Luxury Institute News

February 8, 2016

Luxury Brands Can No Longer Ignore Sustainability

Harvard Business Review
By:  Andrew Winston
February 8, 2016

If I asked you to picture the consumer luxury market, you might imagine jewels, sports cars, watches, premium drinks, high-end shoes and apparel, and so on. A combination of high quality, glamour, celebrity, and attitude. With a few exceptions, it’s been an industry not traditionally associated with concerns about environmental impacts, human rights, and wellness, even while those trends have been sweeping through the mainstream consumer products sector. But according to a new report, 2016 Predictions for the Luxury Industry: Sustainability and Innovation, that sustainability gap is closing fast.

Two organizations that work closely with high-end product companies, the Luxury Institute and Positive Luxury, produced the study (disclosure: I’m on the latter’s informal advisory board, but I had no involvement in the research). Diana Verde Nieto, the founder of Positive Luxury and main author of the study, makes a compelling case that sustainability and social responsibility are no longer nice-to-have for luxury brands — they are now requirements.

The report lays out a few key pressures.

First, the direct pressure: the laws are changing. The report points to the passage of the Modern Slavery Act in the U.K. in 2015, which requires larger companies doing business in Britain to publish a board-approved, public annual slavery and human trafficking statement. This kind of law clearly drives much more transparency and tracking up the supply chain. And it’s a good thing, as 71% of U.K. retailers and suppliers think it’s likely there are slaves in their supply chain.

Second, the indirect and more powerful pressure: social norms are changing, starting with high-profile tastemakers. Celebrities are more invested than ever in sustainability. Leonardo DiCaprio and Mark Ruffalo have produced movies and started organizations to tackle climate change and promote renewable energy. Harry Potter star Emma Watson is a vocal advocate on gender equality while also appearing regularly in fashion magazines. These names and others are lending their clout to the social and environmental agenda. Given their prominence in the fashion and luxury worlds, their beliefs, statements, and demands on companies matter.

On a larger scale, the expectations of companies are changing generationally — Millennials have different views on how companies should act. The report cites research showing that “88% of UK and US Millennials and Generation Xers believe brands need to do more good, not just ‘less bad.’” This generation is questioning consumption in general – a majority say they are spending more on experiences (meaning, less emphasis on stuff), which is a threat to the luxury world. And they are driving a “clean label” trend, where companies feel pressure to explain what’s in everything and where it came from.

Third, the report highlights the fact that the investment community is waking up to the value to consumer brands of managing environmental and social issues well. There are some early shoots of evidence to back this idea up: in 2015, a Morgan Stanley analyst raised the price target on some mainstream apparel players like Nike based on their sustainability performance. The report sees this pressure coming to luxury companies soon.

Finally, there’s the harsh reality of biophysical limits seriously compromising these companies’ ability to source their products. Luxury goods require digging up, growing, and processing materials throughout the value chain, and that’s all getting tougher. According to Verde Nieto, these are not just ethereal brand risks about labor or image, but actual business continuity risks. Climate change is changing water availability and crop production around the world. That affects cotton-based products and, as Verde Nieto says, cashmere and angora, for example, require a great deal of water to process.

For gems and minerals, Verde Nieto sees a range of challenges from the energy required in production to general availability. With slight hyperbole, she says, “we’re out of gold basically (almost all the gold we use is recycled), various substances and ingredients in skin care are threatening the environment, diamonds are scarce, and exotic skins are in trouble…basically — and this is the big ‘a-ha’ — some of the raw materials, crucial to the luxury industry, are under threat.”

The leading companies in this space have been acting on many of these pressures for years. Both Tiffany and Forevermark, a Debeers company, have certified their diamonds using the independent Kimberley Process as “conflict free.” L’Oreal has quietly been making itself one of the global leaders on climate change and renewable energy. The company has already cut greenhouse gases by 50% and has new targets to be carbon neutral (without buying renewable energy credits) by 2020.

Now all the big brands are jumping in. One of the report supporters, French luxury conglomerate LVMH, has been, according to Verde Nieto, conducting extensive lifecycle analyses of their business lines. Others like Veuve Cliquot Champagne are looking hard at packaging now. They’re all figuring out where their biggest risks and opportunities lie. The report has some additional good case studies in the watch, leather, diamond, and eco-tourism realms.

None of this is easy or obvious. This industry has some tough history to reconcile. “Blood diamonds” were not just a campaigners evocative phrase, but based on real money flows to brutal dictators. Slavery is still a problem. Mines are immense operations that can impoverish people and land — or create jobs and build the economy.

But in our transparent world, the risk of not tackling sustainability is extremely high for this sector. As CSR and sustainability evangelist John Elkington told the report writers. “The implicit promise [in luxury] is that the consumer need not worry about anything. Everything is taken care of… Until it isn’t, at which point the whole impression of invulnerability and perfection can deflate.”

An unsustainable piece of clothing or jewel is, in the end, anything but flawless. As we all wake up to that reality, the luxury companies have no choice but to act.

Source: https://hbr.org/2016/02/luxury-brands-can-no-longer-ignore-sustainability?

January 27, 2016

2016 Predictions for the Luxury Industry: Sustainability and Innovation – Executive Summary

Positive Luxury
By: Josie Tutty
January 20, 2016

In this report, we identify the most impactful events of 2015 and look forward to the biggest trends of 2016 in the world of luxury and sustainability.

2015 propelled the luxury industry forward when it comes to how they think about sustainability. The biggest shift, (and one of the most important ones to help accelerate changes from the top down), is the rise in demand from investment communities for sustainable business models. For years, investors have focused on a company’s financial performance and determined if purchasing stock was worth it based on if the company was profitable. Now, sustainable investing strategies are growing, as investors are realising that performance is intertwined in future social and environmental impact.

C-suites are starting to realise that in order to keep creating value, and accelerating growth they must invest in and improve how their company impacts society as a whole, and most importantly how they communicate that positive impact.

There is one group in particular that aligns with this concept more than any other. Millennials are almost three times as likely to look to work for a company because of its social and environmental practices.

And the demand from affluent millennials doesn’t stop at employment opportunities. 2015 saw millennials using their spending power more and more to vote for companies who positively impact society and the environment – in fact – they are twice as likely to buy from brands with strong management of environmental and social issues.

2015 was also the year governments and world leaders took action too. With the launch of the Sustainability Development Goals, COP 21, and the passing of the Modern Slavery Act, creating, maintaining and growing companies with a positive social and environmental impact will soon become a legal obligation.

All these changes have left luxury companies with no option but to improve as the potential for sales and stocks to plummet increases, and the hand of the law hangs over them.

With that in mind, we look forward to 2016 and the trends that will help luxury companies continue on their sustainability journey. New innovations, communication techniques and constant evaluations of how consumers view brands will allow companies to keep marching forward in the fight to stay at the top of their game in a world that demands socially and environmentally responsible brands more than ever before.

You can purchase the full report by contacting hello@positiveluxury.com

Source: http://blog.positiveluxury.com/2016/01/2016-predictions-luxury-world-sustainability-innovation/

 

January 26, 2016

Sustainability efforts to boost investor interest in luxury houses: report

Luxury Daily
By: Jen King
January 26, 2016

Forty-six percent of CEOs agree that climate change and the scarcity of resources will transform their business, according to a new report by Positive Luxury.

Positive Luxury’s “2016 Predictions for the Luxury Industry: Sustainability and Innovation” report examined impactful events from 2015 to forecast how these world happenings will impact luxury going forward into 2016. Sustainability is proving itself more than just a fad, with consumers becoming increasingly aware and conscious of how and what they purchase, and as a result investors are putting more weight into sustainable business models.

“Companies across all industries face material business risks and opportunities, which come about from regulatory and market trends on environmental and social issues,” said Diana Verde Nieto, co-founder of Positive Luxury, London.

“When sustainability is viewed as a cost, or it lacks alignment with the company’s corporate strategy, the business underperforms and the material risks are not addressed,” she said. “Therefore, sustainability will help brands to de-risk their business and remain competitive.”

Together with the Luxury Institute, Positive Luxury conducted one-on-one interviews with key opinion leaders in the luxury lifestyle space, NGOs, The World Economic Forum and CMOs, CSOs and CEOs from top luxury brands and groups. Participants included LVMH, Kering, Forevermark, IWC and the British Fashion Council, among others.

Green machine
Over the course of 2015, governments and world leaders worked to pass legislation and develop strategic plans to protect the environment and underprivileged workers in developing nations.

In the last year, the Sustainable Development Goals were introduced, the Modern Slavery Act was passed and global leaders gathered to attend the COP21 summit in Paris. These milestones, and others, reflect a shift in CRS methods that extend beyond “good PR,” but rather show an increased consciousness of ethics and legal obligation.

While world leaders gathered in Paris to discuss climate change during COP21, French luxury conglomerate LVMH saw an opportunity to tout its sustainability practices while the world narrowed its lens on the topic.

Shared in a series of posts on its corporate social account on Facebook, LVMH offered insights into various programs and strategies implemented by the conglomerate and brands found within its stable, which includes Louis Vuitton, Bulgari and many others. Transparency has become a necessity as consumers are increasingly aware of and concerned about how and where the products they buy are made and the social and environmental impact they may have (see story).

For luxury, these international events have left brands with no other option than to approve their processes. While consumer opinion once drove sustainability practices, now the potential for sales and stock prices to fall increases, as does attention from lawmakers.

During its research for the report, Positive Luxury found that consumers are aware of the power they possess and know they can make a difference. Beyond being vocal about social and environmental causes, consumer power is also based on the product purchases they make.

Likewise, C-suite executives have found that to keep brand value and continue growth, an investment in sustainability performance and practices is a must. Also, given transparency’s importance in the minds of consumers, the way in which brands communicate their positive impact has also grown.

French luxury conglomerate Kering, for example, is helping the world visualize its environmental impact with an interactive environmental profit and loss statement.

Kering’s results page on the conglomerate’s Web site contains a grid depicting the various steps in production and environmental categories in which it could make an impact, with each square containing a circle in relation to the impact that has been made. Kering’s transparency shows its dedication and the steps it has taken while also helping other companies to examine where they can make changes one step at a time (see story).

The color of money
While there has been growth in marketing efforts boasting sustainability practices and an increase in transparency as to how products are manufactured, 2016 will see a higher demand from investors for business with sustainable business models.

As mentioned above, nearly half of brand CEOs agree that climate change and resource scarcity will transform their business, making environmentally-sound choices even more significant.

Luxury houses such as Saint Laurent and Christian Dior have implemented tactics that are environmentally sound. For instance, three Saint Laurent storefronts have been given the highest LEED certification (see story), while Dior has incorporated responsible lighting in a number of its international boutiques.

Additionally, brands are becoming more conscious of protecting the resource supply chain. Prada, for instance, purchased the French tannery Tannerie Mégisserie Hervy to ensure the skills held by its workers are preserved (see story) and in a similar move, Chanel purchased French lamb hide tannery Bodin-Joyeux in 2013 (see story).

The shift toward more sustainable models has also piqued the interest of investors, with 71 percent of individual investors showing interest in sustainable investing based on environmental, social and governance (ESG) criteria.

“As the importance of sustainability intensifies for businesses, the financial markets are increasingly forced to address the challenges posed to them,” Ms. Verde Nieto said. “These challenges come about from the realities of natural resource scarcity, the effects of unabated carbon-emissions, rapid urbanization and the widening wealth inequality, just to name just a few.

“From an investment point of view, the time horizon relevant to sustainability-related risks and opportunities is neither uniformly long-term nor short-term,” she said. “Some of these risks and opportunities are upon us right now, powerfully shaping the current business environment, and must be dealt with in the short term.

“This was validated by the outcome of COP21, where for the first time in history, the 195 countries attending agreed to take measures to mitigate climate change, recognizing that this is an issue that is affecting everyone.”

Source: https://www.luxurydaily.com/sustainability-efforts-to-boost-investor-interest-in-luxury-houses-report/

January 22, 2016

Events crucial at defining brand community: Neuehouse founding partner

Luxury Daily
By: Sarah Jones
January 21, 2016

NEW YORK – Luxury brands can work relentlessly to develop a quality product, but without creating a controlled experience and consistent message around their merchandise and identity, there may be a disconnect between reality and public perception.

During the “Going Beyond the Product: Creating Physical Experiences for Luxury Consumers” session at Luxury FirstLook: Strategy 2016 Jan. 20, panelists agreed that finding one consistent brand personality and ideology and communicating that across all touch points, whether online or in-store, is the key for effective brand positioning. From there, letting consumers engage with a brand through product, entertainment or creative experiences can further help to build a community.

“The brand has to drive the interaction, whatever it is, and then I think you have to be aware of what consumers’ expectations are,” said Matt Powell, co-president of KBS. “So digital has made it so that whether it is a luxury brand or not, people have certain expectations in terms of understanding everything from what’s going on in the supply chain to price comparison, things that normally luxury could avoid.

“And you have to think about how do you take advantage of what consumer expectations are altered by the Web when you’re creating any experience—online, offline, in-store, out of store,” he said.

Leaving a message
When trying to communicate a brand message to many different generations, brands should not let age be the primary focus, since consumers do not like being defined by this demographic. Mr. Powell said instead brands should speak to characteristics that consumers prefer to be identified by.

James O’Reilly, founding partner at Neuehouse, agreed, explaining that the private work collective tries to find common threads among its multigenerational audience rather than point out differences. Additionally, Neuehouse offers programming at different levels, allowing consumers at varying points in their lives to use its spaces and join its private community.

When designing retail spaces, brands should work to create elements of surprise. For instance, Neuehouse’s bathroom doors feature images of a pump and a mustache, fashioned out of magnets, showing more ingenuity than a painting.

In-store digitization efforts should center on creating an experience that the consumer cannot have at home on her tablet or phone. For instance, Puma took the concept of the in-store iPad and made it more memorable by creating a wall of iPads eight across.

“Physical and digital should be seen as complimentary as opposed to standalone items,” Mr. O’Reilly said. “I typically reference how much better educated people, more informed people are prior to an in-store purchase.

“I think those should feed off each other, and what I’ve seen more is people in-store are referencing digital moments, which consumers have prior to purchase,” he said.

Another way to surprise is in sensory and hospitality touch points. For instance, Dover Street Market was one of the first to include an in-store eatery, and its stores use a museum-style layout.

Prada at Dover Street Market 1
Prada at Dover Street Market

Creating a consistent experience at point of sale can become more difficult when a brand does not handle its own retail outlets.

This is true of automotive brands, which typically have a network of dealerships, but no flagship stores. Geoff Cook, founding partner of Base New York, said that he finds this lack of brand-owned store presence “bizarre.”

One option to make up for this would be hosting experiential events where consumers would be able to test drive and see the cars in person.

Similarly, Mr. Powell is working with BMW to bring its fragmented online presence together, uniting dealer, regional and corporate sites into one. The automaker’s corporate team also set up a showroom in a mall, giving itself an opportunity to reach consumers directly.

BMW South Coast Plaza
BMW Gallery at South Coast Plaza

Mr. Cook believes that brands should be more focused on creating news than on designing ads. Neuehouse employs this strategy, identifying itself as a publisher and introducing itself to potential members through editorial placements in media such as Vulture and Vanity Fair.

Face time
Having a consistent brand identity extends to personnel across facets of the business.

Mr. Cook said that the human connection is important in all channels. Ecommerce should therefore be more than just a transaction and a faceless shopping cart, particularly at luxury price points.

This starts at hiring. Neuehouse looks for an “emotional IQ” in potential new hires, searching for employees who fit into its community. Mr. O’Reilly said that it is difficult to tell who is a member and who works at Neuehouse.

When training new team members, brands should communicate not only what is done, but why it is done. For instance, a genius at the Apple store in Shanghai told Mr. Powell that when he resolves an issue, he is not just repairing a device, but he is fixing a fractured relationship between the consumer and Apple.

While luxury brands typically know the best practices in client building, most are not practicing these strategies for their own customers, according to the CEO of the Luxury Institute at Luxury Interactive 2015 Oct. 14.

The traditional training program for sales associates is out of date, as the focus should be on education that can be applied in a creative way rather than a rote set of rules and checklists that take the human element out of interactions. Additionally, these important members of a brand’s team should be rewarded more for their actions than their results, putting the emphasis on client retention and engagement, which will lead to sales over time (see story).

“I think for me, the most powerful thing is clarity and purpose for a brand,” Mr. Powell said. “So lots of people know how they do, lots of people know what they do. The best brands know why they do what they do.

“And that kind of clarity affects a lot of the behavior of the people on that team that end up being some of the most important touchpoints that exist, because they really define the experience,” he said.

Source: https://www.luxurydaily.com/events-crucial-at-defining-brand-community-neuehouse-partner/

January 15, 2016

The wonderful, unexpected return of the luxury coupe

The Verge
By: Tamara Warren
January 15, 2016

If you want to win the hearts of cynical car journalists at an auto show, dazzle them with the unveiling of an unexpected luxury coupe concept. Buick, the GM brand that’s struggled with its old-guy image over the past few decades, opted to use the stage of the North American International Auto Show (NAIAS) this week to make a powerful statement about its identity. Last Sunday, Buick unveiled its vision for a luxury concept coupe — the Buick Avista, a classic two-door looker.

The “coupe,” a term with French origins, refers to a two-door body style and dates back to the turn of the 20th century. It is typically smaller and more svelte in proportion compared to a four-door sedan. In recent years, automakers have started to bend the definition of the word to include sporty four-doors, but the Avista is a true coupe in every sense of the word. “[The Avista] was purely a design exploration exercise,” says Liz Wetzel, director of interior design for Buick. “We used this project to take sculptural beauty and think about Buick and where it’s been in the past. The Buick Y-Job was the very first automotive show car. Buick used to use technology and beautiful sculpture together.” (GM’s first car design chief Harley Earl created the Y-Job, the first concept car at an auto show in 1938.)

But Buick isn’t the only luxury automaker to spark car crushes at the Detroit show this year — Infiniti is showing the Q60, and Lexus makes a powerful statement with the LC 500 production car. Both of these handsome coupes attracted considerable attention away from the more conventional crossovers and sedans.

At NAIAS, automakers’ design departments get to put their best foot forward, and the classic coupe is sure-fire way to drum up attention from admirers. “Luxury consumers have come to expect fuel efficient cars for both economical and environmental reasons,” says Milton Pedraza, CEO of the Luxury Institute. “Aerodynamics play a huge role in the fuel efficiency of cars and highly influence the design. The most aerodynamic designs are simplistic, chic, and timeless. The cars of 2016 will have a classic familiarity that comes with simplistic design, but with contemporary features that make them appealing and modern.”

Design departments are able to experiment at auto shows by pushing boundaries without the constrictions of practicality and safety regulations. When given the green light to make compelling concepts, the show fuels a sense of competition among car design studios. Buick’s exterior director of design, Holt Ware, describes Detroit as “the Super Bowl for car designers.”

“If you think about it like the race track, there are some really fabulous races around the world, but Le Mans is still Le Mans and everyone wants to go to Le Mans,” Ware says. And the Avista won this week’s Super Bowl: it took home the EyesOn Design Best Concept award.

The Avista, like most beautiful objects, started from a burst of creativity followed by an approval from management, not the other way around. “From the teams in the studio, it happened because they wanted to see themselves in a vehicle,” Ware says. “They didn’t all want to see themselves in a three-row SUV or a crossover.” Production designers worked on the car as a side project. “If you’re in a production studio, you have to justify your resources, because everyone runs on a budget. The justification for us was that it was our jam session. If a musician has a concert, you can’t mess up in a concert, but then you have the jam session where you go in the garage, throw down, and try to explore your instruments and working together as a band. That’s what we did on this vehicle as well.”

Both Wetzel and Ware says they’re shocked about the powerful response to the show car. No one at GM is saying this car, which is based off GM’s Alpha platform (the same one that underpins the Chevy Camaro) and boasts a 400-horsepower V-6, will be built. For now, the company is positioning it as a statement piece.”We’re getting the data points in North America right now, because everybody loves it. And so, when is the right time to do it?” says Mark Reuss, GM’s executive VP of global production development. “Is it three years from now; is it two years from now? Is it a year from now? When is that? That would be the next discussion. And so, it’s not out of the question, but the point of the car is, ‘here’s where Buick’s heading.’”

While Reuss fashions the presence of three big luxury coupes at the show a coincidence, I have to wonder if this splashy trio suggests that there is more space in the marketplace for new coupe buyers — particularly as Infiniti and Lexus invest in building the production versions of these cars. Pedraza suggests that automakers might be making cars that appeal to an aging population that has disposable cash. “A majority of current purchasers in wealth are baby boomers,” he says. “This age group is currently in a transition as their children move out of the house and they are left with an empty nest. They no longer need large cars and are able to buy more stylish, trendy, and fun vehicles such as coupes,” he says. Hence products like the LC and Q60 — and maybe, if we’re lucky, the Avista.

Source: http://www.theverge.com/2016/1/15/10772432/the-return-of-the-luxury-coupe-detroit-auto-show-2016

January 13, 2016

Brands need to focus on relationship-building, not selling: Luxury Institute

Luxury Daily
By: Forrest Cardamenis
January 13, 2016

For the first time since the economic crash in 2008, many top luxury CEOs are worried about the state of the industry, according to the Luxury Institute.

Issues ranging from the economy to the weather and internal service problems have contributed to a world in which nine of 10 would-be clients leave a store without a purchase and only 20 percent of the buyers return. Although the global economy and the weather are hard to control or predict, every brand has a chance to empower its sales associates to convert and retain sales.

“In the second half [of 2015] things turned ugly,” said Milton Pedraza, founder and CEO of Luxury Institute. “I had a CEO tell me she hasn’t seen so many negative factors working against the luxury industry since we recovered.

“Remember, after 2008, China decided it was going to go on a growth spurt–and I say ‘decided’ because they are a communist country–and that made up for all the other things in the rest of the world,” he said. “So it helped countries like the United States and it helped Europe to start recovering, but now all those things turned negative.

“There’s a dramatic slowdown in China; the dollar has strengthened so you are getting fewer tourists and exporting less out of the U.S.; Europe never recovered fully; you have luxury shifting toward experiences rather than goods; traffic is down in stores even in the U.S., and while stores are moving into online buying there is no way online buying is making it up, so a lot of companies are now discounting.”

Changing the game
In addition to complex economic issues rooted in global relations, a transition toward a digital economy and the buying patterns and behavior of both aging boomers and emerging millennials, uncontrollable factors such as weather are also capable of hurting stores. An unseasonably warm winter has made it so coats and other seasonal apparel is not selling as well this year.

luxury shoppers
Luxury shoppers

However, brands still have a chance to generate their own sales and ensure that those who do walk through the door make a purchase and return. Despite the hard emphasis on “selling,” sales and retention are a factor of relationship building first and foremost.

“There is a lack of empathy when you enter the store, a lack of trust when you enter the store and a lack of generosity you feel coming to you – when I say generosity I don’t mean ‘discounts,’ I mean ‘Champagne,’” Mr. Pedraza said. “We haven’t empowered our people. We are training them to be robots instead of being the good human beings they are and making connections in a good human way rather than saying, ‘I’m going to sell you stuff!’ Expertise is not being delivered with empathy.

“That’s not the sales associates faults, that’s an education thing,” he said. “It’s not ‘training’ – these are not puppies – you educate them and you empower them to reach out and retain those clients.

“Sometimes you don’t try to make a sale at all, you just say thank you. But if you have 20 sales associates and maybe three or five are doing very good outreach with genuine emails, thank you cards and calling the client with something relevant, that’s not enough.”

Michael Kors affluent couple car
Affluent couple; image courtesy Michael Kors

In addition to empowering sales associates to build relationships first and then let sales arise naturally rather than push hard for sales right away, brands need to put ego aside. Employees at all levels cannot keep up with or recognize the best practices and innovations because of internal politics and relationships and the responsibilities of their own jobs. As a result, independent, trustworthy outsiders need to become a part of the service model.

When sales associates are trained in workshops, the share of associates that use the best practices after six months is a mere 10 percent. With ongoing support and weekly training sessions of half an hour to an hour, the number jumps to 95 percent.

This extends to high-performing sales associates. Although top performers or their supervisors may feel like their performance means they would not benefit from training compared to others, this is not the case. On the contrary, the return from training and continuous coaching is often best with these employees, because a 20 percent boost for an employee who sells $1 million of merchandise per year is a bigger gain in revenue than a 20 percent increase for an employee who sells half as much per year.

Bloomingdale's shopper
Image courtesy of Bloomingdale’s

Even with the introduction of continuous coaching, CEOs note that a sizable 40 percent of success depends on this kind of relationship-building expertise, but that leaves 60 percent for products, and many brands are stumbling on that front as well.

“I think that right now there’s a feeling there’s no compelling product,” Mr. Pedraza said. “There’s not an ‘it bag’ no ‘it product,’ just a lot of ‘me too’ and very little innovation.

“A lot of people are redesigning their stores, and that’s great, or trying to innovate, and that’s great, but very few have gotten there – Gucci on the women’s side, but not much,” he said. “Not many have had the courage that makes people say ‘I need this, I gotta have it,’ and brands need to create the things that people say they want.”

Getting younger
Brands must also keep in mind the habits of their consumers, as baby boomers and millennials do not have the same priorities and concerns.

Understanding demographics is the first step to effective marketing, according to a report by Unity Marketing.

Affluent consumers, defined in the study as those who make over $100,000 a year, slightly more than a fifth of households, are the fastest growing income bracket. Although economic factors are often foregrounded when discussing changes in wealth and buying patterns, understanding shifts in generations and the ratios of different age groups over time can help brands build long-term strategies without the uncertainties related to predicting the economy (see story).

Affluent consumer shopping Rolls Royce
Affluent consumer with a Rolls-Royce

In addition to how to reach consumers, some of those changes might include rethinking of what it means to be a “luxury” brand.

For millennials, the “luxury” label does not carry the same mystique as it has in the past or that it might for older consumers. Instead, the word connotes over-priced and unaffordable goods even more than it defines craftsmanship or value. For these consumers, the values associated with the brand as well as the relative value in cost-per-use are more important.

Indeed, millennials do not abide to the traditional hallmarks of luxury. Rather than marking themselves by wearing the most expensive brands they can afford, they look to brands that reflect who they are, opting, for example, for an Ironman Triathlon watch instead of a Rolex and preferring to foster their own identity through their clothing, accessories and other goods rather than harnessing the brand’s (see story).

“Clients are less loyal, which means they have a lot more options, and they are being bribed by lots of discounting so they are going to where they find the best deal,” Mr. Pedraza said.

“Baby boomers are today far less interested in goods as they were before, and less interested with consumption in general,” he said. “As they get older they’re more concerned with ‘what experiences do I need in what’s left of my life, what legacy do I leave in the world, what do I leave my children, what contributions have I made?’

“Luxury brands have to contend with all those factors and I don’t think there’s ever been a period where we need to contend with so many factors. The luxury industry is going to need to go through transformation and needs to adapt but nobody is exactly sure how. How do you get the traffic back in the store so you can convert them? How do you capture relationships online?”

December 10, 2015

Announcing Luxury FirstLook: Strategy 2016 New York Jan. 20

Luxury Daily
December 6, 2015

Join senior executives and decision-makers at the 4th annual Luxury FirstLook: Strategy 2016, the nation’s premier conference organized by Luxury Daily discussing luxury advertising, marketing, retail, media, Internet and mobile issues and opportunities expected in 2016. Speakers from the Boston Consulting Group, Four Seasons Hotels & Resorts, Van Cleef & Arpels, Breguet, Luxury Institute, Shullman Research Center, Kantar Media Ad Intelligence, Travel + Leisure, Modern Luxury, Neuehouse, Base New York, KBS, Lloyd&Co., Parlux Fragrances, Matouk, Fluid Inc., iProspect, Monaco Lange, Envirosell, Engel & Volkers North America, Bloomberg Pursuits and Driscoll Advisors

Focus: What luxury marketers can expect in a market, while showing strong pockets of growth, is rife with uncertainty in 2016 and what it means for luxury retailers, luxury brands, ad agencies, publishers, market researchers, technology platforms and service providers

Why you should attend: Hear a cross-section of the nation’s leading expects discuss strategy, tactics, execution, results and analysis for gaining or maintaining market share in a rapidly evolving luxury market where the consumer is leading the change as much as brands. Also network with fellow attendees who are senior executives and decision-makers at leading marketers in this 11-hour serious transfer of knowledge

Venue: 10 on the Park at Time Warner Center, 60 Columbus Circle, 10th floor, New York, NY 10019 (entrance is on 60th Street across from Columbus Circle, between Equinox gym and the Mandarin Oriental Hotel)

Price: Only $695, which includes breakfast, lunch and cocktails

Sponsorship: For lunch roundtables and keynotes, tables, breakfast, cocktails and other sponsorships, please email ads@napean.com

Please click here to register for 4th annual Luxury FirstLook: Strategy 2016 in New York on Wednesday, Jan. 20

AGENDA

Luxury FirstLook: Strategy 2016
New York
Jan. 20, 2016

7:30 a.m. – 8:45 a.m.
Breakfast and Registration

8:45 a.m.
Welcome Remarks
Mickey Alam Khan, editor in chief, Luxury Daily
Milton Pedraza, CEO, The Luxury Institute, and Master of Ceremonies

9 a.m.
Opening Keynote
Selected Key Trends In the Luxury Industry In 2016
Boston Consulting Group has a finger on the pulse of luxury given that it works with the world’s leading luxury brands and retailers, advising them on strategy, tactics and execution. The world of luxury is set to undergo several changes in 2016, forcing marketers to rethink marketing, retailing, media, Internet and mobile approaches. This talk will specifically focus on four key trends:

• A changing world: New growth drivers in the luxury industry
• Intro values such as quality, craftsmanship and exclusivity continue to roar as consumers increasingly looking for experiences
• Word of mouth increasingly a driver of purchase decisions
• Winning in the rising digital world

Speaker:
Luke Pototschnik, partner and managing director, Boston Consulting Group

9:30 a.m.
Research Keynote
Van Cleef & Arpels: Examining the Jeweler’s Digital Strategy
Speaker:
Kristina Buckley Kayel, vice president of communications, Van Cleef & Arpels

10 a.m.
How Luxury Brands and Retailers Should Consider Reaching and Communicating with Luxury Buyers in 2016
As the United States economy continues to expand ever so slowly, how much has that ongoing expansion increased the size of the U.S. luxury markets such as the prospects for designer apparel and accessories, premium cosmetics and fragrances, luxury automobiles, luxury travel and luxury home goods? Plus, with the ever-growing number of advertising and communication mediums and channels now reaching the luxury consumer, which channels make the most sense for luxury marketers to communicate with these luxury shoppers? These and other critical questions will be answered from the consumer’s perspective as the Shullman Research Center presents its in-depth analysis of what luxury buyers are now buying and the most effective ways to reach this valuable audience.

Speaker
Bob Shullman, founder/CEO, The Shullman Research Center

10:30 a.m.
Break

11 a.m.
2015 Holiday Advertising Wrap-Up: The Luxury Market
Media advertising was an important marketing channel for luxury brands during the just-completed holiday shopping season. What strategies and tactics did luxury marketers use to break through the competitive noise and connect with their targeted audience? What can be learned from their approaches? Drawing on its comprehensive ad monitoring database, Kantar Media has examined luxury brands and will share insights on holiday campaign ad spending levels, budget allocations across media platforms, digital media initiatives, timing of ad spend during the period, ad message content and more.

Speaker:
Jon Swallen, chief research officer, Kantar Media Ad Intelligence

11:30 a.m.
Going Beyond the Product: Creating Physical Experiences for Luxury Consumers
The way to reach luxury consumers is not just through their shopping habits, but also through the elegant and tangible elements of their environment. How can brands use smart design and user experience to lure luxury consumers back to the exclusivity of white-glove services that are only offered in exclusive memberships and high-end bricks-and-mortar stores? Hear from branding and design leaders on how to create and position a state of mind and experience that goes beyond the price point of upscale products and instead focuses on physical spaces and tangible experiences that exude affluence.

Panelists:
James O’Reilly, partner, Neuehouse
Geoff Cook, founder/partner of Base New York
Matt Powell, Co-president, KBS
Neil Powell, designer, Smart Space

Noon
The New Travel + Leisure: Aligning Platforms to Audience Behavior
One of the leading travel publications nationwide, Travel + Leisure is part of the Time Inc. family of magazines that is straddling both the print and digital worlds. The evolution of this brand mirrors the changing reading habits of consumers. This session will discuss the magazine brand’s approach to:

• Print versus digital versus social
• Defining the brand for cross-platform publishing, growing digital and engaging via new products
• Destination guides
• Video: Serving the audience in new ways
• Utilities
• Commerce
• State of the market: The affluent and travel spending; the Travel + Leisure audience and the year ahead; emerging destinations; and luxury travel trends

Speaker:
Nathan Lump, editor in chief, Travel + Leisure

12:30 p.m. – 1:30 p.m.
Sponsored Lunch Break

1:30 p.m.
Four Seasons: How Luxury Brands Should Focus on the New Principles of Content Marketing
The Four Seasons hotels chain is the byword in luxury hospitality, with a sharp emphasis on customer service. Part of that mission is to involve its customers to share via content their experiences across properties that intersect with life’s key moments. This session will shed insights on the next evolution of content marketing for luxury brands, with a specific focus on user-generated content and the power of harnessing consumer content to drive brand leadership. The Four Seasons has long advocated that luxury brands should become publishers. The next step in that process is to understand how the consumer fits into content creation, both from a creation and an engagement perspective. In essence, what are the new principles of content marketing and how should luxury brands be thinking about that as they look forward to the year ahead.

Speaker:
Elizabeth Pizzinato, senior vice president of marketing and communications, Four Seasons Hotels & Resorts

2 p.m.
A Customer Journey Through the Sense of Smell
There is nothing more personal than one’s’ choice of scent, which makes it even more imperative for fragrances to differentiate themselves when positioned directly next to their competitors in-store. The journey a consumer takes surely does not begin and end with a woman spraying shoppers along the beauty counter. How can you market and sustain a sensory experience for a fragrance brand across all channels to ensure continuity from packing to print? This session will focus on the strategy behind the marketing of luxury fragrances for today’s modern consumer and how the speakers partnered to remaster the iconic Norell fragrance.

Speakers:
Jodi Sweetbaum, president and managing director, Lloyd&Co
Pat Werblin, vice president of advertising, Parlux Fragrances

2:30 p.m.
Breguet: State of the Luxury Watches Market and Outlook for the Year Ahead
Speaker:
Mike Nelson, president, Breguet

3 p.m.
Break

3:30 p.m.
Modern Luxury, Modern Marketing: A Localized Approach to Connecting with the Luxury Consumer
Media houses continue to struggle to find their footing in the modern marketing landscape. One of the few publishers that has maintained continued growth and success despite these changes is Modern Luxury, the country’s largest local luxury media company. With the recent launch of its 67th title (Silicon Valley) and significant year-over-year revenue growth, Modern Luxury has separated from the pack with a unique strategy of building community with highly engaged, high-net-worth individuals in key markets across the United States. Modern Luxury’s presentation will highlight the publisher’s unique approach, specifically the importance of experiential marketing and of targeted engagement specific to each market. Other highlights include:

• Geographical and regional nuances to approaching luxury: How the definition of “luxury” differs not only from state-to-state but from city-to-city, even just within miles (e.g. Silicon Valley vs. San Francisco, Manhattan vs. The Hamptons, Los Angeles vs. Orange County)
• Regional luxury trends and insights, taken from Modern Luxury’s own survey of its readers in each of their markets;
• Learn the cultural habits of these luxury consumers city by city: shopping patterns, attitudes towards brands and experiential programming and more (e.g. Resort towns are often a missed opportunity for beauty brands as purchase intent in those pockets scores off the charts or did you know that Houston in-store events see a bump in sales from attendees after the event? The culture there is one of discreet spending as opposed to conspicuous consumption)
• Modern Luxury’s view on the year ahead and strategies on how to continue to engage with local luxury consumers

Speaker:
Marcy Bloom, senior vice president and group publisher, Modern Luxury

4 p.m.
Personalizing Luxury Household Goods Through Technology
The benefit of in-store shopping for household goods such as bedding and furniture is that it enables one to visualize how the product would look in one’s own home. But with 98 percent of affluent consumers using the Internet on a daily basis, it is imperative that luxury home-good makers explore ways to digitally engage with consumers to ensure that they are staying relevant. Attendees will learn how the speakers partnered to create uMatouk. The tool allows both retailers and consumers to mix and match bedding to create their own combinations that appear on a photorealistic 3D bed. The speakers to how the tool’s success has led to increased traffic back to Matouk’s site and why digital personalization tools should be an essential marketing tactic for luxury brands across categories.

Speakers:
Stuart Kiely, senior director of technology and marketing, Matouk
Chris Haines, director of strategy, Fluid Inc.

4 p.m.
Raffe for Dom Perignon

4:45 p.m.
Closing Panel
Outlook 2016: Key Luxury Marketing, Retail, Media and Digital Trends and What’s Next
Traditional luxury brands enter 2016 having had a mixed reception in the preceding year. While many marketers retained or grew market share, a few including department store chains had to resort to extensive discounts to retain footfall. The trend of brands opening more stores slowed, even as China and emerging market sales slackened while the United States held up. It is also obvious that the Internet and mobile have influenced shopper behavior. Among other issues, this panel will dissect:

• Holiday 2015 recap
• Outlook for the economy in 2016: What luxury marketers should anticipate
• U.S. and international markets: Where does growth lie
• Digital and the integration of online and mobile marketing and commerce with stores
• Theme for the year ahead

Speakers:
Andrea Wilson, vice president/strategy director and luxury practice lead, iProspect
Greg Monaco, founding partner, Monaco Lange
Gustavo Gomez, director of research and methodology, Envirosell
Anthony Hitt, CEO, Engel & Volkers North America
Chris Rovzar, digital head, Bloomberg Pursuits

Panelist:
Marie Driscoll, CEO and chief consultant, Driscoll Advisors

Closing Remarks
Milton Pedraza, CEO, The Luxury Institute, and Master of Ceremonies
Mickey Alam Khan, editor in chief, Luxury Daily

5:30 p.m. – 6:30 p.m.
Luxury Women to Watch 2016 Cocktails Celebration

Please click here to register for 4th annual Luxury FirstLook: Strategy 2016 in New York on Wednesday, Jan. 20

Hotels in the Midtown Manhattan neighborhood (from nearest to farthest):

Mandarin Oriental New York
80 Columbus Park at 60th Street, New York, NY 10023; tel: 212-805-8800
Please click here for the Web site

Trump Hotel Central Park
One Central Park West, New York, NY, 10023; tel: 212-299-1000
Please click here for the Web site

Hudson New York
356 W 58th Street, New York, NY 10019; tel: 212-554-6000
Please click here for the Web site

JW Marriot Essex House New York
160 Central Park South, New York, NY 10019; tel: 212-247-0300
Please click here for the Web site

The Hilton New York 
1335 Avenue of the Americas, New York, NY 10019; tel: 212-586-7000
Please click here for the Web site

The Palace Hotel
455 Madison Avenue, New York, NY 10022; tel: 212-888-7000
Please click here for the Web site

The Bryant Park Hotel
40 West 40th Street, New York, NY 10018; tel: 212-869-4446
Please click here for the Web site

New York Marriot Marquis
1535 Broadway, New York, NY 10036; tel: 212-398-1900
Please click here for the Web site

Sheraton Times Square
811 Seventh Avenue, New York, NY 10019; tel: 212-581-1000
Please click here for the Web site

Please click here to register for 4th annual Luxury FirstLook: Strategy 2016 in New York on Wednesday, Jan. 20

Source: http://www.luxurydaily.com/announcing-luxury-firstlook-strategy-2016-new-york-jan-20/

November 25, 2015

Nordstrom, Bergdorf Goodman lead retailers in overall satisfaction: report

Luxury Daily
November 25, 2015
By: Forrest Cardamenis

Department store chain Nordstrom is the top-rated luxury retailer, according to findings detailed in The Luxury Institute’s third annual Luxury Multi-Channel Engagement Index.

Consumers evaluated six luxury fashion retailers both in-store and online across a total of 31 attributes – 15 online and 16 in-store. Because the findings come from consumers, they can help each retailer determine which areas it needs to improve on and what specialties will help distinguish it from competitors.

“[We wanted] to get the voice of the client, not to have a panel of experts, not to have one individual,” said Milton Pedraza, CEO of The Luxury Institute. “This is the wealthy consumer rating their own experiences, these are all clients of the brands.”

Ahead of the pack
Barneys New York, Bergdorf Goodman, Bloomingdale’s, Neiman Marcus, Nordstrom and Saks Fifth Avenue were evaluated on the ease of 14 common criteria both online and in-store. In addition, there was one additional criterion for online shopping and two for in-store.

The common traits are: finding desired products, the perception consumers had of the retailer, product selection, customizability, customer service, policy on returns and exchanges, product displays, exclusive or limited products.

Traits also included whether selections were relevant to the consumer’s lifestyle, the availability of proper sizes, pricing, loyalty programs, confidence that the retailer would meet the consumer’s needs and how often products from that retailer receive compliments.

SAKS 5th Ave
Dior beauty counter at Saks Fifth Avenue

Respondents had a median age of 52, minimum household income of $150,000 and an average of $289,000 and $2.9 million in net worth, numbers that align with luxury retailers at large. Among the findings about consumers is that twice as much spending takes place in-store, with women and consumers under 45 years of age being more likely to spend online.

Bergdorf Goodman beat out Nordstrom in some notable categories. It is best perceived as a luxury retailer, as having the best prices and having the best personalized shopping experience.

However, Bergdorf Goodman has only two stores, one for men and the larger for women, both on Fifth Avenue in New York, whereas Nordstrom has 118, which will play into perceptions of luxury. Nevertheless, Bergdorf Goodman’s relative aversion to discounting did not stop consumers from highlighting its prices.
Nordstrom
Nordstrom

Nordstrom topped the rankings of more categories than any other retailer. Among them: its convenient refund/return policy, carrying relevant products and styles, having a navigable Web site, including helpful ratings and reviews and good shipping policies online, convenient locations and in carrying products that are complimented by others. It also beat out national retailers in prices and having good personalized shopping.

Fittingly, Nordstrom is the most popular retailer online and leads in market-share on both channels.

Tough times

Mobile transactions do not comprise a large share of the revenue for any of the retailers. While mobile is an important part of the transaction journey for many consumers, who use it to research and in-store to compare prices and selection, it has not yet become a major source of transactions.

Retailers are missing out on significant revenue opportunities by failing to personalize consumers’ shopping experiences, thanks to the lack of adaptive pages, product recommendations and search functionalities on their mobile sites, according to a Retail Systems Research report.

In its “Personalization Across Digital Channels” report, sponsored by predictive analytics platform Reflektion, Retail Systems Research highlights the major faux paus that brands commit when it comes to mobile commerce. As consumers’ expectations for retailers’ digital offerings grow higher, marketers must deliver optimized experiences, including saved search histories, suggestions on previous purchases and responsive pages tailored to each device (see story).

neiman.hudson yards rendering
Neiman Marcus Hudson Yards rendering

Nevertheless, online shares have grown and retailers have proven themselves adaptable to new technology.

“I think what [the data] tells you is that, even though we thought that the luxury multi brand chains were going to be overrun with the likes of Amazon and others, that just hasn’t happened,” Mr. Pedraza said. “They have become very nimble and very agile at online and ecommerce. Don’t underestimate these omnichannel chains. They definitely will rise to the occasion.”

One of the major obstacles in both ecommerce and in being perceived as luxury is in discounting. Discounting is a surefire way to lure in new consumers short-term but represents longer-term risks for the brand.

As a result, many retailers have opened up discount stores, which, despite also risking perception, could become a venue to funnel discounted merchandise and leave the main store full-price.

Although this change could not be implemented suddenly without alienating some consumers, there are already signs that it is taking place and may become more visible as holiday shopping is amped up.

Bloomingdale's Ala Moana exterior
Bloomingdale’s Ala Moana exterior

Consumers should expect a reduction in holiday promotions from retailers, according to a recent report by Upstream Commerce.

Based on the past two years of holiday promotions, the report predicts that 2015 will see a decrease in both the number of products discounted and in the discount rate. Fewer sales incentives and lower discounts could indicate a new strategy based on the “right” offering rather than simply presenting more promotions (see story).

“There is a lot of discounting out there, but full-price will remain relevant,” Mr. Pedraza said. “Unfortunately I suspect there will be a lot of discounting in the fourth quarter because when you enter their store they are flushed with inventory, all of them, so I think there’s going to be a big reduction.

“Traffic is down dramatically in all of these stores — some insider estimates, people on the inside of these companies, place traffic down anywhere from 20 to 30 percent,” he said. “It’s going to be a very tough fourth quarter, at least on market.

“We may see the top line improvement because of the discounting and you’re going to sell more, but we may see that the margins erode and by the way we may see comps that are not that good. Luxury right is in a very tough place, nowhere near what it was in 2008, everybody is suffering.”

Source: http://www.luxurydaily.com/nordstrom-leads-retailers-in-overall-satisfaction-luxury-institute/?utm_referrer=https%3A%2F%2Ft.co%2FFFJxcMPESf%2Fs%2FAiXG&utm_referrer=direct%2Fnot%20provided

 

November 10, 2015

Longchamp looks back on decade-long Jeremy Scott partnership

Luxury Daily
November 9, 2015

French apparel and accessories house Longchamp is celebrating its 10-year collaboration with designer Jeremy Scott through a new limited-edition Le Pliage handbag.

For the past decade, Mr. Scott, who designs for his own eponymous label and Italain label Moschino, has been lending his colorful aesthetic to Longchamp for special-edition versions of its iconic tote. Keeping lasting partnerships enables brands to forge deeper ties with their collaborators, while furthering the connection between the two parties in consumers’ minds.

Pairing up
Each year since 2006, Mr. Scott has taken one of his “cheeky,” pop culture-infused designs and used it to give Longchamp’s Le Pliage a new look. Because the leather goods brand and the designer have been working together for a long time, a strong trust has developed, and Mr. Scott is given carte blanche.

In a brand statement, Jean Cassegrain, CEO and the grandson of Longchamp’s founder, said, “Giving artists an outlet to express themselves is a way for Longchamp to step outside its comfort zone.”

Designs over the 10 years have included everything from a poodle in space or zodiac signs to a credit card or tire tracks. Longchamp has created a social video as a retrospective on the decade of designs, animating each bag’s subjects in the film.

The limited-edition for the anniversary features a postcard from Hollywood. On one side is a cartoon depicting a view from atop the Hollywood Hills, looking down on the cinematic city. The reverse shows a handwritten note from Mr. Scott, who says, “Wish you were here. Love, Jeremy.”

Consumers can enter to win the bag via an application on Longchamp’s Facebook page.

Collaborations can sometimes be risky for luxury brands, and half of affluent shoppers say that the biggest risk for a luxury partnership is the potential damage to the brand’s image or reputation, according to a survey from the Luxury Institute.

Overall the study found that most affluent shoppers enjoy brand partnerships, even with the risk. However, luxury marketers should pair up with brands that have the same goals and mindset when seeking partnerships.

Source: https://www.luxurydaily.com/longchamp-looks-back-on-decade-long-jeremy-scott-partnership/

 

October 27, 2015

Relationship building critical to luxury retail: Luxury Institute CEO

Luxury Daily
October 27, 2015
By: Sarah Jones

LONDON – The human element is going to be the top differentiator among luxury brands going forward, according to the CEO of Luxury Institute at Luxury Interactive Europe 2015 on Oct. 26.

As consumers increasingly experience the world through screens, they will come to crave the now-rare human connection. Here is where luxury brands can help themselves stand apart by outperforming their peers at relationship building and delivering a worthwhile personal touch.

“As consumers are more sophisticated, and as products become more commoditized, it’s the delivery of an optimized experience across channels that is critical and that high performance client relationships are our differentiators,” said Milton Pedraza, CEO of Luxury Institute, New York.

Brand image
Brands are struggling to define themselves, especially as they bleed into more affordable price points. For instance, a representative from an Italian jeweler told Mr. Pedraza that his brand does not know its own identity anymore, after a move down market left it straddling premium and exclusive.

Luxury Institute client Nordstrom now makes half of its sales via outlet stores. Recognizing that the customer retains a level of mystery, Nordstrom similarly remains ambiguous. Despite this non-specific label, the retailer still scores first in customer service in surveys conducted by the consultancy.

Nordstrom Anniversary Sale
Nordstrom heavily promotes its anniversary sale on social media

Consumers are becoming more sophisticated, and brands need to optimize their user experience for their requirements.

Across channels, brands in the luxury space are struggling to connect the dots between policy, procedure and system to deliver a rewarding customer experience.

While 37 percent of men and 49 percent of women find browsing without help from a store associate to be most effective, this does not remove a brand’s place in the process. For brands to guide consumers’ exploration, they should include signage in an on-brand way or have store associates communicate with the shopper to help them find what they are looking for.

Valentino Rome store women
Valentino store in Rome

Even in the digital space, which tends to be thought of as a do-it-yourself shopping channel, the human element cannot be entirely removed. Walmart might be able to automate and take out that the personal interaction from the buying experience, but for luxury brands, the relationship is everything. It is especially important to invest in this personal approach for top tier clients.

Therefore, sales associates should be taught interpersonal skills, such as trustworthiness. While often thought of as innate, these can be learned. Ensuring that all associates are pulling their weight will also help to retain top frontline employees over time.

For best practices, Mr. Pedraza suggests looking outside of the luxury industry rather than studying peers. Those that excel at relationship building are within the military, medicine and airline industries. For instance, brands can look to the military, which has developed successful methods of empowering soldiers, to gain insights on store associate education and guidance.

Making a connection
Mr. Pedraza asked each of the tables to discuss what changes they would make to their organizational structure, front line associates and compensation to help foster strong client relationships.

Ideas from around the room included rotating employees within roles to develop empathy, looking at the company from the consumer’s perspective and empowering sales associates with access to technology and a CRM system. Other suggestions included new roles, such as a customer information officer, which would span sales and marketing.

After hearing from the room, Mr. Pedraza shared his suggestions. These include empowering employees by shifting the organizational structure from a top-down management style to one where individuals are self-managed.

Milton Lux Int Europe
Milton Pedraza

On the same note, employees should be educated rather than trained, with the focus on ideas for creative relationship building rather than delving out a strict formula to follow.

Associates should be compensated for their actions, such as messages sent and appointments booked, rather than their sales results.

Brands should also make sure that each and every member of their team fits the culture. For many companies, this would mean eliminating employees who do not want to talk to anyone.

In addition, brands should ensure that the technology they are providing their staff with is up-to-date. Ineffective systems are often a dealbreaker for associates, particularly younger employees, and they will take their talent elsewhere.

While technology can help to deliver a high-touch experience to consumers, data and automation cannot replicate the level of engagement that a salesperson can create with shoppers, according to an executive from Moda Operandi at Luxury Interactive 2015 on Oct. 13.

Moda Operandi employs stylists, who work with its most valued consumers to provide personalized recommendations and one-to-one communications, but the process being used to deliver this service was tedious. Keeping the same human touch business model, Moda Operandi built a new platform to help its stylists deliver more relevant, visually appealing messages to the most important customers (see story).

“The key is that we’ve created these great channels, but we haven’t connected the dots,” Mr. Pedraza said. “And that I think is the critical issue.

“It’s not that we’re not innovating in each of those channels. It’s that we have not connected the dots to the point where, for example, a sales associate is empowered and inspired and maybe incentivized to send the client online,” he said. “Or that when the client buys online, the sales associate reaches out with a thank you card and a follow-up.

“We haven’t figured out those little basics that really create realtionships. Today we are very digital, very technical, we’ve disempowered the people in the stores, is one of my premises. We haven’t connected the dots, as simple as they are to connect, whether it’s technologically or humanistically, we haven’t figured out the policies, the procedures, the systems yet.”

Source: http://www.luxurydaily.com/relationship-building-critical-to-luxury-retail-luxury-institute-ceo/

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