Luxury Institute News

June 30, 2015

Online shopping? Wealthy still like going to store

Bloomberg News
Jun 29 2015

 

Luxury Institute surveyed 1,600 wealthy people about shopping habits. They earn at least $150,000 a year with an average net worth of $2.9 million.

NEW YORK — Even as shoppers flock to the Internet to get the skinny on everything they want to buy, many wealthy patrons still prefer the traditional method. They want to go to shops, peruse the racks, and have a salesperson help them pick out the perfect item, according to a new survey.

Research and advisory firm the Luxury Institute surveyed 1,600 wealthy people about their shopping habits. The men and women earn at least $150,000 a year and boast an average net worth of $2.9 million. The study found that very few affluent shoppers research exactly what they want to buy, then go out and make the purchase. Instead, they’d rather walk around a store and see things up close. Plus, many insist on guidance from living, breathing humans.

“Luxury experts and luxury executives have bought into the myth that, whether its millennials or men or women, they’ve done so much research on the Internet that they can no longer be influenced in the store,” says Milton Pedraza, chief executive of the Luxury Institute. “This demonstrates the tremendous opportunity to create relationships based on expertise, trust, and generosity in the store.”

For instance, when buying jewelry, nearly half of women don’t do any research whatsoever before heading to the store, preferring to gaze at all the shiny baubles in glass cases and make their decisions on the spot. This number’s even higher when it comes to fashion accessories, with 60 per cent of women opting to forego online research before snagging a pricey handbag.

The only exceptions are men who want to buy a watch, with 28 per cent selecting the item beforehand, and women who are purchasing beauty products, at 26 per cent. That’s because buyers of pricey watches are often aficionados wholly familiar with the world of fancy timepieces, while makeup purchases usually occur to replenish items that were used up.

Though visiting stores without help is the most popular method of researching what to buy, many affluent shoppers prefer the guided path, with aid from a salesperson. Men especially want help picking out watches and jewelry, while women are most likely to want an associate’s expertise on beauty products. Perhaps those workers behind the counter may stay relevant after all.

As for salespeople, the perpetual quest to “sell” the customer is a model that no longer works, says Pedraza. Shoppers go to them for knowledge and guidance, not having products shoved in their faces. For this, luxury retailers must train workers to build real, human relationships over time.

“If you earn their trust, you earn the right to contact them again,” he says.

Source: http://www.thestar.com/business/2015/06/29/online-shopping-wealthy-still-like-going-to-store.html

 

Wealthy People Still Love Shopping the Old-School Way

Bloomberg Business
By: Kim Bhasin
June 29, 2015

Even as shoppers flock to the the Internet to get the skinny on everything they want to buy, many wealthy patrons still prefer the traditional method. They want to go to shops, peruse the racks, and have a salesperson help them pick out the perfect item, according to a new survey.

Research and advisory firm the Luxury Institute surveyed 1,600 wealthy people about their shopping habits. The men and women earn at least $150,000 a year and boast an average net worth of $2.9 million. The study found that very few affluent shoppers research exactly what they want to buy, then go out and make the purchase. Instead, they’d rather walk around a store and see things up close. Plus, many insist on guidance from living, breathing humans.

“Luxury experts and luxury executives have bought into the myth that, whether its millennials or men or women, they’ve done so much research on the Internet that they can no longer be influenced in the store,” says Milton Pedraza, chief executive of the Luxury Institute. “This demonstrates the tremendous opportunity to create relationships based on expertise, trust, and generosity in the store.”

For instance, when buying jewelry, nearly half of women don’t do any research whatsoever before heading to the store, preferring to gaze at all the shiny baubles in glass cases and make their decisions on the spot. This number’s even higher when it comes to fashion accessories, with 60 percent of women opting to forgo online research before snagging a pricey handbag.

The only exceptions are men who want to buy a watch, with 28 percent selecting the specific item beforehand, and women who are purchasing beauty products, at 26 percent. That’s because buyers of expensive watches are often aficionados wholly familiar with the world of fancy timepieces, while makeup purchases usually occur to replenish items that were used up.

Though visiting stores without help is the most popular method of researching what to buy, many affluent shoppers prefer the guided path, with aid from a salesperson. Men especially want help picking out watches and jewelry, while women are most likely to want an associate’s expertise on beauty products. Perhaps those workers behind the counter may stay relevant after all.

For salespeople, the perpetual quest to “sell” the customer is a model that no longer works, says Pedraza. Shoppers go to them for knowledge and guidance, not having products shoved in their faces. For this, luxury retailers must train workers to build real, human relationships over time.

“If you earn their trust, you earn the right to contact them again,” he says.

Source: goo.gl/nwbDcz

June 18, 2015

Smartwatch debate has strapped timepieces back on wearers’ wrists

Luxury Daily
By: Jen King
June 18, 2015

NEW YORK – Panelists during the Watch Collectors’ Roundtable discussion agreed that the introduction of the smartwatch, though originally daunting, may be the best thing to happen to the traditional Swiss watch industry since the quartz.

Held on June 16 at the Aaron Faber Gallery, the “Will smartwatches disrupt the Swiss watch industry” panel debated whether or not the smartwatch will have lasting impact with different perspectives from timepiece sellers, collectors and manufacturers to proponents of wearable technology. Although not agreeing on all fronts, the panelists expressed a sense of gratitude toward Apple, and others in the tech space, for putting traditional watches back into the conversation.

“I cannot even count how many hours of debate [smartwatches have] sparked in our offices, with our members and prospects,” said Randy Brandoff, CEO and founder of Eleven James, New York.

“No matter what one thinks about the technology of today, and where one thinks it’s going in the future, if you’re a lover of wristwatches, mechanical or otherwise, I think the aggregate takeaway is that this is a good thing,” he said. “More than anytime I can remember everyone I know has sparked up a conversation about watches, what this means, where are they going and how useful are they.”

Mr. Brandoff acted as the moderator for the panel discussion.

Ticking talk

The panel discussion delved into the fundamental issues and questions surrounding the wearable category and how, if at all, the technology will affect traditional Swiss watch brands.

Each panelist said that mechanical timepieces have been worn as a way to distinguish someone from a crowd, but Apple Watch, and others like it, will become commonplace with only the high-end model, the Edition, being seen as unique.

But, the wearable model is not as practical or as sound of an investment as a mechanical watch because the technology within will become outdated. In comparison, the technology in a timepiece has gone relatively unchanged for hundreds of years, resulting in a time-tested science that has yet to become obsolete.

The general consensus among the participants was that watches, smart or otherwise, have placed wearables on the wrists of consumers who otherwise would not have considered a timepiece. This consumer sector is made mostly of millennial consumers who have grown up in a virtual era where timekeeping is predominantly done by mobile and smartphones.

Comparably, the introduction of quartz timepieces in the 1970s had a similar outcome with consumers gravitating toward the new technology and away from traditional mechanical watches. As with in the past, consumer sentiment changed as the first wave of interested wearers matured and returned focus to tradition, but not without testing the technologically advanced waters first.

Also, the panelists felt that the disposable nature of the smartwatch also plays into the quartz comparisons. The quartz watch went from cutting edge technology to available as a free prize at the bottom of a cereal box, thus making the innovation diluted.

Just as with a smartphone, the smartwatch will be void of emotional ties while traditional timepieces can have profound meaning for wearers because they can mark a personal milestone or be passed down along generations.

“I think the whole thing is a bit of an evolution right now,” said Jason Alan Snyder , chief technology officer of Momentum Worldwide, New York. “Horology as the science of measuring time really has nothing to do with wearables.

“Wearables are fundamentally an extension of a smartphone at this time,” he said. “But, really beyond that it’s a small visual signatures of what’s happening on your smartphone right now.

“I think that the social capital derived from wearing a fine Swiss timepiece is very different than social capital derived from wearing a smartwatch. I think those two things may converge at some point in the future, but for right now it’s the difference between luxury and utility, and they’re very different ideas.”

Tech as craftsmanship
For the luxury industry, whether it is timepieces or leather goods, the panelists noted that longevity propels the industry through style, and it is that combination that results in consumer desire.

Additionally, luxury goods are described as made by the hands of skilled artisans, but Sir Jonathan Ive of Apple argued at the Condé Nast International Luxury Conference April 22 that all devices, even those in the technology space, have handcrafted elements.

Whether the Apple Watch will prove disruptive to the traditional watch industry has yet to be fully determined, but the degree of quality behind Apple’s first wearable technology is clear (see story). Apple extensively researched the materials for the watch, especially its gold components, and feels that it is a false assumption to assume those in the technology space do not dedicate the same sense of quality to products as traditional luxury houses (see story).

Regardless, mechanical watchmakers have melded traditional horology with technological innovations ranging from synced mobile applications, strapped adaptations and fully connected timepieces.

For example, Swiss watchmaker Breitling is taking the smartwatch concept to new heights with its flight-ready B55 Connected timepiece.

Smartwatches are often synced to a smartphone application that tracks the wearer’s physical activity and sends push notifications (see story). Breitling has taken the opposite approach by having the smartphone service the B55 Connected chronograph to enhance functionality and conviviality.

Also, LVMH-owned Tag Heuer announced its creative partnership between its manufacturer, Google and Intel at Baselworld 2015.

The partnership signifies a new era of collaboration between Swiss watchmakers and Silicon Valley to escalate the expertise of each brand whether it be watchmaking, software or hardware. From the first utterance of wearables, many horologists agreed that collaborative efforts between tradition and technology would yield competitive results (see story).

Since watches are statement pieces of movements and mechanisms, sparking innovation aligns with the heritage of horology and is worth exploring. But, as it stands today the Swiss watch industry will prevail, even becoming more collectable due to wearables.

“I think the category will grow because of Apple’s new entry into the category,” said Milton Pedraza, CEO and founder of The Luxury Institute, New York.

“The Apple Watch will evolve into something more compelling, today it’s not,” he said. “I don’t think we have anything to worry about, however I terms of the luxury Swiss watch industry not only prevailing but thriving as a result.”

Source: http://www.luxurydaily.com/smartwatch-conversation-has-strapped-timepieces-back-on-the-wrist-panel/

June 16, 2015

Meticulous Attention to Detail Elevates Craftsmanship of next Lincoln MKX

Business Wire
June 16, 2015

Overall quality is the top purchase reason for the Lincoln MKX, matching a study that shows 74 percent of wealthy consumers believe superior quality is a luxury product’s most important attribute

The new Lincoln MKX medium crossover, on sale this summer, reflects increased focus on attention to detail and improved craftsmanship in subtle executions.

Advanced models along with a state-of-the-art virtual reality lab are complemented by Lincoln craftsmanship engineers who meticulously pore over vehicles.

Craftsmanship helps define the overall quality of any luxury product. Customers of the Lincoln MKX, for example, cite overall quality as their No. 1 purchase reason for the medium crossover.

“Part of the role of the craftsmanship team is to address the intangible elements of quality – how the space makes you feel, your reaction when you get in and experience the vehicle.”

This desire is seen beyond automotive as well. A study by the Luxury Institute and Epsilon finds that 74 percent of wealthy consumers believe that superior quality is the most important attribute of a luxury product, followed by superior craftsmanship.

The new Lincoln MKX, on sale this summer, elevates craftsmanship by subtly fusing form and function, sometimes in areas not immediately seen or felt by the customer.

“Craftsmanship sits between the worlds of engineering and design,” said Stacy Swank, Lincoln craftsmanship supervisor. “Our role is to bring those worlds together to enhance the experience for the customer. We like to think that if you don’t notice what’s been done, then we’ve done our job.”

Some “hidden” improvements to the 2016 Lincoln MKX include:

  • Foam was added to the wrapped console side panels, providing a softer area for the leg to rest, and also added to the door armrests and steering wheel
  • Extra strength was added to the dead-pedal area – where a driver rests his/her left foot – to make the area more firm
  • Scuff materials in the door and tailgate were upgraded to stainless steel, which is more resistant to scratches and helps maintain a beautiful appearance

The 2016 Lincoln MKX offers available Bridge of Weir® Deepsoft leather, created specifically for Lincoln seating surfaces. Bridge of Weir Deepsoft leather goes through a 16-hour softening process, which is a considerably longer process than most automotive leathers. A hand-sewn and -stitched Wollsdorf® leather-wrapped steering wheel is available on higher-series vehicles.

The center console was redesigned to improve functionality while elevating craftsmanship.

The armrest includes a two-button clamshell execution. This arrangement allows for one button to open only the flocked storage with the tray and the other to open the main bin, creating a versatile storage option.

To increase the crafted appearance, the gooseneck hinge arms that connect the armrest and clamshell tray to the hinge are hidden.

Throughout the interior, the smallest areas were upgraded to higher levels of craftsmanship. To create a cleaner appearance where the A-pillar meets the headliner, for example, a 2.5-mm indent (the thickness of a couple of dimes) was created on the inside of the joint. This allowed the materials to align better.

Lincoln craftsmanship engineers review data at computer-aided-design stations, experience the vehicle in a virtual lab and pore over prototypes to help ensure quality. In the interior of the new Lincoln MKX, for example, there are more than 1,200 interfaces.

Reducing margins and eliminating sharp edges, cut lines, parting lines and visible fasteners – while using genuine wood and metal – drives fit and finish.

“The data, the science and the math help ensure everything fits together correctly and address the tangible elements of quality,” said Swank. “Part of the role of the craftsmanship team is to address the intangible elements of quality – how the space makes you feel, your reaction when you get in and experience the vehicle.”

Source: http://www.businesswire.com/news/home/20150615006393/en/Meticulous-Attention-Detail-Elevates-Craftsmanship-Lincoln-MKX#.VYAfxc7uWXo

June 11, 2015

Hotels Offer Luxury Shopping Inside Your Rooms

The New York Times
By: Shivani Vora
June 10, 2015

Luxury hotels are increasingly partnering with high-end retailers to give guests insider shopping experiences and perks. Many of these collaborations are at properties in New York.

The Mark Hotel on Manhattan’s Upper East Side has teamed with Bergdorf Goodman: Guests are ferried to and from the Fifth Avenue store in pedicabs and have access to shop before and after hours with Bergdorf’s director of shopping. Those staying in a suite receive a $500 gift card and a facial in the store’s beauty department. Rooms from $725, suites from $1,200.

The Quin in Midtown is also working with Bergdorf’s. The phones in each of the hotel’s 208 rooms have a direct-dial button to the store’s personal shopping team, which can set up appointments for a store visit and can order items to be delivered to guests. Terrace suite guests also receive a $300 gift card. Rooms from $499, suites from $2,000.

Travelers who stay three or more nights in a suite at the WestHouse in Midtown receive a $500 gift card to the online fashion retailer Net-a-Porter and can talk with the company’s personal shoppers by pushing a button on in-room phones. Suites from $999.

The St. Regis Washington, D.C. offers guests an opportunity to stock their room closets ahead of time with items from Neiman Marcus. Those interested answer a questionnaire about their style preferences and arrive to a find a customized wardrobe. The service is free, and guests can try on the clothes. There is no obligation to buy them unless the clothes are worn. Rooms from $395.

International hotels are also participating: Travelers staying a minimum of five nights in a suite at the Madinat Jumeirah in Dubai until the end of July receive a free pair of shoes from Harvey Nichols as well as a pedicure. Suites from $800.

These relationships are a way for stores to generate traffic and also appeal to travelers, according to Milton Pedraza, the founder of the New York-based luxury research and consulting firm the Luxury Institute. “Retailers and hotels assume that if you’re staying at a pricey property, you have the means and inclination to shop, and these partnerships give you an incentive to do that with a specific name,” he said.

Source: http://www.nytimes.com/2015/06/10/travel/hotels-offer-luxury-shopping-inside-your-rooms.html?_r=0

June 8, 2015

Cadillac to Sponsor First-Ever New York Fashion Week for Men ‘I Am Very Much Interested in Taking Cadillac Into the World of Fashion’

Advertising Age
June 5, 2015

While the New York womens’ collections have failed to land a car company to replace longtime title sponsor Mercedes-Benz, Cadillac has signed on to become the first-ever automotive backer of New York Fashion Week: Men’s.
The agreement, signed to last two seasons, includes producing a variety of related events and providing Cadillac vehicles as shuttles for attendees. Shinola, Amazon Fashion, and Dreamworks have also been confirmed as sponsors for the fashion week focusing on menswear.

“I am very much interested in taking Cadillac into the world of fashion,” Cadillac President Johan de Nysschen said. “The whole idea of beginning to strengthen Cadillac’s position as a lifestyle brand is very much central to our mission. This is a good start.”

“It should be interpreted as a clear statement of intent that we will walk with a heavy footstep in the fashion world,” he said.

In addition to the role during men’s fashion week, Cadillac will continue as a presenting sponsor of New York Men’s Day, a special day formerly set aside during the womenswear-heavy New York Fashion Week to highlight emerging menswear designers. This year, that day will move to July in order to align with NYFW: Men. This will be the second season that Cadillac participates.

The new deal is a telling move from a 113-year-old brand that was reportedly considering the title sponsorship of what was formerly Mercedes-Benz Fashion Week, which primarily showcases womenswear. Mercedes-Benz ended its title role there earlier this year; the twice-annual event has suffered a deficit of energy since moving from Bryant Park to Lincoln Center in 2010. Many fresh, new fashion brands started showing their wares at off-site locations — often involved with Made Fashion week.

Earlier this year, Cadillac hosted arguably the hottest ticket during New York Fashion Week, when it allowed Public School to show its Autumn/Winter 2015 menswear and womenswear collection in the automaker’s new offices, situated between Tribeca and the West Village.

“We evaluated New York Fashion Week, and we continue to think it’s a worthy property,” Mr. de Nysschen says. “But we weren’t ready to figure out how to fully integrate that into our overallmarketing strategy.”

Cadillac’s decision to sponsor men’s fashion week (which is backed by the Council of Fashion Designers of America), rather than New York Fashion Week, speaks to its desire to return to the cutting edge of culture. In recent years, the automaker has struggled to revitalize its fuddy-duddy image; last year the average buyer of a Cadillac was 59.5 years old, according to the global information company IHS Automotive — much older than the thirties to early forties age range most desirable to luxury brands.

The men’s week sponsorship is totally new — a first. It’s an essential first at that, industry insiders say.

“Cadillac needs that cool, fashionable, ‘gets it’ association to appeal to all consumers, especially Gen Xers and Millennials, who still have a perception of an older brand,” Milton Pedraza, chief executive officer of the New York City- based Luxury Institute, said via e-mail from Stockholm.

New York Fashion Week: Men’s runs July 13-16 at Skylight Clarkson Square in downtown Manhattan. A spokesman for Cadillac declined to disclose the amount of the new sponsorship.

Source: http://adage.com/article/cmo-strategy/cadillac-sponsor-york-fashion-week-men/298907/?utm_campaign=SocialFlow&utm_source=Twitter&utm_medium=Social

June 5, 2015

When is Luxury not Luxury?

PYMNTS
June 4th, 2015

When Lilly Pulitzer released an exclusive line for Target in April, the entire collection sold out at some physical locations within hours. Good for the designer, good for the store, good for the buyers. A resultant Target website crash aside, good for everybody…right?

“No target shouldn’t collaborate with Lilly just no ew ew ew keep Lilly Pulitzer classy people” – Katherine (@kathhlambert)

“lilly pulitzer collaborating with target is probably the worst news I will get in all of 2015” – Marisa Lyn Friedman (@marisalynnnn)

“Lilly pulitzer for target?! Holy hell What’s next?! the apocalypse??! affordable clothing for the masses!? Disgusting” – Pamela Beesly (@trillprincess47)

Those tweets (the third of which, c’mon, has to at least be partially sarcastic) went out not after “Lilly Pulitzer for Target” was released, but actually when the line was first announced, back in January.

The perception among Lilly Pulitzer devotees outspoken in their disapproval of the Target collaboration, then and now, seems to be that the value of Lilly Pulitzer clothing (and other items) is directly related to their cost. And if the cost goes down (Lilly Pulitzer dresses, which often sell for $200, were available at Target for $40), the brand itself diminishes in value.

It wasn’t only semi-anonymous Twitter users who expressed their disdain for Lilly Pulitzer’s availability to bargain shoppers. In an op-ed for Bloomberg, columnist Megan McArdle – having expressed her belief that Lilly Pulitzer clothes are in fact quite ugly and worn only as a statement by people too rich to care – wrote that “actually wearing Target’s Lilly Pulitzer line…signals the exact opposite of what it is supposed to.” That is to say, if you had to make an effort to buy those clothes, you don’t really deserve to wear them.

Crossovers between high-end brands and mass-market retailers – and the potential image risk to the former – are by no means a new phenomenon. In 1983, the designer brand Halston released a collection exclusive to J.C. Penney, and lost some luxury partnerships as a result.

Halston’s experience aside, the particular backlash to the Lilly Pulitzer/Target collaboration seems a bit out of step with the norm, as Target’s own partnerships with brands like Isaac Mizrahi and, as recently as this year, Missoni, or the recently-announced deal between H&M and Balmain, did not raise such a volume of ire among self-appointed consumer protectors of the luxury ideal.

While there is a risk of brand dilution in partnerships, a study from the Luxury Institute (which, you have to figure, knows a thing or two about this topic) showed that affluent shoppers are not turned off by luxury brands partnering with mainstream brands.

With specific regard to the Lilly Pulitzer/Target hookup, the Harvard Business Review crunched the numbers and viewed the outcome as purely positive.

“Unlike the market saturation and brand extension strategies that have de-valued other luxury brands like Michael Kors and Coach,” states the HBR’s report, “the Target collaboration was a smart move for Lilly Pulitzer. The limited-item, limited time collection allowed the company to expand the brand while maintaining its exclusive appeal.”

Given the success of the arrangement on almost every count (save, again, that unfortunate website overload), it is more than likely that more collaborations between high-end brands and mainstream retailers are on the horizon. Will there be outcries from those who, holding luxury in high regard, look down their noses at mass-market consumers? It’s likely. But it’s just as likely that such complaints won’t have much an impact on the bottom line.

After all, haters gonna hate.

Or, as Lisa Birnbach put it more eloquently in New York Magazine, Lilly Pulitzer herself “would not have approved of her ‘defenders.’” Referencing the Alexander Theroux quote, “Hypocrisy is the essence of snobbery, but all snobbery is about the problem of belonging,” she concludes that “Pulitzer, despite her last name, was no snob.”

Source: http://www.pymnts.com/news/social-commerce/2015/when-is-luxury-not-luxury/#.VXGbUs9Viko

May 12, 2015

Niche marketers target the 1% – at their peril

Crain’s New York Business
By: Anne Field
May 11, 2015

Last year, Steven Abt decided to overhaul the business model of Caskers, his five-employee craft-spirits company in Manhattan. He focused his marketing on two segments: the original customers who bought curated spirits on Caskers’ website, launched in 2012, and new, even more affluent buyers, who would receive one-on-one, concierge-style service.

A significant portion of his higher-end clientele was interested in such an approach. “It seemed like an opportunity to tap the luxury market, which is growing in general,” he said.

Five months later, the new offering generates about 2% of the firm’s annual revenue, which is just under $10 million, according to Mr. Abt. He expects that figure to increase to as much as 15%, with pretax margins of 20% to 30%, compared with 10% to 20% for the original service.

Mr. Abt is one of a growing number of small-business owners in New York City who are embarking on a two-tiered strategy in their marketing. That’s the result of a variety of factors: healthy demand for high-end goods and services, postrecession changes in the spending habits of affluent consumers, capabilities made possible by digital technology and the need to ramp up volume.

In some cases, it means branching out into a more upscale market, as Mr. Abt has done; in others, expanding from an affluent clientele to the mass market. Regardless, said Daniel Levine, a consumer-trends expert and director of the Manhattan-based Avant-Guide Institute, “these businesses are just following the money.”

Certainly, there’s a time-honored tradition in such sectors as fashion to bring a luxury brand to a mass audience. Take Lilly Pulitzer—known for its connection to Jacqueline Kennedy Onassis and the very rich—which recently began selling a line of clothing in Target stores.

But such a strategy can be a gamble. The premium brand that expands to a less-affluent market may dilute its cachet. Even trickier is going after a higher-end customer. Companies often are reluctant to admit to doing so, fearing they’ll alienate potential buyers in either market. And it can be difficult to convince more elite customers that their product or service is top of the line.

“It’s always harder to go upmarket,” said Milton Pedraza, CEO of the Luxury Institute, a consumer-trends research firm in Manhattan. He points to British-based Mulberry, a maker of high-end leather bags. It recently stumbled, with declines in profits, during an international expansion that included a flagship store in SoHo; it also increased prices to an ultraluxury level.

Many factors are contributing to the two-tier trend. For small businesses in New York pursuing wealthier customers, one of the most important is postrecession spending by upper-income households. From 2009 to 2012, the total growth in U.S. consumption, adjusted for inflation, happened mostly at the higher end, according to Steven Fazzari, an economist at Washington University in St. Louis.

Two ways to grow

Among those at the bottom 95% of income distribution, there was 2.8% growth during that time period, compared with a 16% increase among the top 5%. That trend has likely continued in recent years, according to Mr. Fazzari. “Growth in consumption has been exclusively driven by the top,” he said.

Companies have also been reacting to significant changes in the buying habits of affluent customers since the recession, according to Jim Taylor, a senior adviser at YouGov.com, a Waterbury, Conn., firm that conducts surveys aimed at better understanding public views about products and current affairs. He is the co-author of The New Elite: Inside the Minds of the Truly Wealthy.

He divides the affluent into two categories: those who seek “worth” and are willing to pay a premium for the things they buy, but go through a rigorous vetting and shopping process. Others are “discounters,” focused more on price. “They derive pride from squeezing their vendors,” he said.

Using technology platforms strategically has also helped some companies expand smoothly from a premium-only service to a larger market. Kofi Kankam co-founded Manhattan-based Admit Advantage seven years ago to provide advice to graduate-school and college applicants. He charges about $200 an hour, with packages running as high as $10,000.

About three months ago, the company launched Admit.me, an online platform that is more affordable to a wide audience. It allows applicants to interact with current students and alumni at schools where they are applying and for admissions offices to search for potential recruits. The basic service is free, but customers can pay about $10 a month for additional capabilities.

“We want to build a scalable business,” said Mr. Kankam, whose profitable, five-employee company has $2 million to $4 million in annual revenue.

The big benefit of expanding to a mass audience is increased volume—especially for small-business owners who have made their name providing time- and labor-intensive, hands-on service. Take Joey Healy, founder of a three-year-old company in Manhattan that bears his name. At Joey Healy Eyebrow Studio, which provides eyebrow-shaping services, Mr. Healy spends about an hour working with each client. He charges $135, up from $85 three years ago.

More recently, Mr. Healy formed a partnership with hair-removal specialist Spruce & Bond to train eight employees in his eyebrow-shaping techniques. They were placed at all four Spruce & Bond stores (three in Manhattan, one in Scarsdale). Called Browlab, the service at the stores costs clients $50; customers also can buy from Mr. Healy’s line of products. “It brings me a new audience,” he said.

Underwriting expansion

About 10% of Mr. Healy’s total revenue, which is “just under $1 million,” now comes from Browlab, but that should increase as Spruce & Bond expands to more locations in Manhattan. Also, in October, Mr. Healy plans to move from his 500-square-foot studio to a bigger space, which will serve as what he calls “more of a flagship” for the profitable company.

In some cases, small businesses regard their premium market as a way to underwrite expansion to a larger mass clientele. Four years ago, Kim Caspare, who has a doctorate degree in physical therapy, opened PHlex Health and Wellness Studio in Manhattan, where she treated patients who were able to pay out of pocket and were mostly referred by doctors.

Since then, she has added such services as acupuncture and meditation and expanded from 1,500 square feet to about 2,200, with plans to increase to 4,600. She recently started treating a new group of patients with insurance coverage, too. Her premium clients, who pay from $160 to $300 an hour for a variety of services, “subsidize everyone else,” said Ms. Caspare. Her profitable, nine-employee company has $1 million to $3 million in annual revenue.

For those adding a higher-end tier, the key is retooling the product or service to make it attractive—and worth the price—to a wealthier clientele. That generally means not moving too far upstream from the company’s original segment.

At Caskers, Mr. Abt had already sold pricey spirits, usually in the $40 to $60 per-bottle range, to affluent buyers. Although his concierge clients have paid as much as $27,000 for an order, “moving to the high end has been a natural extension of the business,” he said.

Another notable example is concierge medicine, through which doctors provide extra services to their patients, who pay an annual fee. About a year ago, Dr. Herbert Insel, a cardiologist and internist in Manhattan, introduced this option.

He charges a $2,500 annual fee to cover services, such as a lengthy physical exam not reimbursed by insurance, longer visits and a direct telephone number to the office. So far, 10% to 15% of patients have signed on. Many of them “are very busy executives in their 40s and 50s who are used to this type of approach,” said Dr. Insel. “They were champing at the bit.”

Source: http://www.crainsnewyork.com/article/20150511/SMALLBIZ/150509841/businesse

May 5, 2015

The latest fashion trend among millennial men? Luxury cologne

Fortune
By: Shivani Vora
May 1, 2015

These four luxe fragrances are part of a growing market for younger male shoppers.

Luxury men’s fragrances are no longer mass produced bottles priced in the high double-digits and available at every department store; the latest upscale scents for men are sold selectively at boutiques, usually cost several hundred dollars, and are often blended by hand in small batches with top quality ingredients sourced from around the world.

According to the Chicago-based market research company Euromonitor International, sales in the U.S. of men’s premium fragrances, classified as labels sold in department stores, grew from $1.28 billion in 2004 to $1.47 billion last year. Those numbers are still dwarfed by the $3.7 billion of sales last year for women’s fragrances in the same category, but the segment is growing as it increasingly appeals to younger consumers.

Milton Pedraza, the founder of the New York City-based luxury research and consulting firm The Luxury Institute, says that men, particularly those in the millennial generation, are becoming enamored with expensive colognes in the same way that they are with fashion. “There is a big movement today of men who have spare money to spend are using it to look good, and fragrance is part of that trend,” he said.

Here are four of the latest luxe colognes to try this spring.

Reckless by Roja Parfums

Courtesy of Roja Parfums

British perfumer Roja Dove, who is known for statement-making scents that often run into the four figures, wanted to create a blend for men who aren’t afraid to take risks, and this spicy and fresh rendition is it. Black pepper, musk, clove, and cedar wood are the most prominent notes, and in a nod to the luxury Dove is famous for, the plaque on the bottle is dipped in 18 carat gold while the cap is made of hand-cut Swarovski crystals. $480, bergdorfgoodman.com

Akkad by Lubin

Courtesy of Lubin

Parisian perfumery Lubin, which dates back to the 18th century and handcrafts fragrances today in its Left Bank atelier, introduces this heady scent, the sixth in its collection for men. It’s named for the ancient and powerful empire part of Mesopotamia and has prominent notes of spicy amber, citrusy mandarin and bergamot; woody and rich patchouli and sweet vanilla are also evident but more subtle. $180, luckyscent.com

New York Sandalwood by Bond No. 9

Courtesy of Bond No.9

The more than decade-old New York City-based brand has a cult following for its upscale women’s fragrances, but this new unisex version is sure to win some male fans too. Like the name suggests, warm and smooth sandalwood, derived from the fine-grained wood of tropical trees, is the main attraction while earthy carrot, spicy cardamom and ripe figs figure into the background. Whether you’re into the scent or not, the attractive gold bottle it’s in is a keeper. $330, bondno9.com

Charming California 215 by Krigler Perfumes

Courtesy of Krigler Perfumes

New stores call for new scents—at least according to the more than century-old New York City and Monte Carlo-based label that’s a favorite of royals around the world and introduced this fresh and light fragrance in celebration of the recent opening of its boutique at the Four Seasons in Beverly Hills. Inspired in part by the jacaranda, a blue flowering tree that flourishes in both Los Angeles and the French Riviera, the perfume is a pick-me-up combination of coriander, orange blossom, green tea and cedar wood. $315, krigler.com

Source: http://fortune.com/2015/05/01/luxury-mens-cologne/

April 28, 2015

Luxury Panel: What Millennials Want

Previews Inside Out
Topic: Life & Style
April 27, 2015

When you hear the words “affluent millennial,” do you picture a 30-something tech mogul buying a trophy home in the hills of LA? Or a hashtag-happy celebrity starting a lifestyle brand? Clichés aside, millennials—more than 74 million adults ages 18 to 34 in the U.S.—are changing the luxury landscape as we know it. For our “Luxury: The Next Generation” issue, we decided to go straight to the experts—the Luxury Institute’s Milton Pedraza, Luxury Daily editor Mickey Alam Khan and Forbes’ millennial reporter Larissa Faw—to find out what this increasingly influential group really wants when it comes to luxury.

Previews Inside Out: What does the next generation of luxury consumers want from brands today?

Milton Pedraza: Across the generations, millennials, Gen Xers and boomers all want the best in design, quality and craftsmanship, along with great service.

Mickey Alam Khan: The next generation of luxury consumers want to build stronger emotional connections with brands. They not only want to experience the products in-store, but also via digital media such as online and mobile. They also want to feel good about their luxury acquisitions from an ecological standpoint. In other words, the next generation of luxury consumers want to see authenticity, digital savvy and environmental nobility from their favorite luxury brands.

Larissa Faw: The key words are “make them feel special.” They want to be the only ones able to experience that product or opportunity. The worst thing in the world is to be mass and beige. Everywhere and generic. Coach got itself into trouble because it opened up an outlet shop in every city. It became overly accessible to everyone. The worst thing for luxury buyers is when some downscale shopper has the same item. That is the kiss of death for affluent shoppers. That brand is no longer luxury.

Milton Pedraza: Hey, and also respect brand heritage! But only as long as the brand stays relevant to them.

Previews Inside Out: There was a recent survey published in Luxury Daily that found the majority of affluent consumers have a different definition of luxury than they did five years ago. What do you think the definition of luxury is today?

Mickey Alam Khan: One of the biggest changes in the last few years has been the shift in the luxury-consumption mindset from “I have” to “I experience.” So it’s gone from simply material acquisition to a collection of exquisite memories to be cherished for a long time from unique experiences. That said, as defined by Luxury Daily, luxury must have these time-proven qualities: exceptional craftsmanship and customer service, brand authenticity, limited distribution and high perceived value. That hasn’t changed.

Larissa Faw: Once upon a time, luxury meant price. You almost just knew something was a luxury product because it was insanely expensive. Now, luxury means exclusivity and authenticity. One-of-a-kind items that come from a true place. A product can be $5, but if it is the only one and rare, that is luxury.

Milton Pedraza: Today’s luxury consumers also demand demonstrated expertise, trustworthiness and generosity from the brand ambassadors. These days, they also prefer a brand with a social conscience that treats associates, clients, suppliers and the less fortunate in society like human beings. Along with the best product, that is what creates an extraordinary experience for most.

Previews Inside Out: Do you think millennials are partly responsible for this shift? How so?

Mickey Alam Khan: Yes, the millennial generation is quite responsible for the shift in luxury’s definition. This generation is digitally savvy and is responsible for the evolving approach in marketing and retailing. Presence on social media enables brands to stay connected with their younger customers and prospects, dialoguing with them in the lingua franca of the day.

Milton Pedraza: Yes, the millennials, with their more humanistic values, are influencing the business world to deliver extraordinary product innovations, but also extraordinary human empowerment with kindness.

Larissa Faw It is great that millennials have moved beyond the materialistic nature of what has been considered luxury. Many traits that typically define luxury—like fawning treatment or rich, indulgent services—are no longer acceptable or cool. Can you imagine being served by someone wearing a uniform and white gloves? I shudder at the thought.

Previews Inside Out: Beyond that, how are millennials transforming the luxury industry?

Milton Pedraza: They tend to take the design, quality, and craftsmanship and service for granted. They want customized, personalized solutions “now, now.” As Four Seasons says, “Show me you know me.”

Mickey Alam Khan: Four words would reflect the transformation in the luxury business: high touch, high tech. Millennials want that kind of experience with their brand, and so do Gen Xers and, to some extent, digitally savvy baby boomers. Luxury brands are being shepherded along a digital path where online and mobile are the start of the research process that may or may not culminate in a store sale.

Larissa Faw: They are making everyone rethink what it means to be a luxury brand. Just because you charge $5,000 for a bag does not mean you are luxury. Just because you operate a nice hotel does not mean you appeal to affluent millennials. What was once considered top-flight treatment—like that white glove treatment—does not necessarily align with younger generations. This presents opportunity, but it is also challenging, because what once worked, no longer does. You don’t earn five stars by doing what you did for decades. That said, I also think millennials take for granted a lot of what is known as luxury. Like top-sourced leather goods. They expect all brands, even discount ones, to offer that. They expect great service, like immediately tending to their demands. Those services used to separate luxury brands from regular ones.

Mickey Alam Khan: Also, for many young people, it’s not simply about flashy identification with a lifestyle or a product, but a reflection of their values. Hence, the importance of storytelling and codes for luxury brand and luxury retailers to get their message across.

Previews Inside Out: Let’s talk more about this push toward authenticity in luxury, which is an important value for many millennials. In what areas of the marketplace have you seen authenticity play out most dramatically?

Milton Pedraza: They require authenticity across the board. But let’s face it—many product offerings are copycats and commodities, even in some luxury circles. So the authenticity is more about the founders, the brand purpose, the brand ambassadors and “how” they do what they do.

Mickey Alam Khan: I’d say authenticity continues to play a key role in leather goods and accessories. Look at Hermès. While other luxury brands such as Gucci are suffering from logo fatigue and endless line extensions, Hermès continues to post above-industry growth. What does Hermès do differently that attracts all generations to its brand? Attention to quality, to its codes, to its heritage, to its line of products. Its messaging is consistent. The equestrian and travel themes are embedded in most ads. And, most of all, the product standards have been maintained over the decades. Hermès is France at its best, and that’s what millennials and other consumers are buying. Pedigree continues to matter to millennials.

Larissa Faw: Fashion and watch brands are really overplaying their histories and design backstories in order to capture that authentic hook. Upscale alcohol brands are also trying too hard. I don’t need to see another old-timer posing with his dog on a farm to tell me a brand is authentic—and that this makes it okay to charge $300, since it has been aged in a barrel for 100 years. This authenticity does matter to millennials, but I see it becoming too commonplace.

Previews Inside Out: Can you identify any luxury brands you think are already starting to make this adjustment in their marketing? You know—moving away from exclusivity to authenticity.

Mickey Alam Khan: Well, let me just point out that exclusivity and authenticity can’t be mutually exclusive. You have to have both to survive long term as a luxury brand.

Milton Pedraza: Bottega Veneta is a prime example of expertise, trust and generosity with all constituents. And they have the numbers to prove it. Burberry is there, too. We see Van Cleef & Arpels moving in that direction. Sephora, too.

Previews Inside Out: Why are some of the top luxury brands a bit stalled today?

Milton Pedraza: Their products are too common, too logoed, and they have disengaged brand ambassadors. So the customers become disengaged, too. The brands have become passive transactors rather than humanistic relationship builders.

Mickey Alam Khan: Gucci comes to mind for me. It’s had some turbulence over senior talent most recently with the departure of the CEO and creative director. While the successors are in place, what Gucci needs to do is rethink its positioning. It’s become rather common, which is the kiss of death for a luxury brand. If too many people have access to the product, it loses its allure. I foresee something similar with Louis Vuitton. Way too many people sport its handbags, thus diluting its exclusivity. It’ll end up catering mostly to aspirational consumers and risk alienating those with serious money. It pays to be slightly discrete in luxury. I know Louis Vuitton is working to scale back on plastering its logo everywhere. The wink-and-nod in luxury should be the styling that those in the know are aware of.

Larissa Faw: Millennials are like cats. If you try too hard, they don’t want anything to do with you. I know Honda isn’t a luxury brand, but its recent commercials featuring top toys from the 80s—like Strawberry Shortcake and Skeletor from He-Man—speaking to the camera to try to sell me a car were pathetic in how hard they were trying to appeal to millennials. My mom had no idea who that skeleton-looking toy was, since these toys were totally millennial-centric, but both my sister and I knew immediately. No one likes a desperate brand that is obvious with its advertising. Pretentiousness is another reason brands are toxic to millennials. Jewelry brands that continue to embrace that silly fairy-tale engagement proposal turn off a lot of millennials. That isn’t how our world looks, and we don’t want any part of it.

Previews Inside Out: When you look at the luxury market as a whole—travel, auto companies, fashion, jewelry—where are you seeing the most innovation when it comes to imparting authentic experiences?

Larissa Faw: I recently saw an ad for a jewelry brand that lets people create their own rings. That is exactly what it takes to reach millennials. Who wants a ring that his or her nemesis in high school might have? Everyone wants to brag he or she has the only one of something. Any company that is able to develop customized and personalized experiences will win them over.

Milton Pedraza: Electronics are the obvious answer. But since technology is invading every space, we see autos, apparel, accessories and really all luxury categories using technology online, in-store and after the sales to enhance the client experience and build a long-term relationship. The most interesting innovations, however, will come from empowering and enhancing the brand ambassadors to build human relationships with their clients. No algorithm can replace a powerful and kind human relationship.

Mickey Alam Khan: There is digital innovation across luxury sectors. Some of it is consumer-led, and some of it brand-driven. Travel and hospitality is a leader in the space. The sites, apps and social media are nonpareil—as are the unique culinary experiences, meet-and-greets with famous chefs and tours in the vicinity of hotel properties that respect the land and traditions. Fashion is also a leader in authenticity. See the abundance of live streams of runway shows that deliver the live experience to the desktop, lap or palm.

Previews Inside Out: In terms of real estate, where do you think the industry needs to move in order to cater to more affluent millennials?

Larissa Faw: Good question. The industry needs to make them feel special, by offering services that understand their life stage. For instance, maybe arrange for Uber accounts so they can have private car services. I recommend taking a page from luxury hotel brands and how they cater to them with dry cleaning, maid services, food delivery. If you come at millennials with the mindset to make them feel special, you can’t go wrong.

Mickey Alam Khan: I’d say real estate needs more digital moxie. Not just PC sites or mobile-friendly versions, but better social media and app executions. Younger luxury consumers are researching on tablets and smartphones, and real estate’s presence on those devices can be improved.

Milton Pedraza: Empower the agent through technology, data and coaching to enhance the client. Real estate is not a game of bricks and mortar; it is a game of hearts and minds.

Source: http://www.previewsinsideout.com/2015/04/luxury-panel-what-millennials-want/

 

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