Luxury Institute News

March 6, 2014

Would You Pay 70 Per Cent More For Chanel?

By: Lauren Milligan
Vogue.com
March 5, 2014

IT’S not just the recession and higher property and living costs that’s making you think it, the price of luxury goods is actually rising. The Wall Street Journal reports that the price of a quilted Chanel bag has on average risen by 70 per cent in the past five years, while Louis Vuitton’s classic Speedy bag is 32 per cent more expensive in America than it was in 2009.

There are several theories behind the increases – which represent a general trend across the luxury goods industry, including watches and jewellery. Some say the prices are intended to help customers differentiate between the high-end brands and their increasingly popular mid-market competitors.

“The more Tory Burches and Michael Kors there are, the more the Chanels and Louis Vuittons will try to price up,” said Milton Pedraza, chief executive of the Luxury Institute, told the WSJ. Others explained that the price increases, although far outpacing inflation, were unavoidable in order to maintain quality – thanks to rising production costs.

Click the link to read the entire article: http://www.vogue.co.uk/news/2014/03/05/price-increases-for-luxury-items—chanel-louis-vuitton-bags

January 23, 2014

Three Luxury Myths Killing Your Brand Equity

(NEW YORK) January 23, 2014 –As one the world’s foremost research and consulting companies for top tier luxury brands, Luxury Institute has been privileged to work with the most dynamic brands in the U.S., Europe and Asia.  We often find ourselves engaged in rich dialogue, and healthy debate, with senior executives and top leadership at the world’s greatest luxury firms.

We help iconic brands adapt themselves to compete in the new world where technology, people and product superiority combine to drive success.  Below are three of the biggest myths that we often encounter and our recommendations for how brands can overcome the tendency of destroying their own equity, despite the best of intentions.

Myth #1: You Must Choose One Area of Focus Among Product Leadership, Operational Excellence and Customer Intimacy

Back in 1995, Michael Treacy and Fred Wiersema published “The Discipline of Market Leaders” in which the authors addressed the idea of strategic focus, and discouraged attempts to excel on multiple fronts.  The concepts and principles were adapted by top-tier consultants and spread throughout the management ranks of corporations that engaged them, propagating the myth that you have to choose only one area of differentiation.

Today, superior products, efficient operations and brand intimacy are an inseparable trio for building and maintaining a luxury brand. The reality now is that you have to be great at all three, or you are highly disadvantaged.

A clear example of achieving excellence on all three fronts is Bottega Veneta.  The iconic luxury fashion brand has seen a phenomenal sales growth trajectory over the past ten years. It was on the brink of bankruptcy in the late 1990s, and in 2001 was acquired by the company that is now Kering.  Back then, annual sales were around $50 million and the income statement was mired in losses. Today Bottega Veneta’s sales are topping $1 billion.

Bottega Veneta’s management team is best-in-class. They are blessed with a brilliant, authentic designer matched by a management team that is beyond superb. The brand delivers on all three disciplines seamlessly. At Bottega Veneta, brilliant execution delivers a reported profit margin of 32%. Phenomenal sales and profit growth flows from product leadership, operational excellence and customer intimacy that is the envy of any brand. A profoundly personal, humanistic culture translates into the Bottega Veneta brand running on all three disciplines, instead of getting a lift from only one.

Myth #2: A Luxury Brand Must Be Organized As a Hierarchy In Order to Be Effective

At the center of a luxury brand is usually a brilliant innovator and founder whose creative genius is unquestionable. There is also typically a business partner who makes all of the decisions jointly with the founder.

The origin of luxury in Europe has created an industry organizational model that has some of the strictest hierarchies known in the business world. When we visit with senior management teams in Europe, and even at many U.S. firms, the organization is defined as a military style, top-down hierarchy.

Proponents of this model say that luxury brands, unlike brands in any other industry, have lasted hundreds of years–or at least for several decades–so why fix what is not broken?

There are two major reasons why the myth of the luxury brand as a strictly regimented organization must be shattered. The first is demographic in nature. As millennials in the 21-34 age group enter the work force, our research shows that that these younger people are far more idealistic about having meaningful purpose in their work.  They tend to change jobs more frequently and often leave if they are in a structured environment where opportunities to develop and contribute are limited. Author and researcher Daniel Pink says that three things are required in an organization today to retain employees: a meaningful purpose; some degree of autonomy over how they perform their function, and continuous skills growth.

The second reason why rigid hierarchies are ineffective is the new meaning of strategy. The metaphor for a successful brand is not the machine model, but the organic model. There must be a balance of adapting processes to achieve healthy, sustainable growth while adhering to corporate DNA.

Myth #3: Sales Professionals are Anonymous and Robotic Transactors

Luxury sales teams at most brands already have enormous turnover and this is not likely to decrease in organizations that fail to empower associates. Brands must embrace the ‘freedom with boundaries’ approach or watch their associates walk out the door.

While luxury executives say they are sold on the ideas of customer experience and engagement, they are far less enthusiastic about employee experience and engagement.  Most brands will tout the new principles but will resort to giving orders instead of trusting front-line professionals, especially in tough times.

The paradox is that in order to unleash the power of customer relationship building, driven by a customer culture, brands cannot simply task front-line employees with delivering results, excluding them from the “customer” definition. Employees are really internal customers and they should be measured just as carefully. In addition to empowering employees, brands must use innovative education and daily customer and sales associate metrics to improve skills and reinforce the culture daily.

Luxury sales professionals in the future will be treated as artisanal entrepreneurs who are given their own email addresses and digital devices for professional use. They will be given the freedom to innovate in small and large ways daily in order to personalize and customize for the customer

It may be true that many sales associates in a variety of industries will be replaced by technology solutions. However, in luxury, these jobs will be upgraded to deliver the extraordinary customer experiences and build the long-term relationships that brands once took for granted when they first opened their doors.  Innovation will flow from the bottom-up as much as from the top-down.

Conclusion:

Luxury Institute has worked with more than a dozen luxury brands or conglomerates on Customer Culture projects in the past few years.  The improvements are real and deliver powerful results in customer data collection, conversion and retention. Brands have seen retention of employees increase too. Bridging the gap between management, the front line, and the customer may be hard for some executives to swallow or imagine, but that is the future of luxury.

The luxury industry is very much a darling of Wall Street today, and with good reason. As the global population of affluent consumers grows, luxury is in for a good ride indeed. Yet, these myths are preventing many luxury brands from achieving significantly better sales and profit growth and could potentially drive many established companies out of business.

About the Luxury Institute (www.luxuryinstitute.com)
The Luxury Institute is the objective and independent global voice of the high net-worth consumer. The Institute conducts extensive and actionable research with wealthy consumers globally about their behaviors and attitudes on customer experience best practices. In addition, we work closely with top-tier luxury brands to successfully transform their organizational cultures into more profitable customer-centric enterprises. Our Customer Culture consulting process leverages our fact-based research and enables luxury brands to dramatically Outbehave as well as Outperform their competition. The Luxury Institute also operates LuxuryBoard.com, a membership-based online research portal, and the Luxury CRM Association, a membership organization dedicated to building customer-centric luxury enterprises.

 

January 6, 2014

But It Doesn’t Look Like a Marriott: Marriott International Aims to Draw a Younger Crowd

By Brooks Barnes
New York Times
January 4, 2014

J.W. Marriott Jr., the 81-year-old chairman of Marriott International, flew to London in September to inspect his company’s new jewel: Edition, a sumptuous boutique hotel intended to anchor a new 100-city chain — the next W, if Marriott has its way. But Mr. Marriott did not stay overnight at the London Edition, as the new property is known, with its laser-lighted nightclub and guest-room paintings of women wearing toilet-paper turbans. He bedded down at Grosvenor House, one of the company’s more traditional luxury hotels.

“This is what I know, but I’m the past,” he said, sitting in the old-fashioned floral splendor of a Grosvenor corner suite. Edition, conceived in partnership with the boutique hotelier Ian Schrager, is about the Marriott company’s future. “We’re trying to get some flash,” Mr. Marriott said. He rose wearily from his chair. “I’m off to see the flash.”

Marriott is big. The company, based in Bethesda, Md., operates 660,000 rooms under 16 brands, including Courtyard, Renaissance and Ritz-Carlton; more than 800 new Marriott-operated properties are in the works worldwide.

Click the link to read the entire article which includes a quote from Milton Pedraza, CEO of Luxury Institute: http://www.nytimes.com/2014/01/05/business/marriott-international-aims-to-draw-a-younger-crowd.html?pagewanted=print

 

November 28, 2013

Luxury Daily’s Luxury Women to Watch 2014

By Staff Reports
Luxury Daily
November 27, 2013

Tip a hat or nod respectfully to the 25 women on Luxury Daily’s Luxury Women to Watch 2014 list, a roll call of the some of the smartest women set to make a difference in luxury marketing and retail in 2014.

These executives share traits in common: dedication to craft, consumer focus, leadership potential, ambition, educator and exemplar. And yet, for all the plaudits, these women know that the journey is won step by step, with many miles to go before true gender parity is a reality in the luxury business.

“Women are extremely underrepresented at the highest ranks of luxury companies but fill the majority of positions at every other level,” said Meera Raja, analyst at The Luxury Institute, New York.

This honor list, the second since its debut last year, is geared to spotting future occupants of the C-suite.

Honor list
Executives on the list represent brands and retailers such as Rosewood Hotels, David Yurman, Bang & Olufsen, Lexus, FHRI Hotels and Resorts, The Ritz-Carlton Co., Savelli, Pratesi Linens, H. Stern, La Prairie, Estee Lauder Cos., Moët Hennessy USA and Michael Kors.

Also on the list are executives from agencies, publishers, researchers, consultancies and service providers such as Art Luxe Style, Avista Partners, Brenes Co., ePrize, ShopIgniter, Gallant Media Group, Bluemoon Works, Luxury Institute, Interbrand, Carrot Creative, Hearst Design Group and Style Coalition.

It is a field of strong women with stronger convictions.

“So much of the luxury business is creating personalized experiences and I think women can think creatively to develop them,” said Nancy Hubbell, prestige communications manager at Lexus, Torrence, CA.

Judging process
Picking the honorees was not simple, given the sheer number of submissions. Luxury Daily invited readers to send in their nominations. The Luxury Daily team also had its own slate of candi¬dates based on regular interactions with luxury marketers.

Once the deadline expired, the Luxury Daily team judged the nominees on their merits and narrowed the list to 25 women who showed the most promise to push the envelope in 2014. All judging was based purely on merit and the potential to make a difference.

The list’s responses reflected the pragmatic approach to luxury marketing and retail, balancing both art and science across all channels including online, mobile and especially the mainstay, retail stores.

“Luxury retail settings are modern art galleries,” said Rebecca Miller, New York-based executive vice president of Pratesi Linens.

MANY THANKS to Michelle Nance for putting together this Clas¬sic Guide. Also, thank you to Jen King, Joe McCarthy and Sarah Jones for their nominations and judging as well as the reporting on Luxury Daily.

Please read this guide and reach out to the women honored. As role models, they pave the way for more women aspiring to not only enter luxury marketing and retail, but also aiming for the top.

London-based Rebecca Robins, Interbrand director for Europe, Middle East, Africa and Latin America, said it best when she quoted the last words of the late British poet Seamus Heaney: “Noli timere.” Translated from the Latin: “Don’t be afraid.”

Please click here to download Luxury Daily’s Luxury Women to Watch 2014

http://www.luxurydaily.com/luxury-daily%E2%80%99s-luxury-women-to-watch-2014-2/print/

November 20, 2013

Treasure, What’s Your Pleasure?

There’s never been a better time to make a mint in fashion.

By Naomi Barr
Slate Magazine
November 19, 2013

The new titans of business are now also the best dressed. Take a glance at the Bloomberg Billionaires list: As of this writing, the third wealthiest person in the world is Amancio Ortega (net worth $64.2 billion), the founder of Spanish clothing chain Zara. No. 15 is luxury goods magnate Bernard Arnault ($33 billion), chairman of LVMH Moët Hennessy Louis Vuitton SA; just a few places behind is Stefan Persson ($29.3 billion), chairman of Swedish retail giant H&M. In the past year, a noteworthy crop of high-end designers made their first appearances on Forbes richest-billionaires list, including Tory Burch, Dolce & Gabbana’s Domenico Dolce and Stefano Gabbana, and Diesel founder Renzo Rosso. Brunello Cucinelli, with his eponymous label of suits and $2,000 cashmere sweaters, has reportedly sailed past the 10-figure mark while the ubiquitous Michael Kors is on the brink, if he hasn’t crossed it already.

High-end (or highish-end) fashion is the provenance of a new class of billionaire. “It’s the bifurcation of the world,” says Milton Pedraza, CEO of the Luxury Institute, a research and consulting firm. “People talk about the 99 percent and the 1, but it’s really more like the 80 percent and the 20. That top number of consumers is growing exponentially, and as a result, premium and luxury brands are surging.” With an expanded consumer base in China and other Asian markets as well as in Europe, Russia, the Middle East, and the Americas, the luxury market has boomed; according to the consulting firm Bain & Co., these consumers worldwide have spent roughly $292 billion in 2013 alone.

Click the link to read the entire article which includes a quote from Milton Pedraza, CEO of Luxury Institute: http://www.slate.com/articles/business/billion_to_one/2013/11/the_next_fashion_billionaire_michael_kors_marc_jacobs_and_others_on_the.html?wpisrc=burger_bar

 

 

November 19, 2013

T-shirt for $7 or $70? How the wealth gap is altering retail

By Allison Linn
CNBC
November 19, 2013

The growing wealth gap between the richest and poorest Americans is creating a shopping chasm between those who are trading up and those trading down, experts say. What’s missing is the middle.

“There is a two Americas kind of thing going on,” said Chris Christopher, director of U.S. and global consumer markets for IHS Global Insight.

The result is a retail marketplace in which even basic goods like socks and razors are becoming either incredibly cheap or extremely expensive, experts say.

Say you’re a guy who needs a new T-shirt. A shopper who feels like he has fallen down the economic ladder might opt for the $6.98 Kmart item. But a tech industry hotshot for whom things are looking up might be tempted by the $70 version available at Barneys.

Is there a new baby in the family? Cash-strapped shoppers might head to Wal-Mart for a $6.96 hoodie to bundle up that bundle of joy. The high-end shopper, on the other hand, could be eyeing the $135 cashmere number offered at J. Crew.

Robert Barakett $59.50 men’s white T-shirt versus Kmart’s Basic Edition $6.98 white T-shirt.

Looking to get back to the gym before the holidays? The 1 percent may go for Lululemon’s $98 yoga pants (despite the recent troubles) but the 99 percent probably is more prone to scoop up the $14.99 product at Target.

On the high-end side, experts say retailers are seeing an opportunity to snag consumers who have fared well in the weak economic recovery and now want the best—even in a toothbrush, hair dryer or coffeemaker.

“A lot of even basic items have gone premium,” said Milton Pedraza, CEO of the Luxury Institute, a consulting firm focused on affluent consumers. He said one company even contacted him recently about the possibility of developing a luxury detergent.

Click the link to read the entire article which includes a quote from Milton Pedraza, CEO of Luxury Institute: http://www.cnbc.com/id/101207907

November 15, 2013

Luxury Outlook 2014: Up, Down or Flat?

By Staff Reports
November 14, 2013

Luxury marketers and retailers have held their ground in a global economy still on the mend from the recent slowdown, high unemployment and growing consumer and public debt. Given this environment, what is the outlook for luxury brands in 2014?

In this free hour-long webinar on Tuesday, Dec. 3 at 2 p.m. ET, senior executives from the Luxury Institute, Select NY and Bloomberg Pursuits will discuss what luxury marketers can expect in the year ahead, how to craft their marketing plans accordingly and what left-field surprises to expect, if any.

“Luxury marketers know that the key to sustained growth is nurturing both brand and customer,” said Mickey Alam Khan, editor in chief of Luxury Daily, New York. “The coming year will bring its own opportunities and challenges as global events dictate the rise and fall of consumer confidence. Luxury brands must continue their focus on quality and exclusivity even as the siren call of market share beckons.”

This webinar is one in a series produced by Luxury Daily to inform and educate luxury marketers on the ins and outs of luxury marketing and retail.

Themes discussed in the webinar
• What luxury-focused brands, retailers, agencies and publishers can expect in the year ahead
• Which marketing or retail channel, if any, will be the breakout star in 2014
• Surprises ahead and how to act or react
• Lessons learned from 2013
• Crafting strategy for next year to truly embrace multichannel marketing, including social and mobile
• Three best-practice tips for luxury marketing and retailing in 2014

Panelists
Milton Pedraza, CEO, The Luxury Institute
Mike Dukmejian, publisher, Bloomberg Pursuits
Wolfgang Schaefer, global creative strategy officer, Select NY

Moderator
Mickey Alam Khan, editor in chief, Luxury Daily

Attendees to the webinar can request a copy of the deck

http://www.luxurydaily.com/luxury-outlook-2014-up-down-or-flat-2/

October 23, 2013

Neiman Marcus Outshines the Competition For Online And In-Store Experiences Among the Wealthy

(NEW YORK) October 23, 2013 – As part of its first installment of the Luxury Multichannel Engagement Index (LMEI) survey, the New York-based Luxury Institute asked consumers from households with minimum annual income of $150,000 to share opinions and rankings of online and in-store experiences at leading luxury retailers. Neiman Marcus earns the highest overall score and stands out for garnering top honors in nine out of ten customer criteria used to evaluate both the Web and brick-and-mortar shopping experience.

Wealthy shoppers say that Neiman Marcus stores rank first for attractive displays of exclusive products, easy navigation, accessibility of customer service, personalized shopping experiences, fair prices, and for carrying ample stock and styles. Customers also laud Neiman’s salespersons for making them feel special while serving as trusted fashion advisors.

The Neiman Marcus online experience draws equally extensive praise with the top overall ranking and the highest scores on the same measures of satisfaction.

“Smart retailers realize the value of leveraging data to deliver superior experiences that build lasting customer relationships, regardless of the channel,” says Luxury Institute CEO Milton Pedraza.

Neiman plans to invest $100 million over the next three to five years on technology that will closely align inventory management, logistics and human resources across multiple retail channels.

“Every aspect of our business is being transformed by technological advancements,” said Jim Gold, president of Neiman Marcus Group, at a retailing summit in Dallas. “The lines have completely blurred between brick-and-mortar and e-commerce. The great challenge is to make the experience seamless.”

About the Luxury Institute (www.luxuryinstitute.com)
The Luxury Institute is the objective and independent global voice of the high net-worth consumer. The Institute conducts extensive and actionable research with wealthy consumers globally about their behaviors and attitudes on customer experience best practices. In addition, we work closely with top-tier luxury brands to successfully transform their organizational cultures into more profitable customer-centric enterprises. Our Customer Culture consulting process leverages our fact-based research and enables luxury brands to dramatically Outbehave as well as Outperform their competition. The Luxury Institute also operates LuxuryBoard.com, a membership-based online research portal, and the Luxury CRM Association, a membership organization dedicated to building customer-centric luxury enterprises.

October 18, 2013

Burberry’s internal harmony paves path for Chris Bailey CEO transition

By Joe McCarthy
Luxury Daily
October 17, 2013

British apparel and accessories brand Burberry’s soon-to-be CEO Christopher Bailey has triggered doubts owing to his creative background, but his collegial relationship with departing company boss Angela Ahrendts and extensive credentials should nullify the skepticism.

Mr. Bailey has spent 12 years absorbing the brand’s ideology and helped to spearhead its transformation throughout the past decade. Furthermore, passing the executive baton to a close collaborator of Ms. Ahrendts allows Burberry to continue its trajectory as a design-driven and digitally pioneering brand without interruption.

“In Bailey you have someone who can handle the job,” said Milton Pedraza, CEO of The Luxury Institute, New York. “He’s worked with Ms. Ahrendts and has learned execution from her.

“They worked in a very good partnership that shared decisions and execution,” he said.
“Change always happens because of the marketplace, but Burberry will continue on its track of being customer-centric and having a customer culture driven by digital.”

Not that disruptive
Burberry announced Oct. 15 that Ms. Ahrendts would be leaving the brand by mid-2014. Mr. Bailey will take over her position while maintaining his current role as the chief creative officer. Ms. Ahrendts will join Apple next spring as chief of the electronics giant’s retail and online stores.

Prior to Burberry, Mr. Bailey worked as a designer for U.S. label Donna Karan and Italian fashion house Gucci, where he was recruited by fashion designer Tom Ford.

Mr. Bailey arrived at Burberry in 2001 and has played an instrumental in restructuring the brand’s image, while advocating for an embrace of technology. In the past year, Burberry has demonstrated its digital prowess several times.

For instance, the brand partnered with Apple to showcase its upcoming spring/summer 2014 collections through images and video captured on the new iPhone 5S. Leading up to Burberry’s spring/summer show Sept. 16, the brand posted images and videos from the iSight camera on the iPhone 5S.

Also, Burberry engaged consumers in branded peer-to-peer communications through a partnership with Google where users sent loves notes around the world. The label created a microsite for the Burberry Kisses campaign that let consumers send and view notes that have been sent.

In a video outlining the fashion house’s executive transition, Ms. Arendts describes the strong management team and global infrastructure that Burberry has developed over the past eight years that will prevent the brand from falling from its expansionary climb.

Also, Ms. Ahrendts explains that her initial dream for Burberry to become a company bigger than any one person has been fulfilled.

“I don’t think Ms. Ahrendts just built a company,” Mr. Pedraza said. “She built a culture that will outlive her and Bailey was a big part of that.”

Mr. Bailey echoes the assessment of the brand’s unified departmental and regional teams in the video. In addition to its digital gains, the brand has transformed itself into a formidable retailer over the past several years.

Revenues climbed 16.8 percent to $1.59 billion, reflecting double-digit gains in all regions, and high-single-digit comparable growth in China, per WWD.

According to the Telegraph, Mr. Bailey is the person most responsible for Burberry’s elevation from a moribund and musty provincial backwater of a British brand into one of the world’s most lucrative and best-known.

“Bailey is already responsible for Burberry’s image,”  said Chris Ramey, president of Affluent Insights, Miami, FL. ”I don’t expect much change.

“Moving a creative officer into the CEO position is a welcome change,” he said. ”Most companies experience a power struggle between marketing and accounting.”

Doubts abound
Some experts are concerned that Mr. Bailey’s background as a designer has failed to adequately prepare him for the role of CEO, with no prior boardroom-level experience.

Skeptics should look around.

Ralph Lauren and Giorgio Armani are two prominent examples of a figure handling both the creative and executive responsibilities. However, these designers share entrepreneurial roots that set them apart from Mr. Bailey, who only has experience as a designer.

Following the Oct. 15 announcement, Burberry’s stock dropped 8.8 percent, according to WWD. This initial dip was countered by Burberry’s release of strong year-to-date sales numbers.

Burberry’s decision to look internally for a replacement indicates that it does not want to shift course.

“Lots of creatives rise to the management roles,” said Marie Driscoll, CEO and chief consultant at Driscoll Advisors, New York. ”It’s Angela’s career arc as well as Mickey Drexler at Gap and Jenna Lyons at J. Crew.

“Bailey has been integral to Burberry for years, so I wouldn’t expect drastic changes as the business is humming,” she said.

http://www.luxurydaily.com/burberrys-unified-internal-structure-ensures-smooth-ceo-transition/

October 16, 2013

Top Earners Recover Their Losses, and Then Some

By Annie Lowery
New York Times
October 15, 2013

FOR most Americans, the economy over the last 10 years has felt like a slog interrupted by a punch: the recession came amid years of stagnation. But for America’s top earners, the experience has been more like whiplash: a boom followed by a bust followed by a boom.

Call it the 1 percent boomerang. The country’s top earners lost huge sums during the recession, as housing values plummeted and the stock market crashed. But the recovery has restored those fortunes — and then some, for some people — and created tremendous new ones.

The trend starts with the merely quite well-off, households earning more than about $150,000 a year. And the sums become more exaggerated higher up the income scale.

Click the link to read the entire article which includes multiple quotes from Milton Pedraza, CEO of Luxury Institute: http://www.nytimes.com/2013/10/16/your-money/top-earners-recover-their-losses-and-then-some.html

 

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