Luxury Institute News

December 11, 2014

Where Has All the Luxury Gone?

By: Judith Russell
December 8, 2014
The Robin Report

 

We in the industry have been bandying about the term “luxury” pretty freely of late, but there is growing realization that if a product or brand is easily accessible and relatively inexpensive, it’s not really a “luxury” product. And the minute you add the term “affordable,” it becomes an oxymoron.

As the ever-widening income inequality gap illustrates, the rich are still getting richer. According to Pew Research, the top 1% of households in the US, or those making $400K or more annually, earn 23% of the total income in the country, and control 35% of the net worth. Both figures have been steadily growing for more than a decade.

One ever-present behavior in the spending habits of the superrich of any generation is opting for the special over the mundane. Makers of high-end jewelry and electronics, cars, exotic vacation hotels, and other products and services target this group of discerning consumers for a reason: They value, and are willing to pay a steep premium for, that which is appreciated by and accessible to only an elite few.

Milton Pedraza, CEO of The Luxury Institute, a research firm that tracks and advises the global luxury goods market, says that consumers consistently define luxury as the best of design, quality, craftsmanship, and service. Brands that always deliver against these attributes, including Audemars Piguet, Chanel, and Buccellati, also tend to have a compelling brand heritage story.

Dumbing Down the High End

So where is true luxury retailing today? The high end is on a steady course down market. Nordstrom, Neiman’s and Saks are slowly evolving into off-pricers, expanding their Rack, Last Call and Off Fifth concepts much faster than their full-line businesses. This is eroding their credibility as purveyors to the elite, since one of the strongest pillars of luxury is pricing integrity. But Wall Street can be pretty unforgiving. In order to satisfy investors, these businesses must grow. Opportunity for organic growth is limited, due to intensified competition and more demanding consumers.

Look at the auto market. Mercedes, BMW and Audi are all adding cheaper models to the low ends of their product lines. You can’t turn on the radio without hearing an ad for their affordable lease deals, wooing us to experience a taste of luxury at a discounted price.

iStock_000041221106Large

Exacerbating the situation is the fact that many luxury brands, including Louis Vuitton, Prada, Hermès, Burberry and Dolce and Gabbana are now bypassing their retail partners and going direct to consumers, launching their own e-commerce sites and brick-and-mortar stores. The fastest way the Nordstroms and Neiman-Marcuses of the world can grow sales and earnings is to trade down. But they can only do this for so long before becoming known primarily for their discounting, the kiss of death in luxury.

Ubiquity Erodes Exclusivity

Then there are the outlet stores. Many of the veteran brand leaders, such as Coach, Tiffany, Michael Kors, and Ralph Lauren, are finding that they’ve tapped out the full-price specialty market opportunity and are now growing exponentially by expanding their outlet store footprints. Overexpansion breeds ubiquity, ultimately the downfall of premium brands whose hallmark is limited distribution.

Ubiquitous availability in outlet stores also compromises perception of pricing integrity. “Wealthy people are smart,” says The Luxury Institute’s Pedraza. “They’re willing to pay a high price for the best, as long as it’s fair, but they don’t want to get taken advantage of.” Also, many of the leading industry bloggers are of the opinion that much of the merchandise in luxury outlets has never seen a full-price store. It is, they believe, a lower level of design, quality and craftsmanship created specifically for the outlet, and carries faux full-price tags that are then reduced to obfuscate their real value. This breaks another rule of luxury, authenticity.

The New Luxury Customer

In what used to be the high-end luxury sector, a big, gaping void is forming, ripe for the filling by a new breed of luxury brands. Several key factors are contributing to this opportunity.

  • Millennials, who will account for 30% of all retail sales by the year 2020, according to Pew Research, are an increasingly important force in the marketplace. They are already wielding tremendous influence in retail, demanding more elevated, contemporary and technology-driven products and experiences. They are forcing retailers to offer better high-tech, high-touch engagement and greater personalization.
  • Many high-end consumers are beginning to show a distinct preference for experiences over things, having become sated with too much “stuff.” This is driving growth in segments like the ultra-luxury travel industry. These experiential customers are also demanding a meaningful brand connection that elevates the products they buy with an emotional investment. We know that a unique personal experience will make it more likely for that consumer to become a loyal customer.
  • A group of consumers has moved away from playing it safe and shopping with the flock to desiring more individualized offerings. Leading fashion-trend forecaster David Wolfe of Doneger says, “Bye-bye mainstream, hello to thousands of tiny consumer tribes.” And these tribal members are demanding fresh, frequent new products and experiences that can be customized, personalized and unique.

The New Face of Luxury

The next generation of luxury brands, I predict, will focus on meeting the needs of a relatively small, yet potentially profitable group of consumers. The brands will deliver quality of workmanship, authenticity of design and materials, and customized fit and trims. Whether casual or dressy, products will be limited in availability. There will be no sales, no coupons, no department store gatekeepers, and no need to get big fast. These brands will need to reach critical mass of between $500 million and $1 billion to generate sufficient profit and cash flow, while remaining exclusive, premium, and ultra-special. Needless to say, service—or its newest moniker, customer relationship building—will be out of this world.

Does this sound like the couture world of times past? You bet it does. But there will be differences enabled by 21st century technology. Brands will use digital tools, including big data, to develop and maintain an intimate relationship with their consumers and engage them on a personal level.

Curated offerings of products and services will be created especially for customers who opt into the relationship. Brands will use store-scanned measurements of their customers’ bodies to deliver a perfect fit. With geo-fencing and other technological capabilities, companies will know where their customers are and where they’re going—even going so far as to deliver a fresh wardrobe to their client’s hotel while on vacation. Sound futuristic? The technology exists today.

Who will be included in the next generation of the luxury elite? Brands like Elizabeth and James, Tom Ford, Bottega Veneta come to mind. The extent to which they succeed in creating luxury businesses with staying power depends on how well they can deliver on their product, service, and customer engagement features, and how well they can rise above the relentless discounting fray that is decimating brands today.

The luxury brands of tomorrow will be privately-owned and managed by a team possessing design genius, marketing savvy, financial prowess and technological wizardry. They will view their work as the intersection between art and science. They will control every phase of the value proposition from product conception to delivery, with customer focus front-and-center every step of the way. These innovators will not think of their businesses in terms of the products they sell or distribution channels, but rather in terms of serving their affinity tribe, a community of customers that share similar values and a passion for the brand, bordering on obsession.

So, back to Wall Street, these guys may not pay any attention to these businesses because they will be privately held. But there’s little doubt in my mind that they’ll become personally invested in the luxury brands of the future—by becoming some of their best tribal customers.

Source: http://therobinreport.com/where-has-all-the-luxury-gone/?utm_source=The+Robin+Report&utm_campaign=c3d66eab66-Where_Has_All_the_Luxury_Gone_12_10_2014&utm_medium=email&utm_term=0_e90268c709-c3d66eab66-201755673

December 1, 2014

Marketer of the Year: Stuart Weitzman

By: Irene Park
Women’s Wear Daily
December 1, 2014

Click on the link to read the entire article (subscription required): http://www.wwd.com/footwear-news/markets/marketer-of-the-year-stuart-weitzman-8049600?gnewsid=a161467a3da489b5897b97c969ca7fb8

October 31, 2014

Men are buying up these $1,200 sneakers

By: Kathryn Vasel
CNN Money
October 30, 2014

Click the link to read the entire article, which includes quotes from Milton Pedraza, CEO of Luxury Institute: http://www.channel3000.com/money/men-are-buying-up-these-1200-sneakers/29428624

October 30, 2014

October 21, 2014

Luxury Institute Introduces Luxcelerate, an Empirically Proven Method to Drive High Performance in Building Client Relationships

Marketwired
October 21, 2014 80763_LuxcelerateLogo

NEW YORK, NY–(Marketwired – Oct 21, 2014) – Today, the New York-based Luxury Institute announced the launch of Luxcelerate, an enhanced version of its innovative successful 7-Step Customer Culture process. Luxcelerate is designed to accelerate sales performance via a proprietary methodology that focuses on empowering the customer-facing online and offline associates, helping brands to improve both client relationships and sales exponentially.

Presently, top brands are struggling to both expand and retain their client base. Top brands have a conversion rate of 10-15%, a data collection rate of 30-40% (approximately 25% of this data is unusable) and a first time buyer retention rate of 10%.

Luxcelerate encourages the individual sales associate to learn and execute the best practices in client relationship building. The process is designed to improve sales performance via an exclusive methodology that focuses on relationship building, while improving a brand’s conversion, data collection and retention rates.

Luxcelerate’s proprietary methodology is based on shared relationship values and standards that are designed by a brand’s front-line teams, and is therefore customized to fit the unique DNA and culture of each brand. Custom education programs use empirically proven learning principles to drive retention of critical knowledge. Measurement and reinforcement methodologies are then deployed individually to guarantee consistent daily execution. The outcome is humanistic, effective client relationship building that leads to sharp increases in sales.

Luxury Institute’s CEO Milton Pedraza developed Luxcelerate’s 7-step methodology. Mr. Pedraza established this innovative methodology after being inspired by best practices from education, medicine and aviation. Using this process, a number of top-tier luxury brands have doubled, or tripled, the accurate collection of critical client data, and have significantly increased client conversion and retention rates. Luxury Institute has worked with the top brands of major luxury groups, well-known brands owned by private equity firms, and small boutique brands, to drive sales at rates of 15-30% per annum.

“The Luxury Institute was invaluable in helping Malia Mills define and implement our clienteling process. The first quarter that we implemented our program we increased sales by a significant amount.” — Carol Mills, Co-Founder, Malia Mills

“Since embarking on this project, we have seen double digit increases in data collection, conversion and a significant acceleration in retail momentum.” — Claudia Poccia, President and CEO of Gurwitch, Owner of the Laura Mercier brand

References are available upon request. For more information please email luxinfo@luxuryinstitute.com or fill out a contact form at www.luxuryinstitute.com

Source: http://www.marketwired.com/press-release/luxury-institute-introduces-luxcelerate-empirically-proven-method-drive-high-performance-1959706.htm

October 18, 2014

The Neiman Marcus catalogue

Hold the myrrh
Gold and frankincense are so two millennia ago

The Economist
October 18, 2014

NOT everyone finds Christmas easy. Some people have so much money that they cannot think what to spend it on. Every year Neiman Marcus, a posh department store, takes pity on these unfortunate souls by offering them its Christmas catalogue, stuffed with ideas to empty even the fattest wallet.

20141018_USP003_0

For example, sporty couples can buy “His and Hers” Quadskis for $50,000 each. These are jet skis that convert into quad bikes in about five seconds (pictured). And they come in a turtle print. Shoppers who wish to relax can buy an elaborate cocktail shaker for $35,000. It comes with a year’s supply of gin and a class for 20 guests with a “mixology” expert.

Many luxury brands are now ubiquitous, which robs them of their snob value. What the truly rich want is “unique experiences”, says Milton Pedraza of the Luxury Institute, a consultancy. Neiman Marcus offers plenty of those. For $125,000 you can ride a Mardi Gras float in New Orleans. For $425,000 you can attend the Vanity Fair Oscar party, having first been glammed up by a style expert so that the other revellers won’t think you are a gatecrasher.

The costliest item in this year’s book is the “House of Creed Bespoke Fragrance Journey”. For $475,000 you can fly to Paris and have a master perfumier create a scent that perfectly suits you. You also get “white-glove car service, private tours and other experiences befitting the royally amazing you”. Your correspondent tried to expense such a trip, for research purposes, but her Scrooge-like editor said no.

Ginger Reeder, who handpicks all the “fantasy items” for the catalogue, does not expect to sell everything. Selling is not the point. “They are chosen for their uniqueness and their publicity value,” she says. In 1997, for instance, Neiman Marcus was unable to offload first editions of 90 of America’s greatest novels, from “The Great Gatsby” to “Catch-22”, but Ms Reeder found some comfort when she received 600 requests for the book-list.

The shop’s most expensive gift ever was a Boeing jet for $35m in 1999. The most memorable have included a submarine ($20m), a mean-spirited camel who spat a lot (Neiman Marcus no longer includes animals in the catalogue) and “His and Hers” mummy cases for $6,000 in 1971 ($35,000 in modern money). A mummy was unexpectedly discovered in one sarcophagus, which caused a spot of bother. A death certificate had to be issued before it could be delivered. Gift wrapping was optional.

Source: http://www.economist.com/news/united-states/21625817-gold-and-frankincense-are-so-two-millennia-ago-hold-myrrh

October 14, 2014

WEALTHY AMERICANS RANK PREMIUM WINES, DIVULGE SPENDING AND DRINKING HABITS IN NEW LUXURY INSTITUTE SURVEY

Market Wired

NEW YORK, NY — (Marketwired) — 10/14/14 — More than two-thirds (70%) of wealthy U.S. consumers, under the age of 50, drink wine at least once a month, and they’re willing to pay premium prices for preferred vintages — an average of $48 per bottle at retail and $64 at a restaurant. These are among findings of the New York-based Luxury Institute’s just released Luxury Brand Status Index (LBSI) premium wines survey.

Consumers 21 and older from households with income of at least $150,000 a year evaluated 20 premium domestic wine brands on the degree to which each embodies the four “pillars” of brand value: superior quality, exclusivity, enhanced social status and an overall superior consumption experience. Respondents also reveal which wines are worth paying premium prices, which they would recommend to people close to them, and which brand they will buy next.

Based on overall 1-10 LBSI scores, Ghost Pines (7.65) earns top honors, and it ranks the highest on all four pillars of value. Known for California winemaker Michael Eddy’s multi-appellation blends of grapes from Napa, Sonoma, Monterey and San Joaquin counties, Ghost Pines is also the brand consumers deem most worthy of a price premium, even though many of its bottles sell for less than $20.

Other highly ranked premium domestic brands include Mount Veeder (7.39), Meiomi (7.30), Bridlewood (7.16) and Edna Valley (6.90).

“Winemaking is the quintessential luxury business in many ways,” says Luxury Institute CEO Milton Pedraza. “Brand value begins with the best-quality raw materials and grows with fine craftsmanship and a relentless focus on execution and consistently delighting customers.”

Contact the Luxury Institute for more details and complete survey data.

Visit us at www.LuxuryInstitute.com and contact us with any questions or for more information.

The Luxury Institute, LLC
luxinfo@luxuryinstitute.com

Source:

http://www.einnews.com/pr_news/229093149/wealthy-americans-rank-premium-wines-divulge-spending-and-drinking-habits-in-new-luxury-institute-survey

October 6, 2014

La Jolla among tops in US for luxury home sales

San Diego Source
Daily Transcript Staff Report
October 6, 2014

San Diego is among the top 10 cities with the highest number of luxury home sales, according to a report by Coldwell Banker, with La Jolla high on the list.

San Diego saw the sale of 927 homes valued at $1 million-plus from July 1, 2013, to June 30, 2014. The Luxury Market Report was prepared by the Coldwell Banker Previews International marketing program.

Topping the list was San Francisco with 2,485 luxury homes sold — up nearly 57 percent from the previous year — followed by Los Angeles with 2,170 and New York with 2,145.

The report included three price points: $1 million, $5 million and $10 million.

Two of San Diego’s ZIP codes saw high sales of luxury homes.

La Jolla’s 92037 ZIP code had closings on 348 homes valued at $1 million or more, the third highest of all ZIP codes in the country at that price tier; 269 homes sold in Carmel Valley and Torrey Pines in the 92130 ZIP code.

Four homes valued over $10 million closed in La Jolla, which ranked 16th, the report said. The most $10 million homes, 58, sold in New York.

The U.S. high-end residential real estate market remains strong, with 48 percent of all wealthy consumers indicating they plan to buy a luxury home within the next 12 months, according to the companion survey of wealthy U.S. consumers with a net worth of at least $5 million, conducted by the Coldwell Banker Previews International program and the Luxury Institute.

Younger buyers are the most motivated to buy; an overwhelming 81 percent of affluent people younger than 35 plan to buy a luxury home in the next year.

Source: http://www.sddt.com/News/article.cfm?SourceCode=20141006cze&_t=La+Jolla+among+tops+in+US+for+luxury+home+sales#.VDQEJSldXDQ

October 3, 2014

Luxury market report reveaks newcomers on list of hottest U.S. citie

New Jersey Hills Media Group
October 3, 2014

Quiet, unassuming areas adjacent to traditional luxury markets have rapidly transformed into hotbeds of luxury real estate in the 12-month period from July 1, 2013 through June 30, 2014. Leading the way and making its debut in the top 5 U.S. luxury markets for homes valued at $1 million+ is San Jose, where high-end home sales are up a staggering 76 percent from this time last year, according to the Luxury Market Report prepared by the Coldwell Banker Previews International® marketing program.

With Silicon Valley luxury real estate on fire, the affluent enclave of Atherton doubled its sales in the $10 million+ range from 2013. Burlingame, located approximately a mile from tony Hillsborough in Northern California emerged in the $10 million+ list for sold homes for the first time, most likely as the result of low inventory in the Bay Area’s most sought-after ZIP codes.

Adjacency is a powerful trend playing out in high-demand luxury cities well beyond Silicon Valley and the Bay Area, notably in Miami. North Miami Beach made its debut among the top 20 cities for $10 million+ homes sold —signaling that luxury buyers are expanding their horizons beyond the typical hotspots of Miami Beach, South Beach and the private communities of Star and Fisher Islands.

Overall, San Francisco led the nation with the highest number of sales in the $1 million+ category—up nearly 57 percent from this time last year.

The U.S. high-end residential real estate market remains strong, with nearly half (48 percent) of all wealthy consumers indicating that they plan to purchase a luxury home within the next 12 months, according to the companion survey of wealthy U.S. consumers with a net worth of at least $5 million (penta-millionaires) conducted by the Coldwell Banker Previews International® program and the Luxury Institute. Younger buyers are by far the most highly motivated to purchase: An overwhelming 81 percent of affluent individuals under 35 plan to buy a luxury home in the next year.

The survey reveals dramatic generational differences:

Penta-millionaires 35 and under reported the highest average purchase price of all age groups – $7.8 million — and have the largest percentage (80 percent) of all age groups paying all-cash.

By stark contrast, wealthy buyers 45-64 paid an average of $2.7 million for their most recent home purchase while buyers 65 and older spent just $1 million.

The report brought to light strong gender gaps:

Seventy percent of women reported paying all-cash for their most recent property vs. 57 percent of men.

Women reported buying more expensive homes than men:

Twenty-two percent of women spent $10 million or more for their most recent property vs. 13 percent of men in the same wealth bracket.

Forty-six percent of women have plans to buy another home in the coming year, up from 31 percent in 2013.

Location, location, location may no longer be the golden rule of real estate:

With the ability to work remotely now a reality for many, only 25 percent of the under-35 age group indicate that location dominates their search criteria.

Instead, 75 percent say that lifestyle considerations are the No. 1 factor driving their choice of which home to buy.

As evidence of this powerful generational shift, 86 percent of buyers 65 and older say that location remains their top priority.

Hottest In-Demand Amenities:

Nearly one-third of all wealthy buyers under the age of 45 count a “green” or “LEED certified” home as more important than it was 3 years ago.

The trend is also catching on among wealthy buyers of all ages, with 21% saying that they want to buy an eco-friendly home, up from a mere 7 percent in 2013.

As homes become increasingly high-tech, 25 percent now consider a fully automated home a priority.

Thirty-seven percent of respondents under age 35 and 30% of those with a net worth exceeding $10 million will prioritize safe rooms in their next homes.

The full list of the Top 20 Best Performing U.S. Cities in Luxury Real Estate by price points of $1 million+, $5 million+ and $10 million+, and the high-net-worth consumer survey results can be viewed here www.previewslmr.com.

Source: http://newjerseyhills.com/luxury-market-report-reveaks-newcomers-on-list-of-hottest-u/article_44f41eb2-e012-5472-a2fc-1047ab4a0690.html

October 1, 2014

Exclusive: Wealthy Consumer Survey 2014

Previews Inside Out
Coldwell Banker
October 1, 2014

You may picture wealthy Gen Y and Millenials as iPad-toting jetsetters who aren’t anxious to tie up their cash in a home. But they are among the most active players in luxury real estate, according to a new survey of ultra-wealthy consumers by Coldwell Banker Previews International® and the Luxury Institute.

“Young affluents recognize the value of real estate,” said Ginette Wright, vice president of marketing for Previews®/ NRT.  “And they are often bullish when it comes to real estate—they own more properties and tend to spend more on average. Their outlook on long-term appreciation is also more positive.”

inforGraphic_final_BLOG

The survey found that 73% of wealthy consumers under the age of 35—the most out of any age group—are considering a purchase of additional residential real estate in the next 12 months for personal use. These buyers also expect their home to appreciate by an average of 16% in the next five years, compared to 13% for buyers ages 45-64 and 11% for buyers 65 and older. Additionally, they are among the biggest spenders, as they paid $7.8 million on average for their last home, compared to $6.8 million for buyers between 35 and 44 years of age, $2.7 million for those between 45 and 64, and $1 million for buyers 65 and older. One reason for the price difference could be due to the kinds of homes they desire. Nearly three-fourths (72%) of respondents younger than 35 said that buying a move-in-ready home is important.

“Our agents in cities like Los Angeles and Miami tell us the same thing: new construction is king right now,” added Wright. “Younger luxury buyers are not looking for a project—they want everything turn-key, right down to the décor and furnishings. All of which, of course, adds to the home’s overall price tag.”

While location and price remain the most important elements in the decision making process for the majority of ultra-wealthy buyers, younger affluents are less inclined to choose a property based on geography. Thanks to convenient travel options and the ability to work from anywhere becoming more widespread, just 25% of the under-35 group reports that location dominates their search criteria, but 75% say that lifestyle considerations drive their choice of which home to buy. At the other extreme, 88% of buyers 65 and older say that location is the most potent driver of their next property search.

Younger affluents are also interested in different home amenities than their seasoned counterparts. Safe rooms (37%), home theaters (36%), pool (34%), outdoor kitchens (33%) and “green” or “eco-friendly” amenities (29%) remain at the top of the wish list for buyers under the age of 35. Compared to the 65+ demographic, those same features ranked far lower: 7% wanted safe rooms, 12% wanted home theaters, 16% wanted a pool, 17% wanted a pool and 10% wanted a “green” home.

To find more interesting comparisons between the age groups, download the complete Wealthy Consumer Survey: http://www.previewsinsideout.com/2014/10/exclusive-wealthy-consumer-survey-2014/

Older Posts »