for companies like Louis Vuitton and Gucci, business has been booming further down the price ladder.

Michael Kors, which launched in 1981 and has steadily grown its lower-priced offshoot Michael Michael Kors over the last decade, enjoyed a wildly popular IPO in 2011 and last year racked up $2.2 billion in sales. Kate Spade, which lost some of its luster following a sale to Liz Claiborne in 2006, underwent a major revamp as an aspirational lifestyle brand and is now looking at a near 70 percent year-over-year bump in its stock price, on top of $1.3 billion in sales for 2013. (Incidentally, Liz Claiborne sold its namesake brand and renamed itself Kate Spade & Co.) Meantime, Tory Burch, the decade-old brand rumored to be heading toward its own IPO, is valued at some $3.3 billion.

“A smart designer understands the importance of developing a business that’s profitable but without losing that creative spirit and losing that dream of what the runway is really about,” says Milton Pedraza, CEO of the Luxury Institute, a research and consulting firm. “They know that they need to often embrace the idea of the secondary lines to help fuel the financing of their main collection.” Consider Victoria Beckham. In 2011, the entertainer-turned-designer added a diffusion line, Victoria Victoria Beckham, to her then two-year-old main collection. Within a year, the success of the secondary label helped put her company in the black for the first time.

Of course, accessible luxury also continues to be an important enterprise for more established brands. Helmut Lang, Catherine Malandrino and Balmain have all launched diffusion lines in recent years, while Valentino has pushed its previously under-the-radar Red Valentino line. Another diffusion makeover is under way at Marc Jacobs. Last year, the designer left his post as creative director at Louis Vuitton to concentrate on both his high-end line and the more youthful Marc by Marc Jacobs, whose sales account for the majority of company revenue.

Another key factor in the growth of this space is the influence of millennials. “Young consumers are looking for quality and design, but they’re also looking for ‘new,’” says Pedraza. “They’re much more open to new and affordable brands than baby boomers.”

Considering their proximity to fashion, consumers are under more pressure to compete in the fashion space. “Even though we say we’re not a class-conscious society, this is a very status-conscious society, and these brands help elevate people who may not have a lot of money but want to show off these accessible luxury brands,” explains Pedraza. “They want that stature that comes with these products as well.”

There can be a downside to becoming too accessible, however. Flooding the market takes away from the feeling of exclusivity that makes luxury brands seem special in the first place. “Ubiquity does breed some backlash,” says Pedraza. “The problem with luxury retail is that you often don’t know where the line is until you’ve crossed it.”

See full article with quotes from Milton Pedraza, CEO of Luxury Institute: http://www.adweek.com/news/advertising-branding/derek-lam-believes-fashion-masses-157455

 

May 2, 2014

Luxury Institute Examines Luxe Rebound

By: Karyn Monget
Women’s Wear Daily
May 2, 2014

There are few generational divides when it concerns spending decisions and luxury goods, a report released Wednesday by The Luxury Institute revealed.

Click on the link to read the entire article(subscription required):
http://www.wwd.com/business-news/forecasts-analysis/luxury-institute-examines-luxe-rebound-7664671?module=Retail-latest

April 30, 2014

High-Income Shoppers Reveal How, Where And Why They Like To Buy Luxury Goods

(NEW YORK) April 30, 2014 – The independent and objective New York-based Luxury Institute has released the second of three multigenerational studies of U.S. consumers, 21 and older, with minimum annual household income of $150,000 per year. Respondents shared details about their most recent luxury shopping experiences, providing valuable insight into shopping behaviors unique to each generation.The age bracket for the Millennial generation ranges from 21 to 34, Generation X includes 35 to 49 year olds, and the Baby Boomer generation starts at 50.

The popularity of online purchases, even for luxury products and services, has risen dramatically. Right now it’s an even split between clicks and bricks: 43.5% of consumers surveyed saying that their last purchase was made online, and an equally-sized 43.5% also said they last bought a luxury item in a store.

Unlike the popularity of the online channel overall, growth of mobile shopping in the luxury industry remains slow. The vast majority of recent online luxury purchases were completed on a computer, and only 2% made via smartphone. Affluent Millennials have been quicker to embrace on-the-go mobile luxury shopping.

The various sources of influences consulted prior to a purchase show the biggest generational differences. They all gather information from brand websites, online consumer reviews, friends and family and sales associates, but Baby Boomers are far less likely to be swayed by advertising than younger shoppers.

Millennials prefer to conduct research in-store before purchasing online, and they are also open to receiving emails or text messages from luxury brands, or even individual salespeople. The 21 to 34 year olds are also the group most likely to engage with companies on digital platforms like social media and mobile applications.

“Luxury brands are still trying to understand how to capture the loyalty of affluent Millennials, because that really means cultivating the next generation of consumers and keeping your brand relevant,” says Luxury Institute CEO Milton Pedraza. “Understanding diverse shopping behaviors of different generations of wealthy consumers is essential for catering distinct marketing strategies that resonate with each of them.”

Please visit us at www.LuxuryInstitute.com and Contact Us with any questions or for more information about specific brand data and rankings.

The Luxury Institute, LLC
luxinfo@luxuryinstitute.com

Millennials value heritage more than Gen X’ers: study

By: Joe McCarthy
Luxury Daily
April 29, 2014

A new report by the Luxury Institute found that millennials scrutinize investment value and heritage of purchases more than Generation X’ers and Baby Boomers.

The study also found that millennials regularly search for one-of-a-kind items as a way to signal status. While brands often treat “showrooming” as a threat to brand integrity, the research that accompanies the trend indicates that improved customer service and responsive multichannel efforts can turn the phenomenon into a benefit and a source for more revenue.

Millennials want the heritage of the brand, they respect history, and they see it as a validation of investment value,” said Milton Pedraza, CEO of The Luxury Institute, New York.

“They don’t have all the money in the world, they’re just starting out, so they want to make sure they’re buying appropriately,” he said.

“But they do have much higher expectations, so that’s a little bit of a paradox. They care far more deeply about certain aspects of a luxury brands.”

This study is the first in a series of three comparatives studies of millennials, Gen X’ers and Baby Boomers by The Luxury Institute.

Click the link to read the entire article: https://www.luxurydaily.com/millennials-value-heritage-more-than-gen-xers-study/

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