Luxury Institute News

September 17, 2014

Can Apple Watch Win Over Swiss Luxury Giants?

By Sarah Mahoney
Marketing Daily
September 17, 2014

Talk about the clash of the titaniums: For centuries, nothing has said “Master of the Universe” as elegantly as a five- (or maybe even six-) figure watch. Yet for status-seekers who pride themselves on being early adopters, sporting the neighborhood’s first Apple Watch will be a big deal. (Especially since the tech insiders over at CNET are speculating that while Apple’s entry-level watch will be priced at $349, gold ones might sell for as much as $5,000.)

While Tag Heuer has said it’s working on its own smartwatch (and has already developed a smartphone), most luxury watch brands seem confident that the old-world chic of the Swiss will outlast any Silicon Valley buzz. And why shouldn’t they be? Sales of luxury timepieces are strong, and online interest for luxury watches is up 7% in the second quarter of this year, compared to the same period a year ago, according to the World Watch Report. In the U.S., that growth is relatively faint. But in the developing world, curiosity is rising fast: Online interest in these watches soared 23% in China, 22% in India, and 20% in Saudi Arabia. (Rolex is by far the most search-for brand, it says, followed by Omega, Cartier, Tag Heuer and Patek Phillippe.)

“The Apple Watch is a product that is not useful if you don’t own an iPhone,” says David Sadigh, CEO of the Geneva-based Digital Luxury Group, which publishes the report. “It’s a product that has been launched to bolster iPhones sales and put a first foot in the door into the smartwatch market. It won’t have a dramatic impact on the Swiss watch market at this stage, as the majority of the market is composed of brands at a luxury level,” he tells Marketing Daily in an email.

For now, watch brands seem to agree, and are ignoring the onslaught that so many techies are predicting. Piaget, for example, is unveiling a new “Perfection in Life” global advertising campaign, which positions its sexy timepieces in some of the planet’s prettiest places, including Geneva, Paris, “La Côte d’Azur,” and Los Angeles, and could have been taken straight out of a1960s jet-set travelogue. Shot by photographer Maud Rémy-Lonvis, they make each piece a hero: The world thinnest automatic watch, the Piaget Altiplano, for example, towers above the Manhattan skyline, while the Piaget Limelight Gala, with white gold set with diamonds, sparkles over the Hollywood Hills.

And just to prove it’s not completely unaware of the digital age, the company describes the effort as a “360° brand concept,” supported by social media. Consumers can post pictures of their own favorite cities to Instagram, hashtagged #Piaget and #PerfectionInLife, the submitted photos will be entered into a contest. A special Piaget jury will select 5 winning photos from the 50 that receive the most likes, and says they will be displayed in Piaget boutiques worldwide.

What the designers of smartwatches and wearables are missing, says Milton Pedraza, CEO of the Luxury Institute, “is that smartwatches like the Apple Watch are accessories. They’re functional, but they’re not emotional. Luxury watch buyers see their timepieces as art, an adornment, made with true artisanship. So they’re missing half the equation. Smartwatches don’t have the personality that luxury watches do.”

And while there will doubtless be luxury consumers who already own classic timepieces and who buy smartwatches too, “there’s only so much real estate on the wrist.” That means there a tremendous opportunity for tech companies to partner with luxury watch marketers, “to move beyond the generic, dramatically improve the aesthetic, and increase the appeal.”

For now, though, says Sadigh, “folks at Vacheron Constantin, Rolex and Patek Philippe can still sleep well at night.”

http://www.mediapost.com/publications/article/234357/can-apple-watch-win-over-swiss-luxury-giants.html

August 27, 2014

In the Loop, At the Half With Betty Liu

Betty Liu
Bloomberg Radio
August 27, 2014

http://www.bloomberg.com/news/2014-08-27/in-the-loop-at-the-half-with-betty-liu-aug-27-2014-audio-.html

Milton Pedraza’s segment is featured at: 9:35-15:11

July 23, 2014

UBS, Merrill Sink in Luxury Ranking as Rockefeller Reaches Top

By Danielle Verbrigghe
FundFire
July 23, 2014

Boutique wealth shops carry a much higher brand cachet than bigger firms among multimillionaires, according to a recent survey by the Luxury Institute. While Rockefeller Wealth Management rose to the top of the list, several of the biggest firms, including Merrill Lynch and UBS Private Wealth Management, continued an ongoing descent toward the bottom.

In the study, the Luxury Institute asked multimillionaires with an average net worth of $15 million and average annual income of $800,000 to evaluate wealth firms on factors including product quality, exclusivity, social status and ability to deliver special client experiences, and assigned firms a score based on the responses.

Rockefeller Wealth Management, a New York-based multi-family office, topped the list of highly ranked wealth managers. Coming second was Atlanta-based Atlantic Trust Private Wealth Management. Convergent Wealth Advisors was a close third, followed by First Republic Private Wealth Management and Bessemer Trust.

“Consumers are opting for boutique firms,” says Luxury Institute CEO Milton Pedraza. “Wealthy consumers really value relationships and the smaller boutique firms really deliver.”

Some of the biggest firms meandered at the bottom or sunk lower. Merrill Lynch tumbled to last place out of 39 firms, while UBS Private Wealth Management came in second to last. Bank of America, Goldman Sachs and Charles Schwab rounded out the bottom five.

The brand reputation problem facing some of the largest firms is partially driven by legal and regulatory woes and other negative press coverage some of the brands attracted since 2008, Pedraza says. “Any time you have news that’s a negative in the media, these firms are going to get hit,” he says. “The larger firms took a beating.”

Other big brands, including, Citi Private Bank, Barclays Wealth, HSBC Private Bank and Wells Fargo also ranked in the bottom half of brands.

The rankings reflect general wealthy individual perceptions of overall brands, rather than specific client experiences, Pedraza ways. While the specific rankings tend to vary from year to year, quartile placement remains relatively stable, he says. This year’s results continue an ongoing trend of boutique wealth shops rising in the rankings and wirehouses and bigger firms sliding lower, he says.

While dropping slightly from its number three spot in 2013, Bessemer Trust made the top five list several years in a row. Brown Brothers Harriman, which took the top spot last year and in 2012, tumbled off the top five list. Northern Trust, Vanguard Personal Investors and J.P. Morgan Private Wealth Management also fell out of the top five.

Brown Brothers Harriman’s absence on the list doesn’t indicate an image problem, Pedraza says. “I don’t think it’s so much that they’re faltering as consumers perceive other brands to be better,” he says.

Boutique shops have an advantage over larger firms when it comes to creating a connection with wealthy investors, says Linda Beerman, chief fiduciary officer and head of wealth strategies for Atlantic Trust.

“Our clients feel they have an exclusive relationship with their client service representatives,” says Beerman. “It’s really a high-touch, client-service driven model.”

Offering unique experiences and hosting events is one way Convergent Wealth Advisors positions itself as a luxury brand, says Douglas Wolford, president and chief operating officer for Convergent Wealth Advisors.

“Wealthy people can find any number of people who are good investors, but what most wealthy people want is an experience,” Wolford says. “Boutiques provide that experience better than big companies.”

To differentiate themselves from other firms offering advice to ultra-high-net-worth and high-net-worth investors and families, Convergent offers special events for wealthy clients. For example, the firm is hosting an event in which wealthy clients can have lunch with David Rubenstein, co-founder and co-CEO of the Carlyle Group. Convergent has also held events for clients where wealthy investors get to drive new models of luxury vehicles, such as Ferraris or Bentleys, before they become available to the general public.

“We focus on trying to provide clients with experiences that money can’t buy,” says Wolford

Such experiences go a long way in attracting wealthy clients and enhancing the firm’s reputation as a luxury brand, Wolford says. “Convergent is a luxury brand and we take care to protect that as part of our image,” he says.

And that image has contributed to client development, according to Wolford.

Convergent Wealth Advisors has seen its Independence by Convergent unit, which caters to investors with between $1 million and $10 million in assets, grow in recent years, driven in part by brand perception, Wolford says. That division has added about 300 new high-net-worth clients over the past two years.

“The brand has really driven that growth. People want to be associated with a luxury, boutique brand,” says Wolford. “I think Convergent is an aspirational brand for people in Indepencence.”

Overall, wealthy individuals are apt to place a greater degree of trust in smaller, boutique firms, says Pedraza.

For brands at the bottom, “There’s only up they can go,” Pedraza says.

Click the link to read the entire article which includes quotes from Milton Pedraza, CEO of Luxury Institute: http://fundfire.com/c/934734/9128/merrill_sink_luxury_ranking_rockefeller_reaches?referrer_module=emailForwarded&module_order=0

 

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

July 4, 2014

America becomes absolutely fabulous

By: Laura Chesters
The Independent
July 4, 2014

Striding down Fifth Avenue clutching a monogrammed black Gucci leather satchel, François -Henri Pinault stands out among many of the trackpant-clad visitors to America’s most expensive shopping street.

Americans might still be better known for their casual fashions but Mr Pinault, the chief executive of Gucci’s owner, Kering, is betting that the millions of domestic and international tourists who descend on New York each year want to snap up European labels on their shopping sprees.

The Frenchman, who is married to the Mexican-American actress Salma Hayek  and whose family owns more than 40 per cent of the Paris-based luxury goods giant, says: “Over the last few years we have talked about the growth engine of luxury being in Asia – but it is important to remember the size and potential of America.”

According to market research from Bain/Alta­gamma on the luxury goods industry, the Americas actually passed China as the growth leader last year. The researchers estimate that the continent’s luxury goods market will grow 4 per cent, and the US alone is valued at €66bn (£52bn) this year.  Other European brands, including the UK’s Burberry and Mulberry, have also been steadily building up their presence across North America.

Mr Pinault is in the US to visit Kering’s American luxury division, which launched three years ago, and its flagship Gucci store in New York, the biggest in the world.

Kering, which owns 17 luxury brands including Saint Laurent and Christopher Kane, now plans to invest huge sums renovating some of its 180 US stores and expanding into new areas, as well as into Mexico and South America. Sales at it luxury division rose 8 per cent last year.

Mr Pinault is also betting that wealthy Americans are beginning to change their habits.  “The way of life here has been to not dress up, but the US shopper is becoming more sophisticated.”

Sarah Willlersdorf at ­Boston Consulting Group  agrees that the wealthy millionaires and billionaires in the States have traditionally spent their cash on cars and experiences rather than expensive clothes, but that now what BCG calls the “personal goods” sector is about to enter a boom period.

She says: “The aspirational masses here do want to spend on luxury – they want to spend on brands, and it is growing. There is a huge change in the desire to buy brands.”

BCG expects that by 2020 the US will have more than a third of the luxury market and  will still be bigger than China’s high-end sector. Japan will account for 7 per cent and the rest of Asia about 23 per cent of the global luxury market. Milton Pedraza, chief executive of the Luxury Institute, a consultancy, agrees: “There are big opportunities for European luxury brands in the US.”

America already makes up 18 per cent of Kering’s group sales, and Mr Pinault is keen to make sure its brands have the best stores in the best locations across the US – not just in New York, which has always had Sex and the City-style fans of European labels.

Ms Willlersdorf adds: “It is not just about East and West coast. The middle and south are very wealthy. European brands are under-represen-ted, particularly in second-tier cities.”

Click the link to view the entire article which includes a quote from Milton Pedraza, CEO of Luxury Institute: http://www.independent.co.uk/news/business/analysis-and-features/america-becomes-absolutely-fabulous-9585525.html

May 2, 2014

Consumer Spending Trends: What Drives Luxury Purchases

New survey finds generational differences in how wealthy shoppers make luxury purchases.

By: Donald Liebenson
Millionaire Corner
May 2, 2014

What becomes a luxury brand most? A new consumer spending trends survey finds that regardless of age, superior quality and craftsmanship are the two most essential elements of a luxury brand that wealthy shoppers consider.

The Luxury Institute surveyed U.S. consumers ages 21 and up with a minimum annual income of $150,000 about what they consider to be important in luxury brand purchases and the specific triggers that motivate their spending decisions.

Six-in-ten wealthy respondents also said they consider superior customer service and design as vital attributes to a luxury purchase.

The consumer spending trends survey found generational differences in what influences luxury purchase. Millennials put a high premium on the opinions of others. Nearly seven-in-ten (68 percent) of wealthy shoppers born after 1980 ask someone they know about their experiences with a luxury purchase before buying it. The becomes less important among Gen Xers (64 percent) and Baby Boomers (58 percent).

Millennials, who came of age during the recession, are more likely than previous generations to give greater consideration to a brand’s history, a product’s uniqueness, and investment value when it comes to evaluating luxury brands. They also grew up in the digital age of online discounts. Playing into the stereotype of their generation as entitled, the survey also found the wealthy Millennials “have developed expectations that luxury brands should show their appreciation for any purchases made by providing complimentary shipping and rewards programs.”

In addition to free shipping, wealthy shoppers of all ages agree that user-friendly return policies and lifetime guarantees are the two most potent features of luxury brands that enhance the luxury shopping experience and compel them to buy from a particular merchant.

There is little generational difference in how the wealthy make their high-end purchases, according to the consumer spending trends survey. Online shopping is no pervasive enough that Baby Boomers, Gen Xers and Millennials are all nearly equally as likely to have made their last luxury purchase online as in-store.

Brand websites are universally the most popular sources of information wealthy consumers use when preparing to make a luxury purchase. Three-in-ten most rely on online consumer reviews and friends and family, while 27 percent most rely on sales associates. More than three-fourths of wealthy Millennials (vs. 70 percent of Gen Xers and 67 percent of baby Boomers) say they are susceptible to being swayed by advertising. They are also much more open to receiving emails or text messages from luxury brands and sales representatives as well as using social media, mobile applications or other digital platforms to further engage with luxury brands.

Click the link to read the entire article: http://millionairecorner.com/Content_Free/Consumer-Spending-Trends-Luxury-Purchases.aspx

March 3, 2014

Soaring Luxury-Goods Prices Test Wealthy’s Will to Pay

Sales Growth Slows as Competition Heats Up; ‘Prices Have Gotten Really Crazy’

By Suzanne Kapner and Christina Passariello
Wall Street Journal
March 2, 2014

Despite expanding into new markets, the luxury-retail business has been relying on price increases to drive sales. Now, even the very wealthy are nearing the limits of what they are willing to spend.

In the past five years, the price of a Chanel quilted handbag has increased 70% to $4,900. Cartier’s Trinity gold bracelet now sells for $16,300, 48% more than in 2009. And the price of Piaget’s ultrathin Altiplano watch is now $19,000, up $6,000 from 2011.

Click the link to read the entire article which includes a quote from Milton Pedraza, CEO of Luxury Institute: http://online.wsj.com/news/articles/SB10001424052702304585004579415110604829016?mg=reno64-wsj&url=http%3A%2F%2Fonline.wsj.com%2Farticle%2FSB10001424052702304585004579415110604829016.html

 

February 28, 2014

Buying into bling

By Daina Lawrence
Special to The Globe and Mail
February 27, 2014

Affluent individuals around the world bucked the depressed market norms of the last few years and managed to keep the luxury goods market bustling by investing in alternatives such as art, wine and supercars.

Companies such as Hermès SA, Michael Kors Holdings Ltd. and LVMH Moët Hennessy Louis Vuitton SA are gaining new customers daily, with 10 million new buyers wading into the market each year.

Many of these companies have given good news to shareholders recently, including luxury goods dynamo Michael Kors – known for its footwear, watches and clothing – whose shares soared 17.3 per cent to $89.91 (U.S.) in early February, after the company’s report of higher-than-expected profits.

Click the link to read the entire article which includes quotes from Milton Pedraza, CEO of Luxury Institute: http://www.theglobeandmail.com/globe-investor/investment-ideas/buying-into-bling/article17132730/

February 5, 2014

Wealthy Shoppers Tell Brands How They Want Technology Integrated Into The Shopping Experience

(NEW YORK) February 5, 2014 – The New York-based Luxury Institute asked consumers 21 years of age and older from U.S. households with minimum annual income of $250,000 about their views on incorporating technology in the shopping experience.

Nearly half (47%) of wealthy consumers say that a sales professional providing live chat or video assistance online would help them understand more product details, and 58% appreciate the convenience of instant answers.  Only 15% of shoppers say that they have tried chat or video and refuse to do it again.

Wealthy shoppers do not mind companies collecting personal data and using it for customized marketing, but they do show strong distaste for clandestine data gathering via mobile phones, facial recognition software and GPS tracking; 69% say information collected in this manner is a privacy violation.  Just 24% approve of retailers using facial recognition software to identify them and observe shopping habits.

Using technology in-stores to accelerate checkout is popular, but many affluent shoppers shy away from self-checkout.  Almost three-fourths (73%) say that they appreciate the time savings of checking out via mobile devices instead of standing in line at cash registers.  Although 45% say that self-checkout is more efficient, 44% prefer transactions with help from staff.

Technology has little to do with what wealthy shoppers desire most: free shipping and returns, cited by 92% of respondents.

“Habits of today’s wealthy consumer have increased the desire to browse, reserve and purchase using a mix of channels,” says Luxury Institute CEO Milton Pedraza. “Technology allows brands to leverage customer data and shopping habits, however salespeople still play a vital role into creating unique and engaging experiences.”

October 23, 2013

Neiman Marcus Outshines the Competition For Online And In-Store Experiences Among the Wealthy

(NEW YORK) October 23, 2013 – As part of its first installment of the Luxury Multichannel Engagement Index (LMEI) survey, the New York-based Luxury Institute asked consumers from households with minimum annual income of $150,000 to share opinions and rankings of online and in-store experiences at leading luxury retailers. Neiman Marcus earns the highest overall score and stands out for garnering top honors in nine out of ten customer criteria used to evaluate both the Web and brick-and-mortar shopping experience.

Wealthy shoppers say that Neiman Marcus stores rank first for attractive displays of exclusive products, easy navigation, accessibility of customer service, personalized shopping experiences, fair prices, and for carrying ample stock and styles. Customers also laud Neiman’s salespersons for making them feel special while serving as trusted fashion advisors.

The Neiman Marcus online experience draws equally extensive praise with the top overall ranking and the highest scores on the same measures of satisfaction.

“Smart retailers realize the value of leveraging data to deliver superior experiences that build lasting customer relationships, regardless of the channel,” says Luxury Institute CEO Milton Pedraza.

Neiman plans to invest $100 million over the next three to five years on technology that will closely align inventory management, logistics and human resources across multiple retail channels.

“Every aspect of our business is being transformed by technological advancements,” said Jim Gold, president of Neiman Marcus Group, at a retailing summit in Dallas. “The lines have completely blurred between brick-and-mortar and e-commerce. The great challenge is to make the experience seamless.”

About the 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 globally 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 Customer 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.

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