Luxury Institute News

February 28, 2018

5 Brands That Reveal The Future Of Luxury Online

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.”




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.”



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.”


To read the full article, please subscribe or login to Luxury Daily:

Data Feed: December 15, 2017

Key stats you need to know about today

By: Rahul Chadh
December 15, 2017


Net Neutrality Nixed: The US Federal Communications Commission (FCC) voted to end net neutrality regulations that prevented businesses from charging higher prices for better quality content and services delivered over the internet. The action will also end the designation of high-speed internet as a utility. The change was protested by consumer advocates and heralded by those opposed to government regulation.

Social Disconnect: A new report by Common Sense and SurveyMonkey polled parents and teens in the US about the use of social media. It found that more than half of parents thought they were well-versed in their teens’ social media behavior, but only 30% of teens thought their parents were up to speed. In addition, more than one-quarter of parents said they used a tracking or other type of monitoring device to keep tabs on their teens’ online behavior.

Year in Search: Google has released its year-end review of search, reporting that Hurricane Irma was the top trending query in 2017. The iPhone 8 and iPhone X finished second and third, respectively, underscoring the strong hold Apple still has on the collective consciousness. The top 5 was rounded out by former TV host Matt Lauer and soon-to-be royal bride Meghan Markle.

Down with OTT: Video ad serving platform SpotX reported that 26% of ad spending on its platform in October 2017 was dedicated to over-the-top (OTT) video. That was up from just 8% a year ago. SpotX also expects OTT video to command around 30% of ad dollars spent on its platform by the end of the year.

Premium Plays: According to Freewheel, ad views for premium video content in the US increased by 24% year over year in Q3 2017. Video content featuring full show episodes saw the largest bump, while ad views for live streaming of linear broadcasts posted a smaller gain.

State of Luxury: A survey of affluent consumers across the world from Luxury Institute found that more than nine in 10 respondents expect to purchase luxury services or items in the coming year. And more than one-quarter think they’ll spend more on luxury in 2018 than they did in 2017. Only 9% expected to shrink their luxury spending next year.




November 28, 2017

Luxury Brands Yield to Discounts Despite Push to Stay Exclusive

Apparel and handbag makers’ efforts to wean customers from discounts are off to a rocky start this holiday season.

Bloomberg Pursuits
By: Lisa Wolfson and Stephanie Hoi-Nga Wong
With Assistance by: Lindsey Rupp and Kim Bhasin
November 27, 2017


Take Michael Kors’s Jet Set Leather shoulder bag, selling at a 57 percent discount on the company’s website Monday for $149, or a black silk Prada blouse priced 40 percent lower at $809 at Barneys New York. Those items aren’t outliers, according to researcher Edited, which said luxury labels and retailers saw the industry’s highest volume of markdowns over the Black Friday weekend, followed by premium brands.

The lower prices couldn’t come at a more inopportune time for fashion houses like Michael Kors and Ralph Lauren Corp., which are trying to restore their cachet by clamping down on discounting. Both companies posted better-than-expected earnings last quarter and an increase in profit margins — signs that those efforts are working.

Though heavy promotions and specials are a hallmark of the holiday season, the data from Edited suggests that the labels still have a way to go before getting customers to shell out top dollar. Prices on more than a quarter of luxury items in stock were cut between 26 percent and 50 percent, according to the firm, which tracks real-time data for brands and retailers. The discount volume was 24 percent for premium brands and 20 percent for mass-market goods sold online.

“There are too many luxury and premium brands selling very similar products,” said Milton Pedraza, a New York-based luxury consultant. “Some of them reduced their prices without announcing it because it’s embarrassing and devalues their brand.”

Michael Kors’s website, while touting deals of as much as 50 percent off, offered some handbags and shoes that were marked down even more. Its Aileen leather boot cost $109 on the site, down 63 percent from $295.

For the online apparel market as a whole, Edited found that almost half of all items were discounted an average of 46 percent so far during the holiday season. The price cuts began weeks before Thanksgiving, and led product sellouts to double from this time last year, according to the research firm, which analyzed data from more than 11,000 clothing, footwear and accessory brands.

“While the retail industry has banked on aggressive discounts weeks before Black Friday and Cyber Monday to boost consumer spending, they need to make sure that this does not sacrifice margins in the long-term,” said Katie Smith, Edited’s director of retail analysis and Insights.

Almost a quarter of luxury handbags for sale online have been marked down between 40 percent and 50 percent so far, up from as much as 40 percent last year, Edited said. It named Fendi, Balenciaga, Tom Ford and Prada as some of top discounted brands.

While some high-end boutiques, like Chanel and Louis Vuitton, didn’t hold Black Friday sales events, they did stay open longer to take advantage of traffic. Others, such as Italian leather goods company Fendi, have offered 30 percent off on some products. One model of the company’s double micro baguette bag, originally priced at $1,800, was marked down to $1,260 on Monday at its Manhattan store on tony Madison Avenue. A salesman at the boutique said a lot more items have been discounted this year compared to only about five last year.

At Barneys New York, a blue cashmere coat with mink trim was selling for $2,889, a 40 percent discount off the original $4,820 price.

“I have seen so much discounted so early,” said Terie Bray, 45, who was shopping at Barneys on Monday, her second visit in two days to the upscale Madison Avenue store. Bray bought designer boots and a pair of Maison Margiela pants yesterday, both at 40 percent off. “If they are giving a 40 percent discount now, how much are they going to give for Christmas — 60 percent, 70 percent?”

While more people are shopping online each year, internet sales still represent less than 12 percent of total holiday retail purchases, according to EMarketer estimates. That means there is still plenty of opportunity for physical stores, including the struggling department-store industry.

Researcher ShopperTrak found that consumer visits to brick-and-mortar retailers on the day after Thanksgiving — considered one of the busiest shopping days of the year — slipped less than a percent from last year.


“There has been a significant amount of debate surrounding the shifting importance of brick-and-mortar retail, and the fact that shopper visits remained intact on Black Friday illustrates that physical retail is still highly relevant,” said Brian Field, senior director of advisory services for ShopperTrak.

More retailers opted to close on Thanksgiving Day this year, Field said. Based on years of traffic data, shopping on the holiday was only pulling visits from Black Friday, rather than creating an additional buying opportunity, he said, and that closing on Thanksgiving contributes to lower overhead and increased goodwill.

The National Retail Federation estimates U.S. holiday spending will increase as much as 4 percent this year. The industry’s biggest trade ground will provide its survey of Black Friday weekend shopping on Tuesday.



November 27, 2017

Multichannel and Millennial Tastes will Shape Luxury in 2018

The Luxury Institute’s annual list of the “Top 10 Luxury Trends for 2018″ found that millennials are opting for high-end services which provide experiences over purchasing luxury goods.

Luxury Society by Digital Luxury Group
By: Danny Parisi
November 14, 2017

While luxury goods are likely to see a bit of a slump in 2018, high-end services will witness solid growth at the behest of millennials who value experiences over things.

This trend is one of the 10 collected in the Luxury Institute‘s “Top 10 Luxury Trends for 2018,” an annual list of the biggest trends, challenges and predictions for the upcoming year. In addition to the primacy of experiences over goods, luxury brands are focusing more on the emotional benefits their products can have for customers over the material benefits.

Luxury trends

In the coming year the luxury world will be facing some major challenges as well as some major opportunities.

According to Luxury Institute’s Top 10 Trends, growth has been uneven for luxury goods but luxury services are faring much better.

This can be attributed to the growing presence of millennials in the luxury consumer base, who are more prone to purchase services and ephemeral experiences over objects and goods.

Millennials make up a much larger segment of consumers than baby boomers, 92 million to 77 million to be exact, but it will still be a while before millennials fully come into their spending power. For now, they do not have quite as much impact on the market as boomers.

Along those lines, Luxury Institute notes that the impending transfer of wealth from boomers to millennials may still be a ways off, and that when it happens it may not be the windfall many are expecting it to be.

One of the more surprising trends is that shopping centers are becoming more important to the luxury industry.

Shopping malls are not usually considered centers of luxury retail, but recent research shows that mall owners are pouring money into redesigns and renovations to be more accommodating to different types of consumers and communities.

Over the last three years, malls in the United States have poured more than $8 billion into renovations with an eye on turning the mall experience into something more upscale with options beyond the usual shopping mall fare. This research comes from real estate management and investment firm JLL in a report outlining the future of the new U.S. mall.

Relying on data

Other trends on the list focus on the ways the luxury industry is connecting online to offline.

While ecommerce accounted for almost 12 percent of all retail last year, there are signs that a plateau may be on the horizon. In response to this, luxury brands will begin to focus on the in-store experience as well as the online experience, bringing those two together for good.

This theme is continued in another trend where brands will begin to seamlessly integrate the various channels that make up their business in order to allow customers to navigate and complete transactions in whatever way they choose.

While digital is a vital aspect of retail, in-store associates are not useless and are proving to be an essential part of the customer experience, according to consumers.

A report from Astound Commerce shows that 52 percent of consumers think it is vital for store associates to be able to place an order and 46 percent believe they should have access to inventory information. However, online shoppers are having extremely positive experiences as well, with 86 percent claim their customer service interactions were great, and 42 percent saying excellent.

Finally, the next year will likely see new developments in the way brands collect and use data, bringing in new tech such as artificial intelligence to help intelligently sort through and make the best use of valuable data that will help brands market and sell better.


Article originally posted on Luxury Daily.


Top 10 Luxury Brands in the World

Stock Talk Review
By: Maria Mancic
November 22, 2017

Photo Source: Pixabay/Public Domain

When someone mentions top 10 luxury brands in the world, what is the first name that crosses your mind?

There is something very appealing about luxury brand items. It might be the fact that they are unreachable for some people or, for some others, the fact that, unlike other mortals, they can afford them. The problem with the most luxury brand items is that the price doesn’t always match the quality, which means that a person is giving a fortune for something that can be bought for, in some cases, less than $200 and it lasts shorter than the one that they would buy for the more reasonable price. But the one thing is certain: as long as there are people who would give that kind of money, the prices will be that high.

Just in one year, in 2016, the global luxury market grew by 3% to extraordinary $240.47 billion. Do you still breathe? Great, let’s continue. Luxury Institute CEO suggests that this growth is caused by an economic slowdown in China, but you will read about that a bit later.

The majority of these top 10 luxury brands in the world are located in Europe. At the beginning of 2017, experts suggested that the luxury market will grow by 4%-6% more by the end of the year and reach incredible $268 billion value. But there are several factors that might slow down this process. One of them is the increasing market awareness and changing conditions that will force luxury brands to open low-cost stores in Asia and it is predicted that, in the next 5 to 10 years, the prominent luxury customer base will come from Africa. The other thing that will affect the luxury market is Trump’s new rules, especially the one regarding making all luxury brand owners to pull their offices from other parts of the world and concentrate on the US only. This will bring the prices up in no time and decrease the owner’s monthly income. Next, it will lead to closing down many stores and firing a lot of people. But, that’s the politics, and people were the ones who chose Trump as their leader.

To clear it up more and find out which luxury brands are on the list, click on top 10 luxury brands in the world.



November 14, 2017

Facial-tracking study reveals 4 key tips for successful luxury advertising

A study of luxury ads released over the last two years by The Luxury Institute and emotion measurement firm Realeyes has revealed the four key ingredients to successful luxury brand advertising – and highlights which ads were the best.

Using facial tracking technology, the firms analysed how video ads from 24 brands were perceived by 1,200 people from $100,000+ income households (the findings are applicable to the UK).

One of the key findings was the gradual shift in luxury brands’ communications from “show and entice” to “engage and connect”, or as Realeyes CEO’ Mihkel Jäätma says, “We’re beginning to see signs that luxury advertising may be shifting away from what might be considered a more aloof and elitist past to trying harder to connect emotionally with viewers.”

The four key ingredients are:

Avoid the ‘look-book’: videos that are just lovely moving images don’t cut it – an emotional connection must be made with the viewer. Speaking has high engagement value. Films with dialogue outperformed films with monologues or no speaking at all.

Tell relatable stories: a simply story that a viewer can understand, follow and relate to yields a stronger emotional reaction compared to those that don’t.

Question celebrity: Recognisable stars may grab attention but it doesn’t ensure engagement in itself, unless the celebrity is seen to interact and engage. It’s the story that helps make the more important emotional bond.

Income matters: The highest income bracket was generally far more emotionally engaged across the videos within the study, which highlights the benefits of accurate targeting.

Milton Pedraza, the Luxury Institute’s CEO says: “The luxury industry has a very strong tradition of creating a mysterious and distant dream in its advertising but as consumers change, it’s responding by making clever use relatable truths and humor, casting celebrities in a more approachable light, and representing a broader spectrum of the human experience.”

These are the three ads that scored the highest emotional engagement with viewers:

1. Mercedes’ “Easy Driver” with Peter Fonda (scored better than 87% of all ads ever in Realeyes’ database): a strong start and a steadily increasing “happy” response ensure engagement keeps growing. The film’s nostalgia, manliness, humor and celebrity has particular appeal to a female audience, with a higher engagement score (9) and a perfect 10 in attraction.

2. Dolce & Gabanna “Light Blue Eau Intense: a new chapter” (better than 87%): sex sells but does so even better when combined with humor – the happiness curve spikes as the director interrupts at the end.

3. Kate Spade “#missadventure” with Miss Piggy (better than 83%): starts on a neutral note before introducing a story to hold attention and artfully strengthen engagement. It finishes with the highest impact score of all the films in the study.

“The key to success in luxury advertising today is in mastering the perfect balance between building the desire of the exclusive, whilst making it tangible enough to buy,” concludes Jäätma.



November 2, 2017

Millennial Debt, Data-Driven Relationships, And Survival Of The Store Among Luxury Institute’s Top Ten Luxury Trends For 2018

NEW YORK, NY–(November 01, 2017) - Changes in the luxury market in the coming year are driven by factors from the financial challenges of millennials to the increasingly omnichannel nature of the customer experience and the ascendancy of data and artificial intelligence in building relationships. At the October meeting of the Luxury Client Experience Board, Luxury Institute CEO, Milton Pedraza analyzed the current state of the high-end market and presented the Luxury Institute’s “Ten Luxury Trends For 2018″ focused on the importance of services within the luxury industry and the distribution of wealth among luxury consumers.

Top executives in attendance from major luxury brands, including fashion retail, watches & jewelry, textiles, hotels and resorts, entertainment and media, as well as representatives from data-driven marketing agencies and innovative technology firms, broke into smaller groups to identify ways in which brands can complement their product offerings with a service component.

Luxury Institute’s 10 Luxury Trends For 2018

1. Growth remains uneven for luxury goods, but solid growth continues in luxury services, particularly health & wellness, beauty, travel, and technology. Sales growth will be sluggish in categories like apparel, accessories, and jewelry. Apparel is an example of a commodity category that is only becoming cheaper. The ability to produce original product that commands premium pricing is limited when fast fashion brands like Zara and H&M can quickly produce a low-cost imitation of an expensive item from a luxury house; an appealing alternative for many cash-strapped millennials and others facing constrained consumption. Offerings like these may not have the same quality of items from more prestigious brands, but they have the look and they are widely accessible. While there will be a few apparel and accessories brands that are major exceptions to this trend, most brands in these categories will feel the effects. Jewelry is another commodity category with a low opportunity to differentiate. Watches are in lower demand, because people simply don’t wear them frequently, especially younger people. Millennials are three times as likely as consumers 55-years and older not to own a watch. Growth looks to be robust by comparison on the services side, with consumers of all ages preferring to consume experiences more than they want more products. Boomers are downsizing and decluttering, while millennials face the need to prioritize purchases. Consumers will continue to find money in the budget for services provided by health and wellness companies like SoulCycle, Equinox, and Ulta Beauty, as well as for upgraded health care services, high-end travel, and massage therapy. Technology is another area where consumers continue to boost spending to upgrade into the latest devices and to take advantage of lifestyle enhancements available in every room of the connected home.

2. Millennials are much more numerous than boomers (92 million vs. 77 million) but their spending power will be subdued for years to come. The younger generation wrestles with staggering levels of student debt, low-paying jobs, and postponement of family formation. Millennials are not spurning luxury goods as much by choice as they are out of economic necessity. Student debt has more than doubled in the past decade to more than $1.5 trillion in outstanding higher education loans. Loan repayment consumes a considerable share of disposable income for graduates who last year left school with an average debt of $37,172. Many holders of college degrees take on the debt and then find themselves involuntarily underemployed as baristas or otherwise working at jobs that pay far lower than what would be necessary to make them comfortable. Marrying later in life also correlates with lower levels of wealth accumulation through home ownership, investing, and more moderate spending habits.

3. An over-hyped generational wealth transfer will begin slowly, and may well disappointthose who are banking on it. Wall Street has long been anticipating a massive transfer of $30 trillion in assets from baby boomers to their heirs over the next several decades. Millennials seem to be anticipating it, too, with 59-years being the average age at which people under 35 plan to retire; six years earlier than age 65, the average age boomers plan on retiring. Millennials may not want to make too many plans for spending the money. A recent survey by Natixis shows 70% of millennials expect to receive a large inheritance from their family, but only 40% of baby boomer parents plan to leave an inheritance to their children. Some of that wealth may be lost to future market returns, and rising costs of health care in old age, like the nationwide median monthly cost of $7,698 for a private room in a nursing home. Current economic headwinds hitting millennials, along with uncertainty over whether mom and dad will bail them out, imperils the future net worth of a large percentage of the millennial generation.

4. Tax cuts may be coming, but don’t expect a big boost to luxury spending. Most taxpayers would get at least some tax relief next year if the U.S. House of Representatives and Senate pass tax cuts this fall, but the biggest benefits would accrue to the top 1% of earners. An analysis of President Trump’s proposals by the Tax Policy Center showed that the tax burden on taxpayers with incomes of $150,000 to $300,000 could actually increase due to the elimination of popular itemized deductions like those for state and local taxes. After-tax income would jump 10.2% for the top 0.1% who earn $3,439,000 and up, but rise just 0.8% on average for those earning between $149,400 and $216,800. Whatever tax savings these consumers achieve will likely be consumed by credit card and automobile debt, with little left over for additional luxury spending. In the luxury goods market, the top 5% of your customers generate 40% of sales, with the middle 15% generating 30%, and the bottom 80% accounting for another 30%. With little net benefit accruing to most of these groups, lackluster gains in overall luxury spending should come as no surprise next year.

5. Luxury firms place greater emphasis on emotional benefits for the consumer and focus less on product functionality. Through reverse engineering and nimble manufacturing, mainstream goods have largely incorporated the features of luxury goods. There will be less focus on the functionality of items that consumers are purchasing, and a greater effort on the part of luxury brands to generate emotional benefits. There is no universal roadmap for producing emotional connections with customers. Doing so successfully incorporates elements of authentic storytelling and communication of brand identity, with rigorous empirical testing to see what really resonates with the clientele.

6. The appeal of the surrounding shopping center or village is rivaling the importance of the individual store in attracting traffic drawn to a retail destination for the quality of the overall experience. The entire shopping center, or the mall, have to create a great experience, and those on the leading edge of luxury offer shoppers spas, art exhibitions, music and other entertainment to enhance the shopping experience. Staff at these shopping centers, from the valets to the shop clerks, provide gracious, helpful, and expert service to create a positive emotional experience. Potential clients may visit an individual store, but they are more likely to be drawn to retail destinations that make them feel special throughout the entire customer experience.

7. The in-store experience finally gets the focus it deserves in terms of training people, redesigning the customer experience, and upgrading technology and systems for inventory management and merchandising. E-commerce accounted for 11.7% of total retail sales last year, and drove 41.6% of all retail sales growth in 2016, according to the U.S. Commerce Department. There are signs of a plateau in online sales growth rates for companies not named Amazon. The 14.3% growth rate in web commerce in the final quarter of 2016 was the smallest year-over-year increase since the fourth quarter of 2014. Amazon’s revenue grew 31.3% to $147 billion, accounting for 37% of total sales on the web of $395 billion in 2016. As online growth rates slow further, luxury brands will turn attention back to the store, in many cases totally redesigning the space, while investing in people and technology to optimize the in-store customer experience.

8. Companies will increasingly adopt seamless channel integration between online and in-store experiences. There is a digital transformation that’s required across all channels as companies realize that the consumer experience is non-linear. They may research products in one place, obtain pricing information at another, and then choose to make the final purchase either in-store or online. They may purchase online, and bring returns to the store. Brands must optimize technology to be agile enough to provide their back-office and front-line people with what they need. A seamless channel goes beyond having access to products either in-store or online. Consumers should be able to transact in any way they choose via any channel that the brand offers and 2018 is a critical year for this objective to be met.

9. Data collection and data quality become urgent in order to feed artificial intelligence initiatives. Highly-publicized breaches of sensitive personal data, like the hack at Equifax, have consumers on edge about protecting personal information, but adaptive organizations must continue to collect and analyze customer data to produce more productive relationships with analytics and artificial intelligence. The front-line sales team must be equipped with more than just a ‘black book’ to write down customer information. What matters most is not the algorithm, but the data to feed it. Data is critical if you are a luxury brand, but if you don’t have data to mine, you will be at a major disadvantage that will become an existential threat.

10. Selecting, developing, and retaining talent become even more critical skills. Recruiting and selecting employees capable of growing the business is not a matter of luck. It is a high performance skill. Most innovative firms are using artificial intelligence to help identify desirable candidates, and to provide on-the-job training and coaching. Instead of providing only sporadic education for employees, successful firms are transforming themselves into universities that teach life skills to their employees, like emotional intelligence, which results in higher client performance metrics and productivity. The idea is to create an atmosphere in which people feel cared for and an environment in which they have the right tools so they can prosper. Front-line professionals will need to combine technology advances with their own emotional intelligence skills to be true brand ambassadors, far beyond most current sales associate job descriptions. The front line of the future will need to have the skills to creatively demonstrate expertise, deep empathy, trustworthiness and generosity to engage productively with clients.

Building Relationships Based On Data

Luxury Client Experience Board event partner, Epsilon, a global marketing company, explained the importance of understanding and analyzing data to gain insights into building relationships and creating superior customer experiences. Epsilon presented a case study of their client, iPic Theaters, the innovative disrupter in the theater and cinema industry. In the case of iPic, there is more of an emphasis on the service of providing a customized dining and viewing experience, and less of an emphasis on the product of the actual film showing on the screen.

Epsilon’s perspective on taking the guess-work out of creating a holistic focus on service and experience through the collection of accurate, qualitative data resonated with the group. Ultimately, insights derived from data, paired with an emotionally intelligent workforce, will be the keys to creating customer experiences that excel.

For more information on best practices in luxury and client experience, visit, or contact CEO Milton Pedraza with questions and information about becoming a member of the Luxury Client Experience Board. 

About the LCEB: The Luxury Client Experience Board (LCEB) is a membership association of luxury industry practitioners, co-founded by Luxury Institute and The Ritz-Carlton to enhance the education and development of leading luxury brands. LCEB members receive ongoing education opportunities in industry best practices through original research and interactive events. Members come from diverse industries, united in their goal to build long-term, high-performance relationships with clients by delivering exceptional, seamless, and measurable omni-channel client experiences daily.


October 13, 2017

‘She just broke her brand’: Donna Karan’s defense of Weinstein is taking its toll

The Washington Post
By: Abha Bhattarai
October 12, 2017


(Craig Warga/Bloomberg News)

Donna Karan’s clothing lines were already struggling before the designer sparked a fury over remarks she made this week asking whether victims of sexual harassment were “asking for it.”

But retail analysts say Karan’s comments, which she made after a number of women said they had been sexually harassed and assaulted by film producer Harvey Weinstein, have further complicated turnaround efforts at her namesake brand.

“How do we present ourselves as women?” Karan was reported as saying at an awards ceremony Sunday evening in response to a question about the accusations against Weinstein. “What are we asking? Are we asking for it? By presenting all the sensuality and all the sexuality? What are we throwing out to our children today? About how to dance, how to perform and what to wear? How much should they show?”

The Daily Mail reported that Karan, who stepped down from her leadership role at the company in 2015,  later told a journalist: “It’s not Harvey Weinstein, you look at everything all over the world today, you know, and how women are dressing and what they’re asking by just presenting themselves the way they do. What are they asking for? Trouble.”

On social media and elsewhere, the reaction has been swift: TV host Megyn Kelly and actresses Mia Farrow and Rose McGowen have said they will stop buying Donna Karan products, and an online petition with more than 8,000 signatures is calling on Nordstrom to drop DKNY and other Donna Karan-branded apparel, bedding and accessories. (Beginning in February, Macy’s will be the exclusive retailer of DKNY products.)

Shares of the company that owns Donna Karan International have fallen nearly 10 percent this week. Stocks closed down more than 2 percent on Thursday to $26.03 a share.

“What she did was a terrible mistake,” Paula Rosenblum, managing partner of Retail Systems Research, wrote in an email. “General consensus is she just broke her brand.”

Karan has since apologized for her comments, which she said were taken out of context. “I believe that sexual harassment is NOT acceptable and this is an issue that MUST be addressed once and for all regardless of the individual,” she said in a statement released by her publicists. “I am truly sorry to anyone that I offended and everyone that has ever been a victim.”

Representatives for Donna Karan International and its parent company, G-III Apparel, did not respond to requests for comment.

On Thursday, a Nordstrom spokeswoman responded: “We’ve heard from some customers, and we certainly understand their concerns. We’ll continue to listen to their feedback.”

G-III Apparel purchased Donna Karen International for $650 million in December. The New York company also owns Calvin Klein and Tommy Hilfiger. And it manufactures clothing and accessories for first daughter Ivanka Trump’s brand, which has weathered its own share of boycotts and negative press.

“The acquisition of Donna Karan fits squarely into our strategy to diversify and expand our business,” the company says on its website. “We intend to focus on the expansion of the DKNY brand, while also reestablishing DKNY jeans, Donna Karan and other associated brands.”

Karan, 69, founded her eponymous fashion house in 1984 and eventually sold it to the French conglomerate LVMH Moët Hennessy Louis Vuitton in 2001. In the years since, analysts say the brand has lost much of its luster.

“DKNY is a brand that has been struggling for years — that’s why LVMH got rid of it,” said Milton Pedraza, chief executive of the Luxury Institute, a New York-based research firm. “Somewhere along the way, it’s lost identity and direction.”

G-III Apparel, however, has vowed to reinvigorate the brand. In the most recent quarter, the company said the Donna Karan and DKNY brands brought in $45 million in sales, accounting for about 8 percent of the company’s total sales. “We believe that our investment in Donna Karan was the right one for our company,” G-III chief executive Morris Goldfarb said in an earnings call with investors last month. “We continue to see Donna Karan as potentially the highest operating margin business in our portfolio. ”

But analysts said Karan’s recent comments could still introduce new challenges, even if shoppers have a short attention span when it comes to consumer boycotts.

“Was this a screw-up? Yes,” Pedraza said. “It might cause some short-term issues, but I think people will forgive it in the long term.”



Older Posts »