Luxury Institute News

August 20, 2014

Macy’s settles up in profiling case

By: Dan Gorenstein
Marketplace
August 20, 2014

After the shooting of unarmed teenager Michael Brown and the recent clashes in Ferguson, Missouri, racial profiling has returned to the national spotlight.

Department store chain Macy’s reached a $650,000 settlement Wednesday with the New York Attorney General’s office over racial profiling practices, which shows how deep the issue runs. This is the second settlement since 2005 for Macy’s, and the deal comes about a week after a similar agreement was reached with the Madison Avenue luxury store Barney’s.

The most recent investigation has found that African-American and Hispanic shoppers were detained at  “significantly higher rates” for alleged shoplifting than white shoppers.

Retail researcher Paula Rosenblum says racial profiling is frequently an afterthought in the industry.

“They mostly advise their store associates to watch out for people who look suspicious,” she says.

Milton Pedraza, founder and CEO of the Luxury Institute, says retailers have every incentive to train front-line and security staff so every customer feels welcome.

“Even if you didn’t have moral clarity on the issue, at least you should have economic clarity on the issue,” he says.

Pedraza says stealing a shirt is insignificant compared to the additional sales that come from building a reputation as a kind and generous merchant.

For its part, Macy’s has agreed to make several changes, including an effort to improve its anti-shoplifting practices and plans to distribute an anti-racial-profiling memo to workers.

Simma Lieberman, who works with retailers on diversity and what she calls “cultural intelligence” says employers should know profiling is often unconscious. Lieberman trains her clients to monitor their own personal biases. Often, she says, shop clerks are quick to make assumptions, and “they don’t get to behavior, they just look at what somebody looks like.”

The danger, says Lieberman, is in our rush to judgment, when we “assume someone is going to have a certain behavior, which they may not have.”

http://www.marketplace.org/topics/business/macys-settles-profiling-case

August 19, 2014

Nordstrom bets on a slow, cautious entry into Canada

By: Marina Strauss
The Globe and Mail
August 18, 2014

For Karen McKibbin, getting it right is more important than doing it fast in her latest assignment at upscale U.S. chain Nordstrom Inc.

The president of Nordstrom’s Canadian division has been gearing up for two years for the launch of its first store here on Sept. 19 in Calgary’s Chinook Centre. She watched another U.S. retail giant – discounter Target Corp. – stumble in rapidly introducing its first 124 outlets in this country in 2013 amid customer complaints of empty shelves and overhigh prices.

Nordstrom is taking a decidedly different approach from Target, opening its first six stores gradually over 2 1/2 years, she said.

“We are going to stub our toe – we are not going to get everything perfect,” she said in a telephone interview from Calgary, where she has been spending three or four days a week commuting from Nordstrom’s Seattle headquarters. “You can expect us to make changes and respond in real time. We are certainly not resting on our laurels.”

A lot is riding on Ms. McKibbin making a positive first impression with Nordstrom in affluent Calgary. As Target works to make up lost ground, Nordstrom is investing in a slow, deliberate rollout, betting that its first foray outside its home country will pay off in giving customers reasons to return amid rising competition in the luxury field.

Nordstrom posted $14-million (U.S.) of operating losses last year in Canada and expects $35-million in 2014, chief financial officer Mike Koppel has said. The red ink will flow for “several years” before the division contributes to the retailer’s bottom line, he has warned. Eventually, the company anticipates it can generate $1-billion of annual sales in up to 10 department stores and as many as 20 of its Rack discount outlets.

(Target, for its part, had expected to be in the black in the final quarter of its first year in Canada, but instead it reported an operating loss of almost $1-billion last year and analysts anticipate more red ink in 2014.)

But Nordstrom, which is a relatively strong performer south of the border, will face an increasingly crowded luxury market in Canada. Dominant player Holt Renfrew & Co. and men’s wear specialist Harry Rosen Inc. are expanding their stores, while U.S. rival Saks Inc., which was bought by Toronto-based Hudson’s Bay Co. in 2013, is preparing to launch its first stores in this country next year. HBC is making progress in polishing its existing operations here.

“Nordstrom is going to have to be adaptable because things will evolve in Canada,” said Milton Pedraza, chief executive officer of researcher the Luxury Institute in New York, which has worked with each of Nordstrom, Holts and Saks. “But I think Nordstrom will be a solid competitor.”

In the Institute’s annual survey of luxury retailers’ customer service and store experience, Nordstrom ranked No. 1 this year after coming in second in 2013 and first the previous year.

In Canada, Nordstrom has already shown its cautious approach by delaying the launch of its Rack stores here from a planned 2015 roll out because of the unexpected complexity of building its new systems. Nordstrom also will hold back for now on introducing a separate domestic e-commerce site, said Ms. McKibbin, a veteran of Nordstrom.

“We definitely feel there’s an opportunity for us to serve the customer online and that’s definitely still part of our strategy,” she said. “Although when we’ll be able to offer that to the customer is left to be determined.” Nordstrom allows consumers here to cross-border shop from its U.S. site although steep duty, tax and shipping fees raise the tab about 10 to 20 per cent, a spokeswoman said.

Its next store opens in Ottawa in March, 2015 and, in Vancouver, six months later. “I’m feeling cautiously optimistic about opening our first store,” Ms. McKibbin said. “The cadence is going to allow us the opportunity to open the doors to our first store and really get to work about making the adjustments, things that customers are telling us they want, and then applying that to our next store.”

Click the link to read the entire article, which includes a quote from Milton Pedraza, CEO of Luxury Institute:http://www.theglobeandmail.com/report-on-business/nordstrom-bets-on-a-slow-entry-into-canada/article20100322/

July 31, 2014

Yoox With Online Luxury Is Alluring for Amazon: Real M&A

By Andrew Roberts and Brooke Sutherland
Bloomberg
July 31, 2014

Yoox SpA offers potential suitors a way to combine two of the fastest growing areas of retail: luxury goods and the Internet.

The $1.6 billion company, which operates e-commerce sites for designer brands including Armani and Moncler, is poised to boost sales by about 75 percent over the next three years, according to data compiled by Bloomberg. Affluent consumers from Seattle to Shanghai have more to spend on luxury goods and are increasingly going online to do it, according to Retail Metrics Inc. That may grab the attention of Amazon.com Inc., said CRT Capital Group LLC.

Amazon, whose stock is under pressure after reporting a $126 million quarterly loss last week, has been flirting with high-end goods, most recently selling Burberry Group Plc fragrances. Yoox, which is profitable, could jumpstart the $149 billion company’s luxury business, according to the Luxury Institute LLC. The Italian company’s technological know-how also makes it a possible target for traditional retailers such as department stores that are looking to bolster their online presence, said retail researcher Conlumino.

Yoox is “in a pretty attractive space to be in at this point in the retail cycle,” Ken Perkins, president of Retail Metrics, a Swampscott, Massachusetts-based researcher, said in a phone interview. “It could be on people’s radar in terms of a takeover.”

The stock rose as much as 4.1 percent and traded 2.3 percent higher at 20.64 euros at 9:34 a.m. in Milan. A representative for Yoox declined to comment. Representatives for Seattle-based Amazon didn’t respond to requests for comment.

Tripling Growth

Since Yoox went public in 2009, the operator of e-commerce for more than 30 brands has nearly tripled its revenue  to about $605 million last year. That growth is poised to continue, with analysts projecting sales of more than $1 billion by 2016.

Potential buyers could get the company for a bargain right now. Yoox’s shares have fallen about 40 percent this year, leaving them near their lowest valuation since last May, as one of its closest peers, Asos Plc, reduced profit forecasts.

That slump is unwarranted because Yoox has a wider product offering than Asos, more geographic reach and a more affluent consumer base, according to Chiara Rotelli, a Milan-based analyst at Mediobanca SpA. Yoox said yesterday that net sales in the second quarter climbed 15 percent to 111.5 million euros, topping analysts’ estimates.

“This might be the right time for companies to look to acquire a company like Yoox,” said Milton Pedraza, chief executive officer of the Luxury Institute, a New York-based research and consulting firm. “The mass brands understand that luxury is far more profitable and more resilient. For a company to trade up to the luxury or the premium providers in categories, that would be wise right now.”

Bargains and Designers

Amazon has been building a bigger share of the apparel market and started selling Burberry fragrances. Still, it’s known more for bargains than designer dresses. Buying Yoox would give the e-commerce giant a stronger presence in luxury apparel and accessories, where margins are higher, said Neil Doshi, an analyst at CRT.

“It’s ultimately Amazon’s desire to be able to serve anybody anything that they want on their site,” Doshi said by phone. The company “has probably done a pretty good job in the lower to mid-range for apparel. To cover the full, broad spectrum, I think they’d probably want to get into more high-end stuff.”

Sales of luxury goods have been growing faster than the broader retail industry since the U.S. recession as wealthier shoppers, buoyed by rising real-estate values and equity prices, have more money to spend, said Perkins of Retail Metrics.

EBay Inc., the $66 billion online marketplace operator, may also want to expand its designer and luxury offerings, according to Kerry Rice, an analyst at Needham & Co.

Department Stores

Yoox’s focus on e-commerce makes it “very valuable” to existing luxury retailers as well, according to Maureen Hinton, global research director at Conlumino. A department store would be the “perfect owner,” strengthening the potential buyer’s sales channels while preserving Yoox’s independence, she added. Yoox also runs three multi-brand Web stores.

Exane BNP Paribas projects that e-commerce will account for about 40 percent of global luxury expansion in the next five years.

Yoox “is well positioned for this growth, with exposure across different segments of online luxury and unparalleled expertise,” Exane BNP Paribas analyst Luca Solca wrote in a report.

Retail Relationships

Kering SAcould be interested in buying Yoox, should the owner of Saint Laurent dresses and Bottega Veneta handbags decide to take its relationship with the company one step further, said Rotelli of Mediobanca. Yoox runs the online operations for most of Kering’s brands.

Cie. Financiere Richemont SA, which last year sought to quash speculation that it was in talks to sell its online fashion retailer Net-a-Porter to Yoox, may instead decide to buy Yoox, said Pedraza of the Luxury Institute. Such a move would enable the Swiss company to take the cost-cutting and revenue benefits of a deal for itself.

Kering may prefer to continue its joint venture rather than acquire Yoox, and Richemont may be content with its Net-a-Porter operations and not want to get bigger in online fashion.

Representatives for San Jose, California-based EBay and Paris-based Kering declined to comment, as did a representative for Richemont.

Still, Yoox sits at the confluence of luxury and e-commerce, and that makes it desirable for both Internet giants and retailers, said Pedraza of the Luxury Institute.

“To me, Yoox is about premium and luxury,” he said. It’s “an extremely attractive candidate for a strategic acquirer.”

Click the link to read the entire article which includes quotes from Milton Pedraza, CEO of Luxury Institute:http://www.bloomberg.com/news/2014-07-30/yoox-with-online-luxury-is-alluring-for-amazon-real-m-a.html

July 7, 2014

The Value of Luxury Poseurs

By: Paul Hiebert
The New Yorker
July 7, 2014

Bellezza mentioned Tiffany & Co. as a good example of a company executing the policy outlined in her and Keinan’s report. Some store locations offer side entrances and private viewing rooms to physically separate the élite shoppers from those looking to purchase a seventy-five-dollar Heart Tag Charm. The core Tiffany users, Bellezza says, are therefore defined by their access to privileged retail space, while the company can still grant a degree of access to the masses without tarnishing the brand. In 2013, the Luxury Institute, a research and consulting firm, conducted a survey that revealed that Tiffany was the jewelry brand most widely purchased by American women with a minimum net worth of five million dollars.

As Amy Merrick noted in April, Burberry recovered from its overexposure problem. Following the arrival of Angela Ahrendts as its C.E.O., in 2006, (who has since left for Apple), Burberry began scaling back its licensing agreements and removing its signature check from about ninety per cent of its items. A sense of sustainability has returned, thanks to a clear balance of insiders enjoying their cachet and outsiders looking in.

Click the link to read the entire article: http://www.newyorker.com/online/blogs/currency/2014/07/the-value-of-luxury-poseurs.html

January 11, 2014

Tiffany results signal caution among luxury shoppers

By Jonathan Berr
CBS News
January 10, 2014

Shares of Tiffany & Co., whose name has been synonymous with luxury since before the Civil War, fell Friday after the second-largest luxury retailer said its earnings would be less than analysts had expected.

The New York-based company expects to earn $3.65 to $3.75 per share in the fiscal year ended January 31. While that forecast is unchanged from a previous forecast, it was below the $3.79 that analysts surveyed by Bloomberg News had forecast.

This is the latest sign of the uneven performance of many retailers during the holiday season despite the improving performance of the U.S. consumers. Wealthy consumers appear to be less enthused about buying goods and services than many experts predicted.

Click the link to read the entire article which includes a quote from Milton Pedraza, CEO of Luxury Institute: http://www.cbsnews.com/news/tiffany-results-signal-caution-among-luxury-shoppers/

Spread the wealth, share!

September 24, 2013

What are your brands doing to customize communications based on what you know about each customer?

By Ben Popken
NBC News
September 23, 2013

Paper towels embossed to look like cloth. Tampon packages with a glossy metallic sheen. Designer ice cubes for $75 a bag. Marketers are going glam with everyday products, taking them upscale as they give up on selling to the middle class.

Companies have reacted for years to the shrinking middle class by developing both top shelf and bargain versions of their product lines. Toyota has been successful with the Lexus. Frito-Lay has introduced Olive Coast, kettle-cooked chips with a Mediterranean flavor, as well as “Taqueros,” a discount tortilla chip. Apple’s new iPhone comes in both a $199 version and a $99 one with cheaper components.

For the wealthy, a 20 percent markup is a small price to pay for “luxury.” For some in the middle class, it’s a way to feel affluent, at a cost. For the poor? There’s the bargain brands. In an economic recovery that has magnified income inequality, consumers are either spending at the Family Dollar stores of the world, or at the Nordstroms.

Click the link to read the entire article which includes multiple quotes from Milton Pedraza, CEO of Luxury Institute:

http://www.nbcnews.com/business/luxury-tampons-companies-spurn-middle-class-4B11212163

September 7, 2013

Cascade Platinum: Turning household goods into gold

Posted in Luxury Market,Retail
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By Krissy Clark
Marketplace
September 6, 2013

Procter & Gamble is a big company that makes a lot of the little things we use every day: Paper towels, toothpaste, razor blades.

Now P & G is leading the charge in offering upscale versions of some of these everyday products.  From specially-embossed paper towels, to designer tampons or fancy dishwashing detergent.

To understand this trend you need to understand the word bifurcation.

Bifurcation is industry lingo for  “splitting the market.”  That is, when a company targets some products to high-end consumers and others to bargain hunters. And in an era when, by many tallies, the American middle class is shrinking and the extremes are growing, bifurcation is a consumer products survival tool.

The country is “bifurcating into the Dollar Stores and the Saks Fifth Avenues of the world,” according to Milton Pedraza of the Luxury Institute, a research firm that specializes in luxury products.

So what to you do if you are a company like Procter & Gamble, which has traditonally made  middle-tier products like Tide, Ivory Soap and Crest that are targetted at middle-class consumers?

Procter & Gamble’s approach involves offering “book-end” lines.

On the low end, the consumer products giant is introducing cheaper, stripped-down product lines like Bounty Basic Paper Towels and Tide Simply Clean and Fresh. On the high end, the company is launching new products like Bounty DuraTowel, Cascade Platinum dishwasher soap, and Tampax Radiant Tampons.

“Toyota did it many years ago with Lexus,” says Pedraza, noting this isn’t a new concept. “And they’ve been extremely successful.”

Yet, consumer trends consultant Alex Smith has her doubts about P&G’s strategy.   “The recession made everyone, even higher-income individuals, think more critically about the things they buy, and not just fall in to the indulgence-for-indulgence’s-sake trap.”

Headed in to a supermarket in downtown Los Angeles, Jessica Czar and Matt Chisum could have been the perfect target customers for Procter & Gamble’s new high-end household items.  They are both young professionals, making good money in the financial industry.  So I asked them what they thought.

First, they looked at the Bounty DuraTowels, for sale at the store for more than $0.05 per square foot– almost twice as much as the regular Bounty paper towels.

“It’s not clear to me that this is any more durable than regular Bounty,” says Czar, unmoved by the print motifs and the ’3x Cleaner than a Germy Dishcloth ™’ claim on the packaging. “I wouldn’t spend more money.”

Chisum shook his head at the Cascade Platinum Dishwasher soap, with the words ‘Our Ultimate Clean For Dishes — Even Helps Keep Dishwasher Sparkling’ printed across the top of the silver bag. Inside, the soap pods were priced at $0.47 per pod, compared to regular Cascade pods that sell for under $0.25.

“Just because of the platinum branding, I don’t think it means it’s any better than the regular,” Czar said.

Then Czar squinted at the label for Tampax Radiant Tampons in a metallic pink box — $0.37 per tampon versus $0.25 for the more basic Pearl Tampax brand.

“I don’t know what radiant means, if it’s like metallic and shiney?” she asked.

All in all, Czar and Chisum’s verdicts were not in these products favor.

“You’re going to dispose of this stuff,” says Chisum.

“Right,” nods Czar. “These are just basic staples that are disposable.”

That sentiment doesn’t surprise Burt Flickinger of the consumer-consulting firm Strategic Resource Group. People are willing to spend a little more on fresh food and juices and produce and automobiles, he says, “but they’re not going to spend more to do their dishes or wash their clothes.”

Pedraza, of the Luxury Institute, is more optimistic that people might spend more on detergents and tampons, if they can be convinced that there is substance behind the shiny boxes.

“If you can show superior performance then you’re going to have a high probability of success,” Pedraza adds, “If you’re not, and it’s just packaging and fluff, then you’re going to have a much lower probability.”

http://www.marketplace.org/topics/wealth-poverty/cascade-platinum-turning-household-goods-gold

August 29, 2013

Retail loyalty programs add tiers to reward big spenders

By Kelli Grant
CNBC
August 28, 2013

Taking a page from airline programs, more retailers are adding elite levels with extra perks to their loyalty packages. But shoppers may find membership nearly as pricey as a first-class airline ticket.

In July, Sephora relaunched its Beauty Insider program, adding a reward level with free shipping, early access to new products and sales as well as VIP event invites for shoppers who spend $1,000 or more in a year. Around the same time, flash-sale site Gilt.com introduced its Gilt Insider Program, awarding shoppers five points per dollar spent and weekly bonuses for interacting with the brand. Tiers with extra benefits such as exclusive sales and a VIP customer service line kick in at the 5,000-, 10,000- and 25,000-point thresholds.

“To make it fair we crafted a program that rewarded engagement, i.e. site visitation and social interaction, in addition to purchasing, so that members could advance up tiers as they earned points,” said Elizabeth Francis, Gilt.com’s chief marketing officer.

Click the link to read the entire article which includes a quote from Milton Pedraza, CEO of Luxury Institute:
http://www.cnbc.com/id/100991902

August 14, 2013

Successful Rewards Programs Prove That Even Wealthy Shoppers Like Freebies And Special Gifts

(NEW YORK) August 14, 2013 – In a new survey of affluent consumers by the Luxury Institute, wealthy shoppers earning at least $150,000 a year share detailed observations and evaluations of various loyalty and rewards programs, and offer suggestions for improvements to existing frequent shopper initiatives.

Overall, 72% of wealthy consumers participate in some kind of loyalty program, with the most popular ones connected to credit cards, airlines, hotels and grocery stores. Men are significantly more likely to be members of airline and hotel rewards programs, while women are disproportionately represented in programs sponsored by grocery stores, drugstores and department stores. Previous Luxury Institute research has shown that Sephora, American Express and Amazon are the top three favorite rewards programs among affluent consumers.

Very few respondents say that they belong to a luxury brand rewards program. The main perceived benefits of luxury brands’ loyalty programs are special offers and rewards, earning and redeeming points, and free goods and services.  Free gifts carry more importance among women, shoppers under 50, and those with net worth less than $1 million.

Satisfaction with existing loyalty programs is high and most high-income shoppers say that they have had positive experiences with their memberships.  The vast majority of shoppers report that loyalty programs exert a strong influence over purchasing decisions.

“Loyalty Programs combined seamlessly with one-to-one customer relationship building can be highly effective in driving conversion and retention while making data collection easier,” says Luxury Institute CEO Milton Pedraza.

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

July 17, 2013

Facial recognition software can create personalized retail experiences

By Jen King
Luxury Daily
July 16, 2013

A new facial recognition software could help give affluent consumers a personalized shopping service while taking the guesswork out of identifying VIP customers for retail employees.

The Facial Recognition software, developed by NEC IT Solutions, will help boutique employees better cater to their customers, even if they do not recognize them at first glance. On the brand side, it will also help ensure that retailers never miss out on a potentially lucrative sale.

“A luxury retailer would include a wall mount display or kiosk that would allow customers to preregister themselves, and opt-in either at time of purchase or online,” said Allan Ganz, account development manager for NEC Corporation of America, Irving, TX.

“The kiosk would have two potential locations,” he said. “The first at the sales counter and second at the service counter for instance at alterations. The key is to allow for an enhanced customer experience.

“Face recognition allows for the storage and real-time analysis of this vast amount of data to gauge and modify the effectiveness of brand promotions.”

Face time
NEC IT Solutions has created similar software with security, rather than retail, in mind.

Similar to the software that helps to identify criminals and terrorists, the facial recognition software is checked against an opt-in database of shoppers.

The software will scan customer’ faces as they enter the boutique. If the software recognizes a face in the database, an alert will be sent to the employees via computer, tablet or smartphone.

Once alerted of the shopper, the boutique employees will be able to access the customer’s clothing sizes, favorites and spending history.

NEC IT Solutions has been conducting software trials in designer boutiques and hotels in the United States, England and Asia. The company has not disclosed the retailers and hotels used in the trial.

Although privacy is a big concern of affluent consumers, NEC IT Solutions found that many high-profile customers did not mind sharing their private information if it meant a more personalized and quicker shopping experience as per NEC IT Solutions.

“I can see an issue with privacy being a concern for most shoppers,” said Brittany Mills, vice president of client solutions at B Culture Media, Atlanta.

“Even though NEC IT Solutions addressed the privacy concern, I am not sure that most shoppers would want to be identified before a purchase.

“If a customer is a frequent shopper, the store associates should already have a relationship with the shoppers and can determine the amount of attention to give,” she said.

To track or not to track
Although many affluent shoppers are looking for an easier, more personal shopping experience there is some degree of hesitation in providing their personal information to luxury retailers.

For instance, sixty-three percent of affluent consumers would choose to keep their online history and Internet activities private through an opt-out tracking policy, according to a survey from the Luxury Institute.

Affluent consumers do not want their personal information used for other purposes and many consumers do not trust the safety of their information when giving it to a brand. This means that luxury marketers need to earn the trust of their consumers before asking for their participation in online tracking.

Other mobile tracking technologies have been used to draw consumers into stores.

For instance, luxury retailers can benefit from using geo-targeting mobile technologies to keep affluent consumers coming into their stores and not their competitors’ locations.

Retailers can use geo-targeting in a variety of ways, which include targeting consumers in a store, outside a store or in specific neighborhoods. By using these technologies along with consumer data and research, retailers can access their target consumers and drive them into store locations.

Facial recognition is not the only way to identify affluent consumers.

“A more discrete and practical way of identifying these affluent shoppers is with an NFC signal from a personal device that can transmit their presence as well as personal shopping preferences,” said Dave Rodgerson, senior management consultant of retail strategy and change at IBM Canada, Toronto.

“Companies like iSign Media in Toronto are making great strides in this area,” he said.

http://www.luxurydaily.com/facial-recognition-software-will-help-retailers-create-personalized-shopping-experience/

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