Luxury Institute News

May 9, 2018

Harry Rosen presses for success with joint ventures, acquisitions

The Globe and Mail

 

“Everybody has been hurt” by big shifts in retail, said Milton Pedraza, CEO of New York consultancy Luxury Institute, adding apparel has been the category most affected. Men are dressing down and not buying as many suits and ties, while consumers generally are spending less on apparel and more on …”

 

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SOURCE:  https://www.google.com/url?rct=j&sa=t&url=https://www.theglobeandmail.com/business/article-harry-rosen-inc-charts-growth-strategy-for-a-changing-marketplace/&ct=ga&cd=CAEYACoTNjUzODM3MTE3MzA4ODAyOTg1NjIaZTUxNjVmMTI4ZWQxNjUwODpjb206ZW46VVM&usg=AFQjCNH-fjRTM-NdSbuN27EHOZxFilrsRg

April 26, 2018

For luxury vehicles, electric is no longer a bad word

Star Tribune
By: Hannah Elliot
Thursday April 26, 2018

High-end carmakers see the marketing light in hybrid drivetrains. 

A plug-in power dock made from sustainable materials and designed by French designer Philippe Starck stands next to the 2019 Bentley Bentayga hybrid l
A plug-in power dock made from sustainable materials and designed by French designer Philippe Starck stands next to the 2019 Bentley Bentayga hybrid luxury sports utility vehicle at the 88th Geneva International Motor Show in Geneva.

 

Many Bentley customers believe they have obtained their wealth because of luck.

So says Bentley Motors’ new chairman and chief executive officer, Adrian Hallmark, during an interview in Geneva.

“I have recognized that a lot of our customers follow a similar thing: They are super-successful. And a lot of them think it’s because they’re lucky,” he says. “That’s really important, because they don’t think they’re above human weakness and frailty.”

Such perceived (and believed) good fortune is spurring the world’s millionaires and billionaires to make luxury purchases, based on a system of values such as reduced carbon footprints and sustainability, he adds. According to Hallmark, hybrid and electric cars allow them to express in a novel way, he says.

“There is a new dimension long-term in the purchase decision — the ethical value,” Hallmark says, referring to gleanings from a 2008 internal study Bentley did of the world’s wealthiest people. “Electrification is part of it, and electrification isn’t going away.”

In fact, this new addition to the traditional considerations for buying a luxury car — performance, quality materials and craftsmanship — is manifesting so strongly among the world’s top 1 percent that it is influencing Bentley’s product planning for the next two decades.

The company debuted its Bentayga Hybrid, a mid-six-figure SUV that can run 31 miles on purely electric power, recently at the Geneva Auto Show. (The 5,400-pound SUV isn’t exactly an econobox, but the hybrid badge certainly adds a feeling of green-tinged do-goodery — both for drivers and for onlookers who know what it means.) By 2025, all Bentley cars will offer some version of an electric drivetrain, Hallmark says. That includes its growling 12-cylinder Continental GT line, the latest generation of which is due early next year.

It may take up to a decade to make an electric version of such a car, but the way Hallmark sees it, Bentley has no choice.

“We already know that the [next version] will be a battery electric vehicle,” he says. “It will have all of those moral and ethical benefits with it. By not going that way, even if we don’t have to, we would be massively underperforming in terms of customer potential.”

Of course, the Crewe, England-based brand isn’t the only one to reckon that, in addition to being more efficient, electric power bestows a mark of honor upon its best clients. Top luxury automakers have been producing hybrid and electric vehicles for years, such as BMW’s i8, Porsche’s 918 Spyder Hybrid, and Mercedes-Benz’s sold-out Project 1.

We take it for granted that a fair number of wealthy car buyers admire electric power, thanks to the cool cachet of Tesla Inc. But not long ago, electrics were viewed as anathema by serious car people, who favored traditional air-cooled engines with their guttural roars and grit. Then Toyota’s Prius introduced the modern electric car to a broad audience. That one, with its awkward angles and gutless drivetrain, made electric cars feel like medicine we took with eyes closed and a quick swallow.

“It is definitely high performance with sustainability that resonates on a values and ethics level with affluent and wealthy automotive buyers,” says Milton Pedraza, founder of the Manhattan-based Luxury Institute, which studies trends of the world’s rich.

Witness Porsche’s upcoming Mission E, an electric-powered sedan that the automaker has hyped for years and plans to unveil on the eve of its also much-hyped 70th anniversary. It will probably cost more than the $90,000-plus Panamera, and while its driving range and battery power remains obscured, it will undoubtedly be a car to impress with next year. Among Porsche’s notoriously rabid fans, it will be the only new model that could divert attention from the usual adulation attending icons such as the brand’s GT3, 911R, or 930. More crucial on a broader scale, if Porsche delivers on its promise, it’ll be the first sedan to challenge Tesla’s Model S in terms of sales volume.

Or take Aston Martin Lagonda, which has announced that it’s turning an entire heritage brand, Lagonda, into an electric powerhouse. The wedge-shaped Lagonda Vision Concept that debuted in Geneva is an all-electric sedan that marks how Aston expects the long-extinct brand to look when it returns.

Aston Martin hasn’t divulged many details about the new car, which, after all, is only a conceptual exercise, but Andy Palmer, president and chief executive officer, says it will get 400 miles on one charge — enough to drive from Los Angeles to San Francisco, with self-driving capability and zero emissions.

“The Lagonda Vision Concept is our plan for the rebirth of a great brand,” he says. “It’s a new kind of luxury car.”

Some of the most prestigious brands are holding off on electric for now. McLaren’s global head of sales, Jolyon Nash, recently said no way, not ever (probably). Automobili Lamborghini’s chief engineer, Maurizio Reggiani, says it would take quite a lot of persuasion — maybe an act of God — for the brand to make anything electric in the near future. Bugatti Automobiles SAS’ Stephan Winkelmann, who incidentally came from Lamborghini by way of Audi Sport, said “it’s too early to talk about” electrification at Bugatti, though he recognizes the potential.

“We are not influencing this discussion, but we take this very seriously,” he says. “It’s something to look into.”

Stephanie Brinley, senior analyst for IHS Markit, takes it all with a grain of salt. Some of the “ethical value” status symbol talk is hopeful thinking and marketing, she says. After all, car companies have invested billions in electrification; they have a lot riding on their ability to sell the story that a massive, expensive hybrid SUV is cool, not just “eco-friendly.”

Still, the automakers are on to something real, she adds, that’s not going away. Young drivers are going to care about sustainable and ethical transportation in the next decade — more than any buying group ever has, especially when it comes to aspirational brands.

“If you look at millennials or the younger generation, there does seem to be more thoughtfulness about what kind of mark you leave on the planet — more so than a decade ago,” Brinley says. “As we move forward in the luxury landscape, for this type of buyer, having one in your garage will be crucial.”

For automakers, at least, it’ll take more than luck to get them there.

 

SOURCE: http://www.startribune.com/for-luxury-vehicles-electric-is-no-longer-a-bad-word/480936511/

April 16, 2018

Upscale, downscale: Target draws customers with collaborations with high-end brands

The Washington Post
By: Abha Bhattarai
Friday, April 13, 2018

 

Not long ago, Gracie Howard got a pair of bright red Hunter rain boots. She felt good about the purchase — at least until she heard Target would soon be selling almost identical Hunter boots for a fraction of the price.

“I just wanna know why I’ve been buying $150 Hunter boots but the Hunter collection at target is $40. . . . ,” the 18-year-old from Cuero, Tex., tweeted. “I feel scammed.”

The boots aren’t so special anymore, she said — “I feel like everybody’s going to be walking around wearing Hunter now” — but that wasn’t going to stop her from heading to Target this weekend to see if she can pick up a pair or two.

“They’re so discounted that I’ll go see what they have,” she said.

And that, shoppers and analysts say, sums up Target’s high-low collaborations: There are obvious downsides, but many shoppers find them irresistible.

The retailer’s newest designer partnership, with iconic British brand Hunter, is set to roll out this weekend (though store credit card holders got access to a few items a week earlier). It is the latest in a series of collaborations that over the past two decades have turned around the retailer’s image and helped establish it as a higher-end alternative to competitors such as Walmart. Target has rolled out limited-time collaborations with established luxury brands such as Missoni, Alexander McQueen and Jean Paul Gaultier, as well as up-and-coming designers including Jason Wu and Prabal Gurung.

But retail analysts say that while the big-box chain has­­ boosted its own cachet, the tie-ups are less fruitful for premium brands looking to attract aspirational shoppers. Sure, partnering with Target may boost brand recognition and awareness in some circles, but to what end? Once the items sell out, often in days or weeks, it’s unlikely, industry insiders say, that Target shoppers will suddenly begin buying Victoria Beckham trousers at Saks Fifth Avenue for 25 times the price. (A version of the designer’s flared trousers sold for $40 at Target last year. A similar item at Saks Fifth Avenue is marked $1,010.)

“I’ve never seen a collaboration between a truly luxury brand and a mass retailer have much of an impact,” said Milton Pedraza, chief executive of the Luxury Institute, a New York-based research firm and consultant to luxury brands. “The only benefit here long term is to the mass retailer, which gets a halo effect from having a top brand on its shelves. But long term, the democratization of a luxury brand rarely works.”

Target, which has rolled out more than 175 such partnerships since the debut of its Michael Graves Design Collection in 1999, has been successful in creating buzz around many of its collaborations. And once shoppers are in the retailer’s stores, or on its website, analysts say they’re likely to make additional purchases.

“These types of lines actually drive little in sales, but the real win is to drive people to stores and have them buy everything else they need,” said Sucharita Kodali, an analyst for the market research firm Forrester. “It’s perfect for Target.”

The partnerships have made high-end pieces more affordable to a mass market — if customers can snag them in time — and helped kick off a frenzy of high-low partnerships. Karl Lagerfeld and Stella McCartney have designed collections for H&M, as have Versace and Balmain. Vera Wang now sells clothing at Kohl’s. And “Project Runway” winner Christian Siriano, whose dresses typically sell for thousands, has a line at Payless ShoeSource, the discount retailer that filed for bankruptcy this month.

Target’s annual sales have more than doubled since 1999, from $33.7 billion to $71.9 billion.

“These collaborations give our guests the opportunity to get their hands on incredible design at an affordable price,” said Mark Tritton, Target’s chief merchandising officer. “With each partnership, whether it be with a designer or brand, we want it to feel unique and special.”

Not always easy to buy

By the time Catherine Donovan logged on to Target.com at 7:30 a.m. Saturday, the $35 Hunter backpack she’d been eyeing had sold out. The Target credit card-holder found it on eBay — for three times the price.

“That may be part of the plan — to create hysteria — but it’s become a complete bloodbath,” said the 34-year-old from Des Plaines, Ill. “I’m not going to turn my back on Target, but you have to wonder who they’re selling to.”

Longtime shoppers say scoring designer merchandise at Target can be a frustrating experience. Collections usually sell out on Target.com within days, if not hours, and the retailer offers few details on exactly when online sales will begin.

The Minneapolis-based company has also faced criticism for sloppy displays and an unstable website. And some shoppers say the marked-down designer wares are sometimes badly made.

“I feel like the quality really takes a hit in collaborations like these,” said Kate Concannon, 31, who runs the fashion blog Life Sucks in a Strapless Bra. “I mean, Hunter boots are an investment piece — I’ve had mine for 10 years — but the Target collaboration is making me scratch my head a little bit: Why are these boots $40 when they normally cost four times as much?”

Hunter boots are typically made of natural rubber and are handcrafted from 28 parts. But the Hunter for Target line is mass-produced in a factory, using a preformed mold. There are also a few obvious differences in design: Hunter for Target boots, for example, come with calf extenders, and the top of the tall rain boots are cut diagonally instead of straight across. But other than that, shoppers noted few visible differences between the $40 boots at Target and the $150 models sold elsewhere.

Hunter did not respond to requests for comment.

It is unusual, analysts said, for a designer to offer a lower-priced alternative that is virtually identical to their legacy product. But some said Hunter, a 162-year-old brand, was likely to reach a fresh audience at Target.

“The demand for the product is limited, and they could go lower end, but that could diminish the higher-end products,” said Kodali of Forrester. “This is a way for them to dip their toes into the lower end in a brand-appropriate way.”

Pedraza, though, was not persuaded. Sure, these luxury brands attract throngs of people, “but is it profitable? Is it sustainable?” he asked. “Very often, these partnerships are a sign of desperation, and we’re starting to see brands recognize that going mass-market isn’t the best idea.”

A number of department-store brands, such as Michael Kors, Kate Spade and Coach, are struggling to turn around their businesses after flooding outlet stores and off-price retailers with low-priced wares, Pedraza said. “Once you’ve gone mass-market, it’s almost impossible to go back up.”

‘Too much hype’

Amy Arbide has been scouring the Hunter for Target lookbook for weeks. On Friday, she stayed up late waiting for Target to update its website with Hunter backpacks, tote bags and fanny packs that it had promised its credit card holders.

“A couple of friends and I stayed up until midnight,” the 32-year-old said. “Nothing happened. I stayed up until 2:30 the next morning refreshing the site. Nothing.”

She finally decided to go to sleep. When she woke up at 7:30 a.m., three hours after the collection had gone live, everything was sold out.

“It made me so mad, and then my best friend calls me with the same story: ‘Oh my God, everything’s gone,’ ” said Arbide, a paralegal in Miami. “Was I supposed to pull an all-nighter for this so-called exclusive presale? It was just poorly executed — and with too much hype.” (A spokeswoman for Target said the sales typically roll out online “in the wee hours” because the company’s site is refreshed overnight.)

Back in 2012, Arbide bought a couple of items — a zip-up clutch and a water bottle — by Tory Burch as part of Target’s holiday partnership with Neiman Marcus. She’d never heard of the brand before, but all of her friends seemed impressed.

“At the moment, I hadn’t realized what I was getting,” she said. “I was fresh out of college. But then I got those products, and I thought, you know, this is a nice brand.”

Since then, she’s bought Tory Burch items at department stores, including four purses, five pairs of shoes and multiplepieces of jewelry.

“It’s a matter of brand recognition,” Arbide said. “Because of Target, you’re going to have a broader range of people wearing items with the name ‘Hunter’ on it. That’ll get people to notice and say, ‘Where did you get that? What is Hunter?’ ”

Case in point: herself. Even though she’d heard of Hunter’s rain boots before, she had never given them much thought or been to the company’s website.

“But once Target announced the collaboration,” she said, “I began going to HunterBoots.com.”

And Arbide is not giving up on the $40 boots yet — even if it stresses her out. On Saturday, when Target makes its Hunter products widely available, she says she’ll set her alarm for 3 a.m.

“I really do want to snag those boots,” she said. “You’re talking about items that normally cost $200 selling for $40. Any time you have something like that available, why not?”

SOURCE: https://www.washingtonpost.com/business/economy/upscale-downscale-target-draws-customers-with-collaborations-with-high-end-brands/2018/04/13/5dd25888-3cd2-11e8-a7d1-e4efec6389f0_story.html?utm_term=.152794c1669a

Most of Trump’s merchandising empire has faded

The Washington Post
By: Zane Anthony, Kathryn Sanders and David A. Fahrenthold
Friday, April 13, 2018

 

Before he ran for office, Donald Trump made millions by selling his name to adorn other people’s products. There was Trump deodorant. Trump ties. Trump steaks. Trump underwear. Trump furniture. At one time, there was even a Trump-branded urine test.

Now, almost all of them are gone.

In 2015, Trump listed 19 companies that were paying him to produce or distribute Trump-branded consumer goods.

In recent weeks, only two said they are still selling Trump-branded goods. One is a Panamanian company selling Trump bed linens and home goods. The other is a Turkish company selling Trump furniture.

Of the rest, some Trump partners quit in reaction to campaign-trail rhetoric on immigrants and Muslims. Others said their licensing agreements had expired. Others said nothing beyond confirming that they’d stopped working with Trump. Their last Trump goods are now being sold off, often at a discount: One cologne is marked down from $42 to $9.99 for an ounce.

“Success by Trump,” the website says. And below that: “Clearance.”

The decline of the Trump merchandise empire is another sign of how politics has changed the president’s business. On one hand, it has allowed his Mar-a-Lago Club and his D.C. hotel to monetize his political alliances, raking in money from evangelical Christian groups and GOP campaigns.

But it has also driven away customers and partners who’d been drawn to the old Trump – a hustling icon of ostentatious wealth, who sold golf memberships to the truly rich and $42 cologne to those who merely wanted to be.

“Once the political campaign started, the wall went up,” said Marshal Cohen, who measures retail business trends for the NPD Group. “The wall that he [built] was more around his merchandise than it was around Mexico.”

The Trump Organization did not respond to questions about its licensed-merchandise business. Trump has said he has given up day-to-day management of his company while he’s in the White House. But he still owns it.

The Trump Organization sells its own name-branded merchandise. Last year, it opened an e-commerce site, www.TrumpStore.com, with an inventory of Trump T-shirts, teddy bears and key chains.

But the licensed-merchandise business was something different. It allowed Trump to make money off other people’s work, other people’s products, other people’s marketing.

All Trump had to do was sell something that he could never run out of.

His name.

Trump first pursued the idea in 2004. His emissaries contacted an executive at Phillips-Van Heusen, the menswear giant, with a proposition.

How would his company like to pay Trump for the right to put his name on their clothes?

The menswear executive wasn’t interested.

“He laughed,” Jeff Danzer, who was a marketer working for Trump, recalled later.

At that point, Trump was still emerging from the long, low years of the 1990s: huge debts, corporate bankruptcies, tabloid divorces. What customer wanted that on their shirt collar?

But then, “The Apprentice” took off – and rebranded Trump as a sharp-dressed boardroom titan.

After that, the idea of Trump shirts wasn’t laughable.

In fact, it wasn’t enough.

“Suits, dress shirts, ties, even down to shoes,” Danzer recalled. “Any- and everything that you would wear in the board room is what we were going out to license.”

By the end of 2004, Trump had a deal with Phillips-Van Heusen and a Donald J. Trump Signature Collection of clothes at Macy’s.

But that wasn’t enough, either.

Eventually, Trump was a smell – A “masculine combination of rich vetiver, tonka bean, birchwood and musk.” Trump was a chandelier. Trump was a mattress. Trump was a steak. “The meat category represents Mr. Trump’s power,” anunderling told the media when Trump Steaks launched.

Trump was a urine test.

“Take a snapshot of the most critical metabolic markers in your body’s natural waste fluids,” said the website for the Trump Network, a vitamin company that sent its customers urine-sample kits with the Trump logo on them. The tests would be used to determine what vitamins the customer needed, according to archived versions of the Trump Network website.

The rest of the marketing business shook its head. But, for a time, it worked.

“A caricature of what wealth is – as opposed to what real wealth is,” said Milton Pedraza, chief executive of the Luxury Institute, a consultant to luxury brands. Trump sold to those, he said, “who didn’t know the difference,” he said.

However, Pedraza said, Trump began to undermine his own success by “label-slapping” – sticking his name on anything he could, even the farfetched and ridiculous. Emeril Lagasse sold pots. Greg Norman sold golf shirts. Trump sold. . . everything.

“There was no strategy,” Pedraza said.

In 2009, Trump reported that his licensing partners had sold $215 million worth of Trump-licensed goods worldwide. That ranked him 80th on License Global magazine’s list of the top 125 merchandisers. In some years, Phillips-Van Heusen alone paid him more than $1 million.

For Trump, the benefit wasn’t just the money. The items brought his name into closets and kitchens around the country.

“It’s ties, shirts, cufflinks, everything sold at Macy’s. And they’re doing great,” Trump told David Letterman in 2012, during an interview in which he’d also complained that China was overtaking the United States as an economic power. “Number-one-selling tie anywhere in the world.”

“The ties are made in China,” Letterman said.

By 2015, when Trump entered the presidential race, some of his more far-out ideas – steaks, urine tests and vitamins – were already kaput. But, according to his financial disclosures, the 19 remaining licensees were still paying him a combined $2.4 million-plus per year, just to put the Trump name on their goods.

Then Trump ran for president.

Within a few weeks, the number was down to 14.

“We are disappointed and distressed by recent remarks about immigrants from Mexico,” said a corporate statement from Macy’s, after Trump called Mexican immigrants criminals and “rapists” at his first campaign event. “. . . We have decided to discontinue our business relationship with Mr. Trump.”

Losing Macy’s meant losing all the Trump merchandise that Macy’s had sold. Phillips-Van Heusen, his first big deal. Peerless, which made Trump suits. Parlux, which made his colognes. Another company made Trump belts. All gone.

Serta, which made Trump Home mattresses, had been one of Trump’s most lucrative partners. Trump lost it, too.

“They’ll all be back,” Trump told Forbes magazine.

A few months later, Trump called for a “total and complete shutdown” of Muslims entering the United States.

He lost another partner, a Dubai-based company that had a license to sell Trump furniture in the Middle East, Africa and India.

That left 13.

What happened to the rest?

To find out, The Washington Post and the Investigative Reporting Workshop at American University tried to contact all of the remaining companies that Trump had listed as licensing partners on his 2015 financial disclosure forms.

In one case, the company was mystified to have been listed at all.

“We haven’t done business [with him] for a long time,” said Jim Ehren, an executive at a sign-making company in the Los Angeles suburbs. His facility had once made inspirational posters, which paired Trump quotes with scenes of Wall Street or a golf course. But not recently.

Two other partnerships – one to sell Trump-branded shoes in Mexico, the other to sell Trump home organizational products – had apparently ended before any Trump-branded merchandise was sold.

That left 10.

Trump vodka also seems dead. It had survived in Israel, after the product had fizzled elsewhere. But Trump’s own financial disclosures don’t list it after 2015.

Trump coffee, also, is no more.

“It was a lack of sales,” said Sam Blaney at Two Rivers Coffee, which stopped making its Select by Trump coffee pods last year. “Not every idea was a good idea.”

At Downlite, which had sold Trump-branded pillows, the company said it had let the license expire in 2015.

“Purely a business decision,” said Josh Werthaiser, the company’s chief executive. “It had nothing to do with the election.”

That left seven.

Of them, five companies said that they weren’t making Trump products anymore – but gave little detail beyond that.

Wonu, which made Trump-branded bedding in Korea, said simply that its license had expired. Ditto for the makers of Donald J. Trump eyeglasses. A French company that once made Trump mattresses has been sold. Its new owner said it didn’t make them anymore.

At the company that once made Trump-branded throw blankets, executives did not call back. When The Post visited its office, a receptionist said she didn’t know of any Trump products being made there now.

At Elk Lighting, a staffer said the company has stopped making Trump-branded chandeliers and sconces. On its website, the company’s Trump Home Regency chandeliers are now sold as just “Regency.”

Since Trump began his campaign, the Trump Organization’s website has not added any listings of new manufacturers, to replace those it has lost. In Trump’s 2017 financial disclosure, he reported that his royalties from licensed merchandise had fallen from more than $2.4 million to just over $370,000. The forms do not give exact numbers, only a range of values that the figures fall between.

Only two companies are still paying to put Trump’s name on their products.

One is HomeStudio, which produces Trump-branded bed linens and housewares for the Latin American market. It declined to comment for this story, beyond confirming that it still makes Trump goods.

The other is Dorya, a Turkey-based manufacturer of Trump Home Collection furniture.

When a reporter visited the company’s Chicago showroom recently, there was a room full of sleek, modern, expensive chairs and tables. But the Trump name itself was hard to find, unless you knew where to look

On one $4,000 end table, for instance, the silver nameplate reading “Trump” – the name Dorya was paying to use – wasn’t on the outside of the piece at all.

To find it, customers had to look inside the drawer.

SOURCE: https://www.sfgate.com/news/article/Most-of-Trump-s-merchandising-empire-has-faded-12831555.php

April 12, 2018

When Marketing Luxury Vehicles, ‘Electric’ Is No Longer a Bad Word

Bloomberg Pursuits
By: Hannah Elliott
Thursday, April 11, 2018

Feeling good about your car is the new feeling cool about your car.


Inside the 2019 Bentley Bentayga Hybrid SUV at the Geneva Motor Show. By 2025, all Bentley cars will offer some version of an electric drivetrain, executives say. Photographer: Chris Ratcliffe/Bloomberg

Many Bentley customers believe they have obtained their wealth because of luck.

So says Bentley Motors Ltd.’s new chairman and chief executive officer, Adrian Hallmark, during an interview in Geneva.

“I have recognized that a lot of our customers follow a similar thing: They are super-successful. And a lot of them think it’s because they’re lucky,” he says. “That’s really important, because they don’t think they’re above human weakness and frailty.”

Such perceived (and believed) good fortune is spurring the world’s millionaires and billionaires to make luxury purchases, based on a system of values such as reduced carbon footprints and sustainability, he adds. According to Hallmark, hybrid and electric cars allow them to express in a novel way, he says.

“There is a new dimension long-term in the purchase decision—the ethical value,” Hallmark says, referring to gleanings from a 2008 internal study Bentley did of the world’s wealthiest people. “Electrification is part of it, and electrification isn’t going away.”

In fact, this new addition to the traditional considerations for buying a luxury car—performance, quality materials, and craftsmanship—is manifesting so strongly among the world’s top 1 percent that it is influencing Bentley’s product planning for the next two decades.

The company debuted its Bentayga Hybrid, a mid-six-figure SUV that can run 31 miles on purely electric power, last month at the Geneva Auto Show. (The 5,400-pound SUV isn’t exactly an econobox, but the hybrid badge certainly adds a feeling of green-tinged do-goodery—both for drivers and for onlookers who know what it means.) By 2025, all Bentley cars will offer some version of an electric drivetrain, Hallmark says. That includes its growling 12-cylinder Continental GT line, the latest generation of which is due out early next year.

It may take up to a decade to make an electric version of such a car, but the way Hallmark sees it, Bentley has no choice.

“We already know that the [next version] will be a battery electric vehicle,” he says. “It will have all of those moral and ethical benefits with it. By not going that way, even if we don’t have to, we would be massively under-performing in terms of customer potential.”

Successful—and Enlightened

Of course, the Crewe, England-based brand isn’t the only one to reckon that, in addition to being more efficient, electric power bestows a mark of honor upon its best clients. Top luxury automakers have been producing hybrid and electric vehicles for years, such as Bayerische Motoren Werke AG’s i8, Porsche AG’s 918 Spyder Hybrid, and Mercedes-Benz AG’s sold-out Project 1.

We take it for granted that a fair number of wealthy car buyers admire electric power, thanks to the cool cachet of Tesla Inc. But not long ago, electrics were viewed as anathema by serious car people, who favored traditional air-cooled engines with their guttural roars and grit. Then Toyota Motor Corp.’s Prius introduced the modern electric car to a broad audience. That one, with its awkward angles and gutless drive train, made electric cars feel like medicine we took with eyes closed and a quick swallow.

The few electrics that did get car fanatics excited were rather fragile, million-dollar hypercar one-offs that spent more time in the garage than on the road. These days, well-heeled buyers consider a hybrid or plug-in vehicle a crucial part of a well-rounded garage.

“It is definitely high-performance with sustainability that resonates on a values and ethics level … with affluent and wealthy automotive buyers,” says Milton Pedraza, founder of the Manhattan-based Luxury Institute, which studies trends of the world’s rich.

Witness Porsche’s upcoming Mission E, an electric-powered sedan that the automaker has hyped for years and plans to unveil on the eve of its also much-hyped 70th anniversary. It will probably cost more than the $90,000-plus Panamera, and while its driving range and battery power remains obscured, it will undoubtedly be a car to impress with next year. Among Porsche’s notoriously rabid fans, it will be the only new model that could divert attention from the usual adulation attending icons such as the brand’s GT3, 911R, or 930. More crucial on a broader scale, if Porsche delivers on its promise, it’ll be the first sedan to challenge Tesla’s Model S in terms of sales volume.

Or take Aston Martin Lagonda Ltd., which has announced it’s turning an entire heritage brand, Lagonda, into an electric powerhouse. The wedge-shaped Lagonda Vision Concept that debuted in Geneva is an all-electric sedan that marks how Aston expects the long-extinct brand to look when it returns.

Aston Martin hasn’t divulged many details about the new car, which, after all, is only a conceptual exercise, but Andy Palmer, president and chief executive officer of Aston Martin Lagonda Ltd., says it will get 400 miles on one charge—enough to drive from Los Angeles to San Francisco in one sitting, with self-driving capability and zero emissions.

“The Lagonda Vision Concept is our plan for the rebirth of a great brand,” he says. “It’s a new kind of luxury car.”

The New Future

Some of the most prestigious brands are holding off on electric for now. McLaren’s Global Head of Sales, Jolyon Nash, recently said no way, not ever (probably). Automobili Lamborghini SpA’s chief engineer, Maurizio Reggiani, says it would take quite a lot of persuasion—maybe an act of God—for the brand to make anything electric in the near future. Bugatti Automobiles SAS’s Stephan Winkelmann, who incidentally came from Lamborghini by way of Audi Sport, said “it’s too early to talk about” electrification at Bugatti, though he recognizes the potential.

“We are not influencing this discussion, but we take this very seriously,” he says. “It’s something to look into.”

Stephanie Brinley, senior analyst for IHS Markit, takes it all with a grain of salt. Some of the “ethical value” status symbol talk is hopeful thinking and marketing, she says. After all, car companies have invested billions in electrification; they have a lot riding on their ability to sell the story that a massive, expensive hybrid SUV is cool, not just “eco-friendly.” (Because, let’s be honest, if you wanted to really reduce your carbon footprint, the answer would be to buy a cheap, tiny electric car, or ride a motorcycle—or a bike.)

Still, the automakers are on to something real, she adds, that’s not going away. Young drivers are going to care about sustainable and ethical transportation in the next decade—more than any buying group ever has, especially when it comes to aspirational brands.

“If you look at millennials or the younger generation, there does seem to be more thoughtfulness about what kind of mark you leave on the planet—more so than a decade ago,” Brinley says. “As we move forward in the luxury landscape, for this type of buyer, having one in your garage will be crucial.”

For automakers, at least, it’ll take more than luck to get them there.

 

SOURCE: https://www.bloomberg.com/news/articles/2018-04-11/when-marketing-luxury-vehicles-electric-is-no-longer-a-bad-word

 

 

April 5, 2018

7 Complaints of Successful Luxury Salespeople

CEPro
By: Jason Knight
Wednesday, April 4, 2018

 

Change these seven problems, from spending too much energy on social media to altering product lines, and boost sales by 30%, according to the Luxury Institute.

 

7 Complaints of Successful Luxury Salespeople
New York’s Luxury Institute finds sales training to be a waste, and product discounts are ineffective on high-end clientele. 

 

Has any integrator playing in the high-end luxury market ever wondered why one of his or her previously top-performing salespeople suddenly seems to be demotivated and in a sales slump? According to information from the independent New York-based Luxury Institute, it could be something you are doing, not necessarily a problem with the salesperson.

The Luxury Institute recently held “intimate and confidential individual interviews” with top performing in-store sales associates across the spectrum of top-tier luxury and premium brands. The Institute also cross-checked the findings with store managers and retail heads to confirm the results. These top performing associates average more than 12 years of experience, and most perform supervisory roles. They are among the 20 percent of associates who deliver 80 percent of the dollars to top brands, comprising all genders and ethnicities.

The data reveals a “performance-numbing lack of communication” between top-tier luxury brand headquarters and their front-line associates. “The consequences continue to be a significant loss of sales, high employee turnover, poor morale, and most importantly, severed or damaged client relationships,” says the Institute. While the focus of the study was on retail luxury brands, many integrators may be able to relate to these same issues for their own sales teams.

According to the Luxury Institute, luxury employers who adopt these principles will boost their sales by 20 percent to 30 percent.  Here are the seven critical issues that top-performing salespeople say negatively affect their sales performance.

1. Sales Training Is a Waste

Top performers are unanimous on this point, according to the Institute. Successful salespeople learned how to build client relationships from parents and exemplary mentors who inspired in them a passion for living their life purposefully on a daily basis and helping others at work beyond the training tools provided by the brand. They see product and operational training as table stakes. According to these top performers, current sales training is coercive and dehumanizing.

The best associates tell Luxury Institute that they have honed their skills mostly through trial and error, learning to listen without judgment, asking relevant questions, earning trust, and finding creative ways to make individual clients feel cared for and special.

They acknowledge that it took far too long for them to achieve top performance. They want accelerated relationship-building skills for everyone on the sales team, especially for young associates. These young team members have grown up on social media, and the veterans observe that many can’t make eye contact, they lack empathy, and that they are unable to apologize without stating, “I am so sorry you feel that way,” when they make a mistake.

Some top sellers have hired personal coaches at their own expense.

2. Client Feedback Is Often Ignored: Inventory Is Mismanaged

Clients provide constant feedback to the sales associates about products, policies and trends. According to top sales associates, this critical intelligence is rarely collected systematically, or acted upon. One frequently cited example is the constant tweaking, or discontinuance, of timeless staple brands.

Another impediment is inventory mismanagement. VIP clients are often left wanting due to mismanagement of inventory. These destroy customer lifetime value and relationships. Many clients feel betrayed and don’t return.

Top associates say customer attitudes, desires, and behaviors change often. They recommend that these changes be monitored through periodic market research, or by aggregating customer feedback through the voice of the associate. Also, meet with the sales team prior to rolling out any new product offering.

3. Stop Spamming Clients With Emails

Top sales associates earn trust with top clients by committing to them that they will not be spammed by emails or contacted excessively. But salespeople complain their clients are sent waves of “irrelevant, impersonal emails and other communications,” even though the campaigns are often well-intentioned and well-executed.

Associates say they prefer to keep their frayed, outdated black books, and protect their relationships, rather than enter the information into the database and lose a great client. The result is a massive loss of a critical asset in the era of Big Data. Even more damaging, when a client loses trust, the impact on sales is negative and too often permanent.

The best sales associates suggest using a CRM specialist who understands that personal, measured, humanistic communication is required to build a long-lasting client relationship.

4. Stop Discounting Products/Services

One of the greatest annoyances for both clients and sales associates are inconsistencies regarding product pricing. When clients see products or services for which they paid full price available later for a lower price, they revolt and demand make-goods. The wealthiest clients are particularly vocal, based on principle.

Pricing inconsistencies makes clients hesitant to buy at full price. It also allows sales associates, who want to stay in the client’s good graces, to encourage clients to wait until the products go on sale. Those, according to the top performers, are the games they are forced to play, which adversely affect their credibility and their earnings.

They suggest offering more exclusive products for their own channels, and offering classic, heritage, and signature products that never go on sale. Providing early access to very limited-edition exclusives is not only a more profitable way to engage VIP clients than early access to promotions, it is also a more meaningful way to connect with them. Top associates are happy to let marketing communicate sales and promotions. They would prefer to have the inside scoop topics to talk about.

5. Keep Technology Up to Date

Top performers say it’s a big positive to have “wow factor” in a showroom, but it needs to be kept up to date. That same message goes for the back-end systems, such as inventory management. Even things like making sure the Wi-Fi in the showroom is fast and accessible are a plus. If your showroom Wi-Fi is slow, what do you think a customer will think about the system you can install in their home?

6. Social Media Hurts Local Marketing Initiatives

Top sales associates are active personally and professionally on social media. Many of them post to Instagram almost daily and appreciate that some of their clients stay in touch, albeit lightly, on Facebook and Twitter. However, they report, and the research bears out, that the wealthiest and highest potential clients are less active on social media than aspirational consumers, and are becoming even less so as they become more fearful of the potential damage to their identity, reputation, and privacy.

Wealthy clients have far more to lose in a social media environment where the evidence now shows that their data lacks any protection.

According to top associates, marketing has failed to get the message. They want more funds for customized gifting, rewarding special clients, and creating personalized and exclusive client events. They are happy to be held accountable for the return on investment required to fund those programs and invite marketing to be a part of the brainstorming, execution, and measurement.

7. Offer Flexible Schedules

Calling working schedules “dehumanizing” and “stuck in the Industrial Age,” the study says employers need to be flexible in both scheduling and compensation. Top sales associates who pay for themselves in multiples want flexible schedules and compensation to maximize productivity. For example, part-timers can be some of the most productive sales associates.

 

Source: https://www.cepro.com/article/7_complaints_of_successful_luxury_salespeople

March 28, 2018

Despite deep discounts, H&M can’t get people to buy its clothes

The Wall Street Journal
Abha Bhattarai
March 27, 2018


(Charles Mostoller/Bloomberg News)

Despite a series of widespread markdowns, clothing chain H&M is struggling to sell off $4 billion in extra merchandise — including months-old Halloween costumes and Christmas sweaters — as changing consumer tastes and increasing competition take their toll on the Swedish retailer.

The company, for years a fast-fashion darling, says it’s having trouble persuading customers to buy its clothes. Sales are slipping, profits are down to their lowest level in 16 years, and inventory is way up, H&M parent company Hennes & Mauritz said Tuesday. Shares of the retailer’s stock fell about 6.8 percent Tuesday, to their lowest level since 2005.

“The rapid transformation of the fashion retail sector continues,” H&M chief executive Karl-Johan Persson said in a statement. “The start of the year has been tough. Weak sales combined with substantial markdowns had a significant negative impact on results in the first quarter.”

A confluence of factors have led to H&M’s troubles, analysts say. Chief among them: Millennials are growing up and are more interested in buying well-made clothes than in buying cheap items. There is also more competition from companies like Zara, Topshop, Uniqlo and Asos — all of which customers tend to associate with higher-quality clothing and better websites, according to Milton Pedraza, chief executive of the Luxury Institute, a New York-based market research firm.

“Millennials are looking for quality over quantity, which means they no longer want throwaway products,” Pedraza said. “They care less about fashion and more about classic and quality, neither of which H&M has been able to deliver.”

The recent backlash over an H&M ad showing a black child wearing a “coolest monkey in the jungle” sweatshirt could also have hurt sales, analysts said. There were widespread calls for customer boycotts after the January incident, and musicians The Weeknd and G-Eazy, both of whom had partnerships with the retailer, announced they would cut ties with the company.

“Whether an oblivious oversight or not, it’s truly sad and disturbing that in 2018, something so racially and culturally insensitive could pass by the eyes of so many (stylist, photographer, creative and marketing teams) and be deemed acceptable,” G-Eazy wrote on Instagram. “I can’t allow for my name and brand to be associated with a company that could let this happen.”

H&M has since apologized for the ad, but some in the industry say the company could feel far-reaching effects.

“There was a huge backlash, particularly in places like South Africa, that could’ve left some customers saying: ‘You know what? I wasn’t that loyal to H&M anyway. Maybe I’ll shop somewhere else,’ ” said Tasha Lewis, a professor of fashion design management at Cornell University.

In the most recent quarter, H&M said inventory rose 7 percent to a record $4 billion. On Tuesday, the company’s website was promoting “further markdowns up to 70 percent off.” Many items were clearly months old: Halloween-themed T-shirts were selling for $3.99, while infants’ Santa outfits were discounted to $4.99.

Excess inventory has plagued a number of traditional retailers in recent years, as customers increasingly shop online and look to start-ups for more unique clothing. Several chains, including Macy’s, Kohl’s and Nordstrom, pared back on holiday inventory last year, hoping to avoid having to offer deep discounts on leftover merchandise. The plan seemed to work: Retailers posted their most successful holiday performance in years, and many said they did not have to resort to huge markdowns.

“We maintained a healthy inventory position, which meant we did not need additional discounting to clear inventory,” Jeffrey Gennette, chief executive of Macy’s, said in a recent call with analysts. “We were disciplined with our promotions.”

That, however, wasn’t the case at H&M. As the world’s second-largest clothing retailer (behind Inditex, which owns Zara), analysts say, the company is particularly susceptible to the whims of consumers. H&M’s quarterly sales began falling late last year.

“There is a massive clash between customers’ expectations and what companies are delivering,” said Andreas Inderst, an analyst for the Macquarie Group in London. “This is an industry-wide issue, but for H&M it has become a particularly pronounced problem.”

Company executives, meanwhile, say they’re planning further discounts in the second quarter, as they look to turn around H&M’s business. The company is also preparing to introduce an “off-price marketplace,” called Afound, that will sell discounted items by H&M, as well as other brands.

Source: https://www.washingtonpost.com/news/business/wp/2018/03/27/despite-deep-discounts-hm-cant-get-people-to-buy-its-clothes/?utm_term=.2e8294e6a60d

February 28, 2018

5 Brands That Reveal The Future Of Luxury Online

Forbes
Pamela M. Danziger
February 26, 2018


Badgley Mischka New York Fashion Week runway app

 

Online is the next frontier for luxury brands. It’s where luxury brands can find their next path to growth, but for a variety of reasons they have been notoriously slow to follow it. As an industry steeped in heritage and tradition, change doesn’t come naturally to it, but in today’s dynamically changing consumer market, that is exactly what luxury brands must do.

While luxury brands have accepted that they must market online, they have been much slower to accept that they must sell there as well. That remains its stumbling block.

“A big part of luxury brands’ hesitance to embrace sales online has been how to keep that luxury aspect of the brand, if it is so easily available,” says Lori Mitchell-Keller, Global General Manager, Consumer Industries at SAP. “Keeping that perceived cache of luxury in the online world have made them slow to migrate there.”

But migrate sales online is what they have to do for assure a prosperous future. Bain & Company recently reported online luxury sales growth is phenomenal, increasing by 24% in 2017. Yet it still accounts for only 9% of the total personal luxury goods market worldwide.

On the surface online’s less than 10% market share might not seem compelling, but the industry’s perception may not match the consumers’ reality. Compare that meager market share with luxury consumers’ preferences in where they like to shop and a totally different picture emerges.

In a global survey of affluent consumers with annual incomes of $150,000 per year, or equivalent, the Luxury Institute found that 21% of those surveyed prefer to shop luxury online, and another 27% had no preference between online or in-store shopping. Just shy of a majority of luxury consumers don’t shy away from doing so online, rather they actively embrace it.

“Luxury brands will lose share if they are not able to interact in the way the world is changing and the way customers want to interact with them,” Mitchell-Keller maintains .

While heritage luxury brands drag their feet, plenty of others are jumping in unburdened by fears of losing their luxe on the internet. “We are seeing a lot of luxury brands being created online, companies like Farfetch, Net-a-Porter, Bonobos, that have much more of an online than physical presence,” Mitchell-Keller says. “And other more traditional brands, like Badgley Mischka and Gucci, have figured out how to create, maintain, even enhance their luxe cache online. There is no secret or easy answer how they’ve been able to do that, but it can and is being done.”

Two of these born on the internet brands, she notes, have recently been acquired by other companies – Yoox Net-a-Porter by Richemont and Bonobos by Walmart – and Farfetch has just signed deals with Fendi, Burberry and Chanel in advance of an expected IPO in NYC this coming November.

Such deals are expected to pick up in the future, as Mitchell-Keller explains, “The main reason physical luxury brands are acquiring digital brands is because they haven’t figure out the online equation yet. They are looking for help to reach the digital customer.”

Putting our heads together, we think these 5 brands best exemplify the future of luxury online.

Farfetch goes further

Founded in 2008 as a online luxury fashion platform, Farfetch is seamlessly blending in-store access to fashions across the globe with internet convenience. With offices in 11 fashion hubs, from which it offers same-day express delivery, it lists products from over 700 boutiques and fashion brands. It carries a multitude of heritage and emerging designer brands, including Dolce & Gabbana, Givenchy and Chloé.

Having acquired the London-based Browns boutique in 2015, it used that platform to introduce its technology-enhanced “Store of the Future” concept that marries the digital and personal experience luxury shoppers desire.

Given its chops in digital luxury marketing, Farfetch also initiated a white label digital service called “Farfetch Black and White” for brands that want to use its platform to power their own branded online presence.

Numerous heritage brands are coming on board in one way or another, including Burberry to list all inventory in its marketplace, Fendi for customized handbags, Gucci for 90-minute delivery service, and most recently Chanel.

But tellingly, Chanel was quick to point out that its Farfetch partnership will not include selling fashion online, rather using its proprietary in-store technology for physical retail. “We are not starting to sell Chanel on the Farfetch marketplace – I want to be very clear on that,” said Chanel’s president of fashion Bruno Pavlovky in announcing the deal. To which Mitchell-Keller asks, “How much share will they lose while they are trying to figure online out?”

Such reluctance to embrace full-on digital access for customers is indicative of an industry attitude that has to change to ensure a vibrant future. It is ridiculous for a brand like Chanel to force its 21st customers to shop like they did back in the 80s.

Net-a-Porter brings it

Just acquired by Richemont following a merger with YOOX in 2015, Net-a-Porter founded in 2000 takes a more heavily content-driven strategy than its closest competitor, Farfetch. But like Farfetch it offers white label digital support to designer brands through its YNAP platform which Richemont says will continue to operate as a separate entity. Nonetheless, it will make strange bedfellows, since YNAP operates flagship online stores for many competitive Kering brands, including Bottega Veneta, Balenciaga, and YSL.

While Mitchell-Keller admires Net-a-Porter, she thinks its Outnet website that offers discounted fashions in flash-sale format is especially in tune with how the next generation wants to shop. “My son, who is totally a millennial, had me logon to order a pair of gold Nike shoes, which I understand are status items for the college crowd. So here we are logged in at midnight for the countdown and find out we are #500 in line to order. It is such a different experience than I am used to where luxury brands pamper you in the store, but millennials don’t necessarily want that. They want this,” she says.

Outnet makes it fun for millennials. It is fast, it’s limited, it’s accessible and it’s cheaper.

Bonobos shows men how to wear it

Bonobos is one of those born on the internet luxury brands, or near-luxury for those who want to quibble, that have captured the loyalty of affluent men shoppers, a hard demographic to attract into the store. It’s achieved that by not just selling clothes, but showing men how to dress fashionably. It is also helped by offering casual-luxe styles that modern men favor.

“I’m intrigued by the way Bonobos shows their clothes,” says Mitchell-Keller. “It’s not just a guy standing there like on most websites. You can see the movement and men interacting with each other. It is a much different experience than just going online and seeing picture after picture of clothes. It’s engaging.”

As a result, Bonobos caught the eye of a big company suitor, Walmart, which acquired the company last year, and with it a thought-leader in the next generation of retail fashion, Andy Dunn who joins another ecommerce powerhouse, Marc Lore, at Walmart to give it a leg up into new internet markets.

While Walmart just announced that its recent quarterly online sales growth slowed, up only 23% compared to a year ago vs. the 50% growth enjoyed throughout the first nine months of the year, it continues to project a 40% uptick through the rest of the year, with Bonobos and a recently announced online partnership with Lord & Taylor showing that this low-end leader aspires to reach higher.

Badgley Mischka dress its models with tech

While the Badgley Mischka brand has long maintained a vibrant online ecommerce presence, co-owner and co-designer James Mischka is described by Mitchell-Keller as a “technology geek.” Being as attuned to tech as fashion, he partnered with SAP to create a runway app for the recent New York Fashion Week where those in the audience could vote on each look as it walked down the runway. “In 9 minutes they got feedback that usually takes them 6 months to get,” she says.

The results were eye opening for the company which discovered that a dress they hadn’t thought would make much of a splash turned out to be the #2 most popular look, allowing the company to place sufficient orders to get it into the stores in record time.

The audience in turn loved the ability to get all the fashion details on their phones instantaneously. The models loved it, who were back stage reading the results and competing to see whose look scored highest. And the other designers at show were envious and lined up afterwards to get an app for their next runway show.

Thinking about new ways consumers can interact and engage with a luxury brand is what makes Badgley Mischka an important luxury brand for the future. “Too many luxury brands aren’t thinking about the technology. They are thinking about product, which is important, but they have to understand how their brand is being consumed differently than it used to be consumed,” Mitchell-Keller notes.

Gucci breaks out of the luxury culture

And we can’t finish our look at luxury online without mentioning Gucci. In an interview on CNBC,  Kering’s chairman and CEO Francois-Henri Pinault said its Gucci brand is doing about 50% of its sales with millennials. In recognition of its online success, L2 Research, which specializes in data-driven analysis, gave its top spot for best performing digital fashion brand to Gucci in 2016 and 2017.

I’ve written extensively about Gucci here, but suffice to say that Gucci’s success online is thanks to Gucci’s CEO Marco Bizzarri giving free reign to its young creative director Alessandro Michele, who understands how to connect with this digitally-native generation. Thus Gucci has broken out of the inbred, digitally-adverse culture that plagues so many other luxury brands.

In conclusion, Mitchell-Keller and I see a whole digital transformation that is going to happen in luxury, just as it has happened in other markets. While we recognize that the experience of in-store shopping, and the pampering luxury consumers can find there, isn’t going to be replaced by digital engagement, customers today value the luxury of convenience that online delivers too.

“The time issue is a huge one,” Mitchell-Keller concludes. “It’s not just that everyone is now on social media. Everybody also has huge demands on their time. It’s a very different world than 20 years ago when these brands started to become popular. Luxury brands have to adapt to the way that consumers want to interact with their product now, and that increasingly is going to be online.”

 

Source: https://www.forbes.com/sites/pamdanziger/2018/02/26/5-brands-that-reveal-the-future-of-luxury-online/#32f21d5c3c7e

 

Americans are finally coming back to Macy’s to shop for clothes

The Washington Post
By: Abha Bhattarai
February 27, 2018


A Macy’s department store in New York on Feb. 13.  (Victor J. Blue/Bloomberg)

 

Americans are buying more clothing, shoes and jewelry at Macy’s, helping turn around the retailer’s fortunes.

The department store chain on Tuesday said a renewed emphasis on apparel helped bring in more shoppers and persuaded them to spend more. Sales at stores open at least one year rose 1.4 percent in the most recent quarter, marking the first period of sales growth in more than three years.

“Our customers have responded well to the increased focus on fashion and enhanced quality of the merchandise,” Jeffrey Gennette, chief executive of Macy’s, said in a Tuesday call with analysts. “The consumer was out spending, and that was great.”

Macy’s has for years been dogged by many of the same issues facing its peers: changing shopping habits, excess inventory and a culture of deep discounts and promotions. It also faces increasing competition from Amazon, which is projected to surpass Macy’s this year as the country’s largest apparel seller. (Jeffrey P. Bezos, founder and chief executive of Amazon, owns The Washington Post.)

But on Tuesday there were signs that the retailer’s turnaround efforts were working. Sales of women’s dresses, tailored men’s clothing, winter coats and fragrances all rose during the critical holiday season, helping lift fourth-quarter sales 1.8 percent to $8.67 billion. Profits nearly tripled, to $1.3 billion, or $4.31 per share, from $472 million, or $1.54 per share, a year earlier. Shares of Macy’s stock rose nearly 12 percent Tuesday morning after the news, before closing at 3.5 percent.

“Consumers had the ability to spend,” Dana Telsey, chief executive of Telsey Advisory Group, told CNBC on Tuesday. “Retailers and brands were able to come out with products people wanted. We have a little bit of an apparel cycle: Whether it was fragrances, dresses, active or men’s tailored, it all seemed to work.”

Macy’s said it boosted sales by dialing back discounts, adding exclusive products and investing in its private-label brands. Customers on average spent 3 percent more on each item they purchased during the quarter, according to Gennette.

The company is also adding more exclusive products, which make up about a third of its inventory. Last month, it began selling a line of “modest” clothing, including maxi dresses, jumpsuits and hand-dyed hijabs. Other exclusive brands include lines by Tommy Hilfiger and Martha Stewart.

“Macy’s has realized it needs to focus on its sweet spot: clothing for adults and kids,” said Milton Pedraza, chief executive of the New York-based Luxury Institute. “This is a company that has always been about mainstream apparel, and I think they’ve found a way to make that work for them again.” (That appeal, he added, didn’t necessarily translate to teenage consumers. Indeed, Macy’s executives said sales of junior apparel slipped during the most recent quarter.)

Macy’s has made a number of sweeping changes in recent months. The Cincinnati-based retailer has closed dozens of stores, invested in new businesses and revamped its loyalty rewards program. It is also increasingly looking beyond the mall for expansion. The company opened 36 Bluemercury beauty stores last year, as well as 30 off-price Backstage locations. It plans to add another 100 Backstage stores this year to compete with rivals such as Nordstrom Rack and Saks Off Fifth.

“Macy’s is hot on the heels of a good fourth quarter,” said Stephen Beck, managing partner at New York consultancy cg42. “But there’s still a long way to go before we see a truly healthy turnaround.”

 

Source: https://www.washingtonpost.com/news/business/wp/2018/02/27/americans-are-finally-coming-back-to-macys-to-shop-for-clothes/?utm_term=.659edcbf22b8

January 11, 2018

Saudi Arabia’s tourist visa supports plans to reconfigure economy

Luxury Daily
By: Brielle Jaekel
January 4, 2018


Four Seasons looks to open new location in Saudi Arabia amongst news of tourist visa. Image credit: Four Seasons

As affluent travelers continue to look for destinations that many others have not been, Saudi Arabia’s tourist visa announcement will likely attract the luxury vacationer.

While Saudi Arabia has been open to business travel and religious pilgrimages, visiting for pleasure has never been an option. But now the Middle Eastern destination will be opened up to tourists through a new visa that extends to leisure travelers, likely attracting affluents who seek out unique spots and true cultural experiences.

“There is clearly a segment of the luxury market that is interested in middle eastern destinations – you only need to look at the growth of travel to UAE to see that,” said Taylor Rains, managing partner at Flugel Consulting. “What Saudi Arabia offers, though, is a purer cultural experience.

“Travelers looking for history, culture and a unique experience are likely to be interested in exploring new opportunities in the region,” he said.

Unseen experiences
Saudi Arabia’s decision to welcome leisure travelers will attract visitors outside of the Middle East in a manner similar to when Cuba’s borders opened to United States travelers.

When the U.S. government’s travel ban to Cuba lifted, the island nation quickly climbed into the top 15 of desired destinations among affluent American travelers, according to a luxury survey conducted by Travel Leaders Group.

The Caribbean country was a destination previously unseen by many U.S. travelers due to the past travel restrictions imposed by the government, but many affluent travelers have flocked to Cuba now due to the exclusivity (see more).

Since Saudi Arabia has not had previous experience with excessive tourism, visiting the country will mean a true authentic cultural experience. Many destinations that see a flurry of leisure visitors will accrue touristy traps that turn off affluent travelers, but Saudi Arabia’s lack of vacationers have kept it a cultural mine.

The country is already home to a series of five-star hotels including locations from brands such as Four Season, Ritz-Carlton, Rosewood and InterContinental. But top locations such as the Holy City of Makkah, also known as Mecca, Jeddah and Saudi Arabia’s capital of Riyadh will likely see an increased presence from additional luxury brands and hoteliers after the visa is instated.

In October, Four Seasons announced a second property in Saudi Arabia.

The hospitality brand currently operates a property in Riyadh and will add a hotel in Mecca, through a development partnership with Jabal Omar Development Company (JODC). Due to the new Four Seasons’ adjacency to the Al-Masjid Al-Ḥarām, or Grand Mosque, the hotel is likely to be of interest to affluent Muslims visiting the Holy City (see story).

For instance, a series of resorts across the Red Sea will be opening in the near future.

Tourist trap

While Saudi Arabia is not currently a touristy area, this could change within the next couple of years after the visa is out. U.S. theme park brand Six Flags is already working with Dubai Parks and Resorts DUBA.DU to build a series of amusement parks in Saudi Arabia.

The destination’s future theme parks and increase of luxury brands are a few initiatives that will hope to position its image as a luxury hub to compete with Dubai and Abu Dhabi, United Arab Emirates, cities known as top luxury locations in the Middle Eastern region due to the prevalence of high-end shopping, automobiles, hotels and residential properties.

Reports have also noted that the country is looking to develop more entertainment to help support its economy. However, experts have noted that the future the country looks for could be complicated, as Saudi Arabia is known for its strict guidelines on women’s clothing and gender segregation.

Women have only just recently been given the right to drive, but Crown Prince Mohammed bin Salman has been making continual strides similar to these to adhere to a more “modern Islam.”

The Crown Prince originally announced he was looking to overhaul the economy in Saudi Arabia, to help its dependence on oil. These new policies will start to take effect this year, which includes women being able to drive (see story).

Saudi Arabia’s Crown Prince will also allow commercial movie theaters to start to open up, as well as allowing women into major sports stadiums to better accommodate families.

In an interview with CNNMoney, the Crown Prince stressed that with these changes he is hoping to see 30 million visitors a year by 2030, an increase of 12 million.

CNNMoney interviews the Saudi Arabian Crown Prince. Image credit: CNNMoney

In 2016, Saudi Arabia saw a total of 18 million visitors, most of which are a part of Hajj, an annual pilgrimage to Mecca and the Grand Mosque. The journey to Mecca is to be taken at least once by every adult Muslim, which is regarded as Islam’s most holy city.


Travel increase
The inclusion of a tourist visa in the hopes to attract affluent travelers might come at a good time for Saudi Arabia. While 2017 was a solid year for luxury, 2018 is projected to see slight increases to total spending, with most of the growth coming from travel-related purchases.

This data comes from Luxury Institute’s annual study on the state of the luxury business, which surveyed thousands of affluent customers from the wealthiest nations in the world. The data supports the growing understanding that luxury consumers are beginning to value experiences over products (see more).

“This step by Saudi Arabia could be indicative of a turning tide in the tourism industry,” Flugel Consulting’s Mr. Rains said. “A handful of middle eastern nations have maintained a tight control over tourism in the country, Saudi Arabia being one of the most notable.

“In effect, this region has been a last frontier for luxury travel,” he said. “With Saudi Arabia loosening restrictions on travel, it’s possible other nations in the region will follow suit.

“The infrastructure for luxury travel in these countries is already in place, it’s just a matter of access. With that access permitted, I imagine there will be a large influx of luxury tourists, particularly those interested in cultural and experiential travel, planning trips to the middle east.”

 

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