Luxury Institute News

November 28, 2017

Luxury Brands Yield to Discounts Despite Push to Stay Exclusive

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

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

 

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

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

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

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

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

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

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

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

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

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

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

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

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

Brick-and-Mortar

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

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

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

 

Sourcehttps://www.bloomberg.com/news/articles/2017-11-27/holiday-markdowns-deepen-despite-brands-push-for-higher-prices

November 27, 2017

Multichannel and Millennial Tastes will Shape Luxury in 2018

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

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

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

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

Luxury trends

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

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

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

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

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

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

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

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

Relying on data

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

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

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

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

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

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

 

Article originally posted on Luxury Daily.

Sourcehttps://www.luxurysociety.com/en/articles/2017/11/multichannel-and-millennial-tastes-will-shape-luxury-2018-luxury-institute/?utm_source=Luxury+Society+Newsletter&utm_campaign=6fa6d0ff3c-EMAIL_CAMPAIGN_2017_11_20&utm_medium=email&utm_term=0_d63682bcfa-6fa6d0ff3c-61061965

Top 10 Luxury Brands in the World

Stock Talk Review
By: Maria Mancic
November 22, 2017

Photo Source: Pixabay/Public Domain

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

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

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

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

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

 

Sourcehttps://www.stocktalkreview.com/top-10-luxury-brands-in-the-world/23357/

November 2, 2017

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

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

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

Luxury Institute’s 10 Luxury Trends For 2018

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

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

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

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

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

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

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

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

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

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

Building Relationships Based On Data

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

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

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

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

Source: http://www.marketwired.com/press-release/millennial-debt-data-driven-relationships-and-survival-of-the-store-among-luxury-institutes-2239087.htm

October 13, 2017

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

The Washington Post
By: Abha Bhattarai
October 12, 2017

 


(Craig Warga/Bloomberg News)

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Source: https://www.washingtonpost.com/news/business/wp/2017/10/12/she-just-broke-her-brand-donna-karans-defense-of-weinstein-is-taking-its-toll/?utm_term=.191183479af3

 

October 10, 2017

DSW steps into shoe rental

Retail Dive
By: Daphne Howland
October 9, 2017

Dive Brief:

  • Among the initiatives in DSW’s overhauled business strategy unveiled last month are plans to test shoe rental and shoe repair services, according to a company press release.
  • Rentals would focus on high-end shoes, according to a report from The Washington Post, a departure from the retailer’s traditional sales of new shoes. The move follows in the footsteps of Rent the Runway, which offers some 65,000 items and reportedly loaned its customers an estimated $1.35 billion worth of high-end items in 2015.
  • Milton Pedraza, chief executive of the retail consultancy The Luxury Institute, told the Post the move takes the sharing economy too far. “Shoes are such a personal item — you’ve got to worry about fit, style, so many things — that I don’t think it’s necessarily something people want to share with strangers.”

Dive Insight:

Shoe rental is par for the course at the bowling alley, and in that context consumers have a high tolerance for the years’ worth of scuff marks and the odd sensation of wearing shoes that have been worn by many others. But it’s not so easy to picture how that would work for shoes that would be worn for more than bowling night.

Even a short-term event like a wedding involves walking in unpredictable weather and activities like dancing, not to mention the everyday way shoes stretch and bend to their wearers’ size and stride. Still, both rentals and repairs are on DSW’s lists of things to try in a new era of retail, where consumers aren’t prioritizing apparel sales and are interested in cutting down on waste.

Beyond access to apparel otherwise outside the financial limitations of many younger shoppers, Rent the Runway’s business model also complements consumers’ growing environmental concerns, breathing new life into merchandise customers would otherwise likely wear only once, at weddings and other milestone social events. Two thirds of consumers in 2015 were willing to pay more for a product if it came from a company that’s committed to making a positive environmental impact, up from 50% in 2013, according to a Nielsen study.

DSW also last month announced a redesign of its storeswith a new warehouse-like look that will allow 70% more merchandise to be showcased, along with new proprietary technology to allow store associates to spend more time with customers. Several electronic devices that store staff now juggle will be reduced to one simple, streamlined tablet. The footwear retailer is also revamping its loyalty program next year, leveraging its 25 million-customer database.

Source: http://www.retaildive.com/news/dsw-steps-into-shoe-rental/506823/

October 9, 2017

‘A new extreme’ for the sharing economy: Shoe rentals

The Washington Post
By: Abha Bhattarai
October 5, 2017


You may soon be able to rent a pair of designer heels at a nearby shoe store. (Caroline Blumberg/European Pressphoto Agency/EFE/REX/Shutterstock)

The discount shoe purveyor DSW says it wants to give its customers what they want, which is how the chain has arrived at this: shoe rentals.

The retailer announced last week that it is considering adding a rental service, as well as shoe repair and storage facilities, to some of its 511 shoe-and-accessories stores. The experiments are part of a broader effort by DSW, which stands for Designer Shoe Warehouse, to get more customers into its stores.

“Today’s customer craves more than just a transaction, they want an experience,” Michele Love, the company’s chief operating office, said in a statement.

Retailers across the country are racing to add services that might keep customers coming back to their physical locations, where people are more likely to make impulse purchases — and spend more — than online. Nordstrom this week opened its first merchandise-free store, staffed with stylists, tailors, manicurists and bartenders. Apple, meanwhile, is outfitting its stores with outdoor plazas and indoor boardrooms in hopes that shoppers will linger.

At DSW, executives say the idea is to create a one-stop shop where customers can buy everyday footwear, stash items that are out of season — and yes, rent shoes.

“This is something we’ve had a lot of customers ask us for, particularly with special-occasion shoes,” said Christina Cheng, a spokeswoman for DSW. “When it comes to prom or a wedding or a special event, people are usually looking for a very specific shoe in a particular color, that matches a particular dress, that they probably won’t ever wear it again.”

But, Cheng added, shoe rental — which the company will begin testing in coming months — also raises a number of logistical questions: How will stores know which styles and sizes to keep on hand? How will they clean them between uses? And how do you determine the cost-per-wear of a bedazzled stiletto?

Industry experts also raised concerns about the program. Sure, it may be commonplace to rent shoes at the bowling alley or skating rink, but are people willing to wear someone else’s open-toed, high heels to a wedding? Some are unconvinced.

“It’s good to think outside the shoe box, but this is taking the shared economy to a new extreme,” said Milton Pedraza, chief executive of the Luxury Institute, a New York-based retail consultancy. “Shoes are such a personal item — you’ve got to worry about fit, style, so many things — that I don’t think it’s necessarily something people want to share with strangers.”

And, he added, what happens if a suede shoe gets caught in the rain? Or a glittered heel pops off into a ditch? Or a particularly large foot stretches out a loafer?

“I don’t think shoe-sharing is going to be either in high demand or highly profitable,” Pedraza said.

There are, however, a number of other apparel and accessories rental models that have worked: Rent the Runway has created a $100-million-a-year business offering dresses, gowns and jewelry for short-term wear. Bag, Borrow and Steal has found similar success — and millions in venture capital funding — by renting out designer handbags. Other start-ups allow you to rent watches, earrings, necklaces, even custom wigs.

The larger challenge for DSW, analysts said, is getting customers to buy and returns items at its stores. Online shopping has become a particular problem for shoe retailers, which often struggle with high return rates. It’s become commonplace, analysts said, for some people to order eight pairs of shoes in different styles and sizes, and keep just one. Fulfilling those large orders, then processing returns and covering shipping costs can add up to an expensive problem.

“Getting traffic to their stores is really the most critical component,” said Steven L. Marotta, a footwear analyst for CL King & Associates. “And having a very large footprint around the country, which DSW does, has been a real advantage.”

The more reasons a customer has to walk into a DSW store, the more likely they’ll walk out with a pair of new shoes. And that, executives said, is ultimately why they’re experimenting with shoe rental, repairs and storage.

“An example would be, you come in today, it’s raining and you want to pull your rain boots out of storage,” Roger L. Rawlins, chief executive of DSW, said at a retail conference last month. “When you pull them out of storage, we also offer you an opportunity to buy rain boots that just arrived so that you aren’t using necessarily the ones you’ve had in storage for two or three years.”

DSW is also looking for new ways to turn its existing stores into mini-warehouses. It is often cheaper and easier, Cheng said, to ship a shoe from a nearby store than from the company’s fulfillment center in Columbus, Ohio. The company is also reconfiguring its shops to add taller, deeper shelves that can store up to 30 percent more inventory, and it recently merged computer systems so that online orders, store purchases and inventory catalogues are in one place.

“Today’s retailer needs to be able to do it all,” Marotta said. “Ship to store, ship from store, ship store to store. Anybody who can’t offer that is at a disadvantage.”

Source: https://www.washingtonpost.com/news/business/wp/2017/10/05/a-new-extreme-for-the-sharing-economy-shoe-rentals/?utm_term=.56e2987f39f0

September 14, 2017

Nordstrom’s plan to attract shoppers: Wine, manicures — but no merchandise

The Washington Post
September 12, 2017
By: Abha Bhattarai

 


The first Nordstrom Local is scheduled to open next month in Los Angeles. (Courtesy of Nordstrom)

Nordstrom’s newest store will have personal stylists, manicurists, a tailor and plenty of wine.

But there won’t be any merchandise for sale. No clothing, no shoes, no accessories.

Instead, Nordstrom Local will serve as a gathering ground for customers to chat with employees, pick up online orders and drop off returns. Stylists will be available to put together personalized recommendations — outfits for a Caribbean vacation, say, or a job interview — that customers can view on their mobile phones and buy directly from Nordstrom.com.

The experiment, which begins with a 3,000-square-foot store in Los Angeles next month, comes as retailers around the country look for ways to blur the line between shopping online and in stores. Analysts say it is also a way for Nordstrom to open smaller locations in more urban areas to keep up with changing customer preferences. (A typical Nordstrom store is about 140,000-square-feet — or nearly 50 times the size of the new concept.)

“As retail continues to transform at an unprecedented pace, the one thing we know is that customers value great service, speed and convenience,” Shea Jensen, senior vice president of customer experience for Nordstrom, said in a statement. “Finding new ways to engage with customers on their terms is more important to us now than ever.”

It’s a model others are trying, too. Apple executives on Tuesday said the company’s newest stores have outdoor plazas, boardrooms, forums and workshops, all with one goal in mind: getting people to linger.

“We don’t call them stores anymore, we call them Town Squares,” Angela Ahrendts, head of Apple Retail, said at a company event Tuesday. “They are gathering places.”

It’s a similar idea at Nordstrom, which in 2014 spent $350 million on Trunk Club, the online personal styling service. The company was also an early investor in Bonobos, the men’s e-commerce company that was acquired by Walmart for $310 million earlier this year.

“Nordstrom has never been afraid to try new things, and that’s become especially important in an environment where bricks and mortar is becoming obsolete,” said Ivan Feinseth, an analyst for Tigress Financial Partners. “Most retailers are struggling because they have no identity and can’t connect with customers. Nordstrom is the opposite: It has always been known for a high level of customer service, and now they’re moving further in that direction.”

But some said it’s not immediately clear whether Nordstrom’s new concept will be successful. Among the challenges the company could face: higher shipping costs as it mails more items to customers’ homes, and difficulty winning over shoppers who have become accustomed to shopping from home.

“It’s a mixed bag,” said Milton Pedraza, chief executive of the Luxury Institute, a market research firm. “There are people who like the instant gratification of going to a store, and there are others who like the convenience of ordering from home. This model — well, it kind of gives them neither.”

Nordstrom has been a rare bright spot in the retail industry, as longtime department stores chains like Macy’s, Kohl’s, Sears and J.C. Penney report declining sales and profits, and announce plans to close hundreds of stores. Seattle-based Nordstrom, however, reported that both revenue and same-store sales — a measure of sales at locations open more than a year — were up during the most recent quarter, as more people shopped online and in its stores.

But the company is also facing competition from Amazon.com, which this year is expected to surpass Macy’s as the country’s largest seller of apparel. Amazon has been aggressively building up its clothing and shoes businesses with its own private-label brands and last month completed its $13.7 billion purchase of Whole Foods Market, giving it a network of nearly 500 stores around the country. (Jeffrey P. Bezos, the chief executive and founder of Amazon, owns The Washington Post.)

“That’s the big question on everybody’s minds: How do you create a hybrid between shopping online and in store?” Pedraza said. “Nobody has figured it out just yet, so the stakes are very high.”

“It’s not a slam dunk — it’s not like anybody is saying, ‘Oh my God, what a great idea.’ They should’ve done this years ago,’” Pedraza said. “But it’s an interesting idea. And who knows? Maybe it will work.”

Source: https://www.washingtonpost.com/news/business/wp/2017/09/12/nordstroms-plan-to-attract-shoppers-wine-manicures-but-no-merchandise/?utm_term=.18b4f737fdb9 

July 27, 2017

Jimmy Choo purchase just the start, says Michael Kors CEO John Idol

South China Morning Post
July 26, 2017

Michael Kors isn’t done with deals. The fashion house, which agreed to buy luxury shoemaker Jimmy Choo for about US$1.2 billion this week, is planning to build a portfolio of upscale brands. And that means acquiring more businesses, possibly in the same billion-dollar range, according to chief executive officer John Idol.

The company is turning to deals as it tries to regain lost sales – a slump brought on in part by its flagship brand becoming too exposed. Michael Kors plans to focus on integrating Jimmy Choo, known for its Sex and the Citystilettos, in the next six to 12 months. Then it will start shopping around again, Idol says.

The Jimmy Choo acquisition was Michael Kors’s biggest effort to expand beyond its own brand name since its initial public offering in 2011. The takeover gives the company a greater presence in higher-end luxury – and helps it play catch-up with Coach Inc., which agreed to buy Stuart Weitzman in 2015 and made a US$2.4 billion deal to buy Kate Spade & Company in May.

It also helps decrease Michael Kors’ reliance on handbags. Both Michael Kors and Coach are trying to become something akin to European luxury conglomerates, with a diversity of brands.

“These two fashion houses are trying to achieve what Kering and LVMH have done in an American way,” says Milton Pedraza, a New York-based luxury consultant.

But Michael Kors faces a critical challenge: maintaining the cachet of Jimmy Choo while building up its distribution.

“You don’t overexpose it, you don’t oversell it and overexploit it,” Pedraza says. “You can still grow viably without growing like a weed and becoming a weed.”

Like Ralph Lauren, Michael Kors opened too many stores and stretched itself too thin. The company also has relied heavily on struggling department stores and discounters like T.J. Maxx, where steep discounts hurt the brand’s image. On the Macy’s website, for example, Michael Kors’s signature US$298 tote bags are currently sold for as low as US$149.

Its stock tumbled 32 per cent in the past year as the company struggled to mount a turnaround plan.

As Michael Kors works to regain its prestige, it will close up to 125 retail locations in the next two years. The company also is renovating the stores that remain, stepping up product innovation and further cutting promotions – part of the Runway 2020 turnaround plan that Idol announced in May. The Jimmy Choo acquisition will increase the sales contribution of its footwear business to 17 per cent from 11 per cent currently, Idol says.

Michael Kors is buying Jimmy Choo from JAB Holding Company, owned by the billionaire Reimann family. It will pay 230 pence a share for the shoemaker, a premium of 18 per cent over Monday’s close. The price is equal to about 13 times Jimmy Choo’s adjusted earnings for 2017, according to Bloomberg Intelligence analyst Deborah Aitken.

Jimmy Choo rose to prominence in the late 1990s, boosted by high-profile fans, including the late Princess Diana and the fictional Carrie Bradshaw in television series Sex and the City. The brand gets its name from its Malaysian-born co-founder, who created it in 1996 with British designer Tamara Mellon.

For future acquisitions, Michael Kors could seek luxury-footwear and accessories makers with visionary designers, Idol says. The company is looking for names that aren’t already widely distributed. “We are definitely interested in having things that we can help develop.”

Source: http://www.scmp.com/lifestyle/fashion-luxury/article/2104185/jimmy-choo-purchase-just-start-says-michael-kors-ceo-john 

July 25, 2017

Is Tiffany & Co. Amazon-proof?

CBS MoneyWatch
By: Jillian Harding
July 24, 2017

Though many major American retailers have had their foundations shaken by Amazon (AMZN) and the wider explosion in e-commerce, Tiffany & Co. (TIF) appears to be a rare diamond in the rough of brick-and-mortar retail.

Exhibit A: The company’s stock price has jumped nearly 30 percent over the last year, even as department stores like Macy’s (M), J.C. Penney (JCP) and Sears struggle with shrinking growth.

Analysts point to several reasons why Tiffany’s, despite a recent dip in sales, remains in favor among investors. Those include the touch-and-feel experience of shopping for fine jewelry, the company’s potent brand, and a global, and well-heeled, customer base.

Another advantage is Tiffany’s small physical footprint of 125 stores in the U.S. and roughly 300 total worldwide. Its stores also are in upscale malls, which have been less affected by the mass department store closings that have affected other malls.

That helps keep Tiffany’s operating costs low and its stores churning out profits, with sales of around $2,600 per square foot in 2016 and a sparkling 62 percent gross profit margin.

Like other retailers, of course, Tiffany must cope with the impact of e-commerce and, as ever, the changing tastes of consumers. To that end, it recently named Alessandro Bogliolo, a veteran of luxury retail who is known for his ability to revamp brands like Bulgari, as its new CEO.

As with many luxury retailers, Tiffany also is looking to add millennial buyers that may be more interested in experiences and paying down student loans than spending on big-ticket jewelry. The trick is to attract younger shoppers while maintaining its core high-end client.

One way to appeal to younger buyers is by offering lower-priced fashion jewelry, which does not include gemstones and carries a lower price tag than fine gemstone jewelry. The fashion jewelry category was responsible for 33 percent of Tiffany’s sales in 2016.

Edward Jones analyst Brian Yarbrough said the company must be cautious about not devaluing its brand. While having different price points opens the door to a different mix of consumers, “You have to be careful — they had this problem in the early 90s… People who are buying $20,000 or $30,000 pieces don’t want teens running around,” he said.

Retail consultant Howard Davidowitz, CEO of Davidowitz & Associates, said that for Tiffany to retain the luxury customer, the company might consider looking to do an offshoot for fashion jewelry or acquire a brand like Pandora to appeal to a different kind of consumer.

“If you have a store and you load the store up with a lot of middle-level merchandise because you are trying to sell to tourists and everyone else, they are going to want to buy a small item and get the Tiffany bag. If you do that, you are a going to lose luxury customers.  I don’t think there’s any way to do it unless you can come up with a store within a store strategy — there is clarity in that.” he told CBS MoneyWatch.

In reporting its first-quarter earnings, the company laid out a new strategy for driving growth, including finding ways to more effectively engage with customers, adding new products, and revamping or even closing some stores.

Yarbrough said Tiffany needs to refresh its product line and improve its marketing, while adding that a greater focus on supply-chain efficiency could boost the retailer’s profit margin. But he also thinks that the company’s core strengths — its allure in overseas markets and high-end jewelry niche, in which customers want to make purchases in person — help buffer it from the competitive ravages of e-commerce.

“We think it’s a brand, as well as a retailer, that is more Amazon-proof,” he said.

Echoing this theme, Cowen senior retail analyst Oliver Chen wrote in a recent note, “In our view, Un-Amazon-Able qualities include… store and vertical integration focus at Super-Premium luxury stocks (Tiffany, LVMH, Sotheby’s),” he said in a recent note.

But Tiffany can’t rest on its diamond-studded laurels, Davidowitz said, noting that high-end clothing retailers with strong brands have been hurt by e-commerce and that Amazon could eventually decide to encroach on the jeweler’s turf.

“They have to have a plan to address the gigantic change taking place… Now is the time to do it. There is no way to say people are not going to buy jewelry online.”

Milton Pedraza, CEO of retail research group the Luxury Institute, said the key for Tiffany is to foster strong relationships with customers built on its compelling products and prestigious brand. 

“I think the world will become a barbell — at the one end it will be Amazon, commoditized products — and then there will be real luxury,” he said. “There are a lot of ‘luxury’ pretenders….Tiffany is no pretender. I think they will continue to survive and thrive.” 

Source: http://www.cbsnews.com/news/is-tiffany-co-amazon-proof/ 

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