Luxury Institute News

June 27, 2013

Wealthiest U.S. Women Find Jewelry And Relationships At Tiffany, David Yurman And Cartier; Ralph Lauren And Brooks Brothers Suit Pentamillionaire Men

(NEW YORK) June 27, 2013 – The Luxury Institute surveyed ultra-wealthy U.S. consumers with minimum net worth of $5 million about luxury brands they buy and the relationships they have with luxury sales professionals.

Tiffany & Co. is the jewelry brand most widely purchased by ultra-wealthy women, followed by David Yurman and Cartier. These three leaders in market share are also the top three jewelers where ultra-wealthy women have a preferred salesperson.

In the women’s fashion and accessories category Michael Kors holds a commanding 36% market share, followed distantly by Prada, Burberry, Louis Vuitton, Chanel, Gucci and Marc Jacobs.  These top seven brands vary widely in their ability to build relationships with ultra-wealthy women, with Marc Jacobs falling behind the rest while Prada leads the pack.

Among pentamillionaire men, Ralph Lauren and Brooks Brothers hold the largest market share in the men’s fashion and accessories category.  Overall, ultra-wealthy men are less likely than women to build relationships with salespeople.

Pentamillionaire men and women both agree that the top ways salespeople build lasting relationships are by making them feel comfortable, communicating honestly, earning their trust and recognizing them on store visits. More than half of ultra-wealthy women who purchase from both jewelry and fashion brands say they appreciate handwritten thank you notes.

“Relationship selling is not something exclusive to markets like high-end automobiles, real estate and wealth management services,” says Luxury Institute CEO Milton Pedraza. “Even in luxury jewelry and fashion, relationships cultivated by trust and an understanding of customer preferences can help boost both the frequency and size of sales.”

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

November 30, 2011

Men, Not Women, Drive Luxury Goods Sales in China

By Neerja Pawha Jetley
CNBC
November 29, 2011

Contrary to popular perception, men — not women — make up the bulk of consumers buying luxury goods in China. From Giorgio Armani clothes to Gucci handbags and Rolex watches, Chinese men have been outstripping women when it comes to shopping.

In 2010, Chinese men spent 7 billion yuan ($1.1 billion) on their wardrobes, far more than the 2.8 billion yuan spent by women, according to a Bain report. Further, the market for luxury menswear in China is expected to rise 9 percent in 2011 compared to 7 percent for women’s wear, according to the consulting firm.

Looking to tap this spending power of Chinese men is Landmark Men – a 60,000 square-foot men’s-only mall in Hong Kong. Luxury brands like Valentino Men, Gucci and Louis Vuitton are nestled amongst premium grooming products, fragrances and gadgets in this sprawling mall that opened in October 2011.

Victor Luis, president of Coach Retail International in Shanghai was quoted by the Los Angeles Times as saying men make up 45 percent of the $1.2 billion market for all luxury handbags in China. In the U.S., that figure is just 7 percent. He added that “There’s a confidence and comfort in Chinese men utilizing bags in the same manner as women do.”

Vinay Dixit, Senior Expert and Leader of McKinsey Asia Consumer Center, told CNBC that over the past 12 months, Chinese men on average spent 61 percent more than women on fragrances and 52 per cent more on watches.

Seeing this growing affinity among Chinese men to shop, luxury brands are going all out to woo them. Dior Homme, for example, has around 35 freestanding men’s stores in China.

Burberry, the maker of the iconic check trench coat, has opened 59 stores in 31 Chinese cities with every store carrying a wider selection of men’s styles compared to other markets.

Louis Vuitton now has 36 stores in 29 cities across the mainland, compared to stores in just 10 cities in 2005. The company has used an Asian male model for the first time in its 2011 advertising campaign, a likely attempt to woo the male shopper in China.

Other retailers are also expanding rapidly. Gucci, which started with just six stores at the beginning of 2006, has 39 stores today. Hermes quadrupled its stores from five in 2005 to 20 today. All these stores house the company’s full range, including menswear. “There’s a reason for the rush: while many other markets are flat or shrinking, luxury goods are booming in China,” according to a 2011 McKinsey Insights China research report.

The report points out that China will account for over 20 percent of global luxury sales by 2015 and will overtake Japan as the world’s largest market for luxury goods. Market watchers say Chinese male consumers will drive much of this growth.

The average male luxury shopper in China is less than 45 years old, educated, well-traveled and entrepreneurial, says McKinsey‘s Dixit.

According to a senior manager at a prominent luxury brand in Hong Kong, until a few years back, luxury consumption in China was a result of businessmen traveling abroad and bringing home fine goods. “Men were bigger shoppers than women, buying gifts for wives and business associates, very often for government officials,” he said.

But the motivations have now changed. Men are now rewarding themselves for hard work and success. “They also consider luxury labels as lending credence to not just their social status, but individual style,” said the McKinsey report.

L’Oreal, the French personal care products company, now sells more male grooming products in China than in Western Europe, according to media reports.

Sales in China in 2010 rose to 9.085 billion yuan ($1.38 billion), an 11.1 percent increase over the previous year, and a double-digit gain for the 10th consecutive year, said Alexis Perakis-Valat, CEO of L’Oreal China at a news conference in Beijing earlier this year.

According to a recent seven-country survey conducted by the New-York based Luxury Institute, attitudes toward shopping for luxury goods were far more positive in China than in rich nations. Seventy-five percent of Chinese said that luxury expenditures were “prudent” purchases, while 78 percent of wealthy consumers in the U.S., U.K., and Germany considered them to be an “extravagance.”

http://www.cnbc.com/id/45472638

November 10, 2011

PPR’s play for Brioni signals new interest in menswear: Pinault

By Rachel Lamb
Luxury Daily
November 9, 2011

With its planned acquisition of Italian label Brioni, Gucci and Yves Saint Laurent owner PPR has made clear its interest in a market segment where it sees much potential: luxury menswear.

Founed in 1942, Brioni is known for both season collections and bespoke products targeting men looking to addstyle and pizazz to their wardrobe. Financial details of the planned transaction were not disclosed yesterday.

“Brioni’s acquisition makes a lot of sense for PPR,” said François-Henri Pinault, chairman/CEO of PPR. “The brand is complementary and does not compete with the group’s other brands, as much as in regards with its market positioning than on its stylistic content.

“Growth in the men’s segment is significantly stronger than in women’s, and Brioni is the perfect match for this,” he said.

PPR owns Gucci, Bottega Veneta, Yves Saint Laurent, Alexander McQueen, Balenciaga, Boucheron, Girard-Perregaux, JeanRichard, Sergio Rossi and Stella McCartney.

Spoken for
PPR announced the signing of an agreement with Brioni shareholders to acquire all of its capital yesterday morning.

The transaction should be finalized at the beginning of 2012, according to PPR.

Brioni has significant intrinsic growth potential and PPR will enable it to accelerate its expansion and boost its profitability, notably through a wider product range and geographic expansion in strong growth markets, according to the conglomerate.

“PPR is buying one of the most prestigious and exclusive brands in the mens clothing business – Brioni is a gem of a brand,” said Milton Pedraza, CEO of the Luxury Institute, New York. “As PPR has shown with Bottega Veneta and Gucci, it knows how to scale a brand.

“Most of these brands are for men’s and women’s clothing, but Brioni is very distinctive and will give PPR an edge for custom and bespoke men’s clothing,” he said. “They can even expand the brand into accessories because men’s is such a growing business.

“PPR has the power to bring Brioni to a $1 billion company.”

Indeed, many experts believe that Brioni will certainly flourish under the control of PPR.

The addition of Brioni is a quick expansion of PPR’s product line and adds a new customer base for other PPR brands, according to Ron Kurtz, president of the American Affluence Research Center, Atlanta.

Brioni can benefit from having access to the capital resources of PPR and PPR’s relationships with the channels of distribution, he said.

Luxury brands that are part of conglomerates are provided with extra protection, especially in light of economic uncertainty.

PPR has taken brands such as Bottega Veneta and Gucci under its wings, turning them into extremely lucrative and successful labels.

“I think that Bottega Veneta is one of the most successful luxury brands in the last 10 years,” Luxury Institute’s Mr. Pedraza said. “The marketing and the customer experience expertise of PPR will be a tremendous asset to building Brioni.”

Acquiring gems
The luxury industry has witnessed several mergers and acquisitions in the past year.

Some experts believe that the reemergence of M&A is indicative of a recovery economy.

Following the recent acquisition of sportswear manufacturer Volcom, PPR announced in July its 50.1-percent stake majority control of Swiss watchmaker Sowind Group, parent company of Girard-Perregaux and JeanRichard.

This is just the most recent in a whirlwind of mergers and acquisitions in the luxury industry.

For example, footwear manufacturer Jones Group acquired Kurt Geiger in June, which followed the sale of Jimmy Choo to Labelux in May.

Additionally, Richemont, the conglomerate that owns luxury brands such as Jaeger-LeCoultre, Cartier and Montblanc, recently acquired online retailer Net-A-Porter this summer.

Furthermore, the ever-hungry LVMH Moët Hennessy Louis Vuitton set its sights on, and soon acquired, Italian jeweler Bulgari in the first quarter of this year.

This begs the question: Is there any hope for independently-owned luxury brands in the future, or will they all eventually be owned by conglomerates?

“I think that luxury brands can achieve a certain level on their own – look at Coach,” Luxury Institute’s Mr. Pedraza said. “Gaining capital is the easiest thing to do right now, but having great financial management is a skill that these companies [such as PPR] have.

“There is no question that luxury brands can remain independent, but a brand in a conglomerate that has this certain level of expertise will grow tremendously,” he said. “The portfolio management approach works well for both the conglomerates that acquire brands and the brands that are acquired.”

http://www.luxurydaily.com/ppr-has-the-power-to-bring-brioni-to-a-1b-company-expert/

June 18, 2011

Wealthy Consumers From China And Japan Rank Luxury Brands In Four Categories; Lots Of Love In Asia for Chanel, Hermès and European Stalwarts

(NEW YORK) June 17, 2011 – A new series of Luxury Brands Status Index (LBSI) surveys from the independent and objective New York City-based Luxury Institute reveals firsthand impressions and rankings of dozens of luxury brands by high net-worth consumers from Japan and China. Respondents were 21 years of age and older, earning the equivalent of at least $185,000 per year—one million Chinese renminbi or 15 million Japanese yen.

Wealthy Japanese and Chinese shoppers rated each brand on quality, exclusivity, social status and overall ownership experience. Also considered were price worthiness, willingness to recommend the brand and likelihood of purchase.

Based on overall LBSI scores, the top luxury brands rank as follows:

  • Hotels
    • China: Fairmont Hotels & Resorts; JW Marriott; Aman Resorts
    • Japan: Ritz-Carlton; Orient-Express Hotels; Aman Resorts
  • Handbags
    • China: Chanel; Louis Vuitton; Dior
    • Japan: Hermès; Chanel; Louis Vuitton
  • Women’s Fashion
    • China: Chanel; Dior; Hermès
    • Japan: Hermès; Chanel; Louis Vuitton
  • Men’s Fashion
    • China: Giorgio Armani; Versace; Brioni
    • Japan: Hermès; Louis Vuitton; Burberry

“European luxury brands are warmly received by wealthy shoppers throughout Asia,” says Milton Pedraza, CEO of the Luxury Institute.  “Japan’s market is more mature and surprisingly resilient so far in the wake of the tsunami and quake, while growth stays red hot in China.  Firms need to know where they
rank.”

For greater details on brand rankings in each category and other purchase considerations of wealthy Japanese and Chinese consumers, visit LuxuryInstitute.com.

About Luxury Institute (www.LuxuryInstitute.com)

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

For Further Information, Please Contact:
The Luxury Institute, LLC
Martin Swanson
Vice President
(914) 909-6350
mswanson@luxuryinstitute.com

December 10, 2010

Borrowing from Avon and Dell to Sell Shirts

Dallas shirtmaker J. Hilburn combines direct sales with custom tailoring, and reaches out to an untapped male market

By John Tozzi
BusinessWeek
December 9, 2010

You can’t buy Dallas clothier J. Hilburn’s shirts in a retail store or online. Nonetheless, the company expects to sell 60,000 of them this year by dispatching salespeople to customers’ homes or offices to take measurements and suggest fabrics and styles. They send their orders to a factory near Macau, China, where shirts are cut and sewn from Italian fabric. Buyers receive them in two to three weeks and pay between $80 and $150, less than half the price of similar shirts sold in some high-end stores.

The company is the brainchild of a couple of former finance types who set out to serve men who see shopping as a chore. “No one’s really thought about how to engage male shoppers,” says Veeral Rathod, 31, one of the founders. Rathod and co-founder Hil Davis (the company took its moniker from his full name, J. Hilburn Davis IV) have borrowed from the direct-sales model of Avon Products (AVP), the supply chain management of Toyota Motor (TM), customization techniques pioneered by Dell (DELL), and Amazon.com’s (AMZN) ease of shopping.

Some 30,000 people have bought clothing or accessories from Hilburn, the company says. And 93 percent of its customers return for a second purchase, says Davis. Since Hilburn was founded in 2007, its sales have tripled each year and are on track to top $9 million in 2010, driven by growing demand for its shirts as well as newer products such as trousers, cuff links, and cashmere sweaters. “Customers are basically saying, ‘You’ve become my solution, now offer me more products,’ ” says Davis, 38.

Jim Pitkow started buying from Hilburn 10 months ago for the convenience and price. Pitkow, chief executive officer of a San Mateo (Calif.) software startup called Attributor, used to visit tailors during trips to London or send his measurements to shirtmakers, which sometimes resulted in a poor fit. Until he started buying from Hilburn, “nobody came to measure or fit me properly,” he says. The shirts cost about half what he used to pay.

While new customers can find sales reps through Hilburn’s website, most come through referrals. The company has 650 “style advisers” who earn commissions of up to 25 percent on clothing they sell after paying $399 for fabric samples, sales materials, and training. Most are women with school-age children looking for extra income, Davis says. As in other direct-sales companies, they get a cut of sales made by reps they recruit. Each Hilburn rep, though, can sign up only five others directly, which Davis says creates an incentive to find the best salespeople rather than simply recruiting as many as possible.

Amy Mancini started selling Hilburn shirts in 2008. A mother of three in West Boylston, Mass., the former nurse says she earns about $60,000 annually, spending between 20 and 25 hours a week managing other reps and visiting customers. “I have clients anywhere from college students all the way up to presidents and CEOs,” she says. The sales calls are crucial to getting measurements right and making customers feel comfortable about buying a garment they can’t try on. Clients’ measurements are stored in a database, and the company plans to launch an online store next year where customers can order new shirts once they’ve been fitted.

The model removes some traditional up-front costs of retailing. “You’ve got a sales force you’re not paying until they sell things. You’re not paying to make the shirt until the shirt is sold,” says Brian O’Malley, a Hilburn board member and partner at Battery Ventures. The Menlo Park (Calif.) venture capital firm has invested $7.25 million in the company. Hilburn is replicating custom tailoring on a mass scale, says Milton F. Pedraza, CEO of the Luxury Institute, a consultant to high-end brands. “They’re trying to scale a model that already works,” he says. The prices also give Hilburn an advantage: Pedraza says he pays more than $300 for similar shirts.

Making custom shirts, though, brings its own inefficiencies. The fabric for each must be cut individually, not in bulk from one template, the way off-the-rack shirts are made. The company’s contract manufacturer in China eventually created a new pattern-making department where the shirt shapes are sized on computers and cut automatically. Still, each seamstress can make only about six shirts a day.

Hilburn recently hired Lawrence Hagenbuch, a veteran of General Electric (GE), as chief operating officer to help streamline manufacturing and distribution. Davis and Rathod want to halve the time it takes to get clothing to customers. Among other steps, Davis wants to box individual orders leaving the factory in China so they can be shipped directly to customers instead of having to break up shipments once they reach the U.S. “The apparel supply chain hasn’t evolved since the 1920s,” says Davis. “That’s our opportunity.”

The bottom line: J. Hilburn is trying to create a new retail model for men’s fashion by combining customization with direct sales.

http://www.businessweek.com/magazine/content/10_51/b4208026699046.htm

November 26, 2010

Big Spenders Returning To The Luxury Fold

By Marina Strauss
Globe and Mail
November 25, 2010

In the depth of the recession, Tiffany & Co. (TIF-N60.14-0.46-0.76%) struggled to sell $3,200 (U.S.) diamond earrings and $12,000 bangles, while it fared better with $100 silver necklaces.

Today, the situation is reversed, as the high-end retailer grapples with softer sales of jewellery under $500 even as it enjoys a recovery in higher-priced items.

“The people who are coming in to spend $1,000 or $5,000 or $10,000 or $20,000, they’re showing a much greater willingness to spend,” Tiffany vice-president Mark Aaron said in an interview on Wednesday.

“That customer is feeling a little better about things, while people who might purchase silver jewellery are spending more cautiously.”

New York-based Tiffany and other purveyors of luxury goods are rebounding from the recession in their North American businesses, which are still underperforming their overseas operations.

Retailers such as Saks Inc. and Coach Inc. are beating analysts’ quarterly expectations, luring well-heeled customers with pumped-up ad spending and classic styles, while scaling back margin-pinching discounting.

“We have turned the corner,” said Milton Pedraza, chief executive officer of market researcher the Luxury Institute in New York.

Still, upscale companies will be challenged to sustain the gains because of the relatively easy comparisons with previous recessionary years, he said.

And wealthy consumers are no longer shelling out for $800 camera bags or other frivolous merchandise, he said. “There’s a flight to quality.”

At Toronto-based men’s clothier Harry Rosen, sales of $5,000 (Canadian) Tom Ford suits and $4,500 Zegna leather jackets are particularly strong, said CEO Larry Rosen. The privately-held retailer’s overall sales so far this year have jumped by more than 13 per cent, compared with a decline of 5 per cent in 2009, he said. For this month alone, they’ve shot up 25 per cent from a year earlier. “The luxury customer has come back.”

But the past couple of years have taught Mr. Rosen to be more disciplined in focusing on classics – such as $300 cashmere sweaters – and refraining from taking risks on bright orange sweaters or “off-the-wall” items, he said. This year he is running sales with discounts of up to 20 per cent, compared with 40-per-cent reductions last year.

Saks has also reduced its promotions by offering, for example, “family and friend” discounts of 20 per cent this year compared with 25 per cent last year, CEO Steve Sadove said last week. The retailer’s cosmetics markdowns dropped to 10 per cent from 15 per cent. “We are consistently trying to reduce the number of [markdown] events, the brands included, the value of the events, and move toward a more full-priced selling environment,” Mr. Sadove said.

Tiffany, which doesn’t discount merchandise, raised its ad spending this year – shifting toward previous peak levels – after reducing it to 5.9 per cent of sales in 2009, down from 7.2 per cent of sales in 2008, Mr. Aaron said.

The marketing helped the jeweller perk up its third-quarter sales by 14 per cent, to $681.7-million (U.S.), while profit jumped 27 per cent to $55.1-million; Tiffany forecast a strong holiday season and raised its annual outlook.

Tiffany’s revenue in the U.S., Canada, Mexico and Brazil, which makes up about half of its business, rose 9 per cent, although the gains trailed those in the Asia-Pacific region (up 24 per cent;) Europe (22 per cent;) and Japan (12 per cent.)

Same-store sales, an important retail measure, rose 5 per cent in the Americas, below the overall 12-per-cent gain and largely driven by higher prices, which are expected to increase further early next year to offset rising costs of diamonds and precious metals such as gold.

To try to win more business, Tiffany is expanding into handbags, briefcases and watches. It and other upscale retailers are capitalizing on affluent consumers who feel more confident in their spending, helping the chains outperform other merchants whose customers are worried about the uncertain economy and sticking to must-have purchases.

http://www.theglobeandmail.com/report-on-business/big-spenders-returning-to-the-luxury-fold/article1812574/