Luxury Institute News

February 28, 2010

Beauty in Virtue: Luxury brands can make us look (and feel) truly good

By CABLE DANIEL-DREYFUS
Jan/Feb 2010
HubMagazine.com

The hideous debt hangover of the gimme-gimme credit recession was a sobering wake-up call to many. Goodbye luxury, hello H&M. But the truly wealthy responded differently. Afflicted by survivor’s guilt, they paused momentarily, looked to their favorite luxury brands for guidance, and kept purchasing.

While the world was in a state of shock, smart CEOs of luxury brands busily augmented the purchasing experience by adding a dimension of social good, simultaneously removing buyers’ guilt and building brand equity.

Luxury brands and their celebrity muses started embracing their inner goodness by investing time and money in philanthropic causes and charity work. Whether it is the Grey Goose Character & Cocktails bar for Elton John’s AIDS Foundation, the Rolex Institute or Cartier’s LOVE Charity (see sidebar), these A-list brands would have us believe that giving is the new receiving.

Wealthy non-celebrities have taken note, as have the aspirational masses. Western luxury shoppers are now demanding more than a beautiful design and a non-disposable, fast-fashion item.

Their desire is for feeling virtuous as well as for looking good. Luxury consumers expect their brands to fulfil more than the temporary happiness of retail therapy, or the self-expressive benefit of keeping up.

Conscientious Consumption

This trend has wider implications than just making people feel good about spending money. We’ve moved from conspicuous consumption to conscientious consumption and we want to be associated with beauty — of both object and behavior.

The luxury brands that can best tie their products and heritage to a philanthropic cause that allows customers to express their “goodness” publicly are the ones that will be rewarded with loyalty.

As Milton Pedraza, chief executive officer of The Luxury Institute, a U.S. think-tank, told Qantas Magazine, “If wealthy consumers know a luxury brand is socially responsible, they will give that brand greater purchase consideration over a brand with similar quality and service.”

Celebrities and wealthy consumers are spreading the belief that it is their personal duty to give time and money to causes. It is an updating of old social orders, as traditional buyers of luxury were the upper classes. Upper-class women did not work; they donated time to causes.

The old money believed that it was noblesse oblige to donate both time and money. Giving was not a choice; it was a duty. Today’s “upper classes” are considered by many to be luxury brands and celebrities, and are treated as such.

Read the full article at http://www.hubmagazine.com/content/beauty-virtue

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February 23, 2010

News Release: High Net-Worth Consumers Rank “Best of the Best” Luxury Retailer Customer Experience

Posted in LCEI,Press Releases,Retail

NEW YORK, NY–(Marketwire – February 23, 2010) – Given the tumultuous economy and its effect on luxury retail, the objective and independent New York City-based Luxury Institute reported the top-rated luxury retailer brands in the recently updated 2010 Luxury Customer Experience Index (LCEI) survey. The LCEI identifies the top brands that deliver true luxury customer experiences based solely on the independently verified ratings of wealthy and ultra-wealthy consumers.

The LCEI asks high net-worth customers to rate luxury brands by category across three equally weighted and detailed rating components: Complete Satisfaction, Brand Personnel and Store Environment. The survey also measures Problems and Resolutions, Worthiness of a Significant Price Premium and Willingness to Recommend.

The “Best of the Best” Luxury Retailers are: (LCEI score out of 10)

--  Bergdorf Goodman - 8.23
--  Nordstrom - 8.15
--  Barneys - 7.91

“The economic recession and individual brand responses have generated quite a bit of movement in the rankings,” says Milton Pedraza, CEO of the Luxury Institute. “For example, Barney’s, which had not been highly ranked in previous periods, has risen significantly due to a multi-year focus on improving customer experience. We have seen a tremendous interest in luxury brands seeking to dramatically redesign their customer experience, with a focus on both Luxury Cultural CRM initiatives and Analytic CRM projects working together to deliver measurably improved customer experiences.”

The proprietary Luxury Customer Experience Index (LCEI) survey is the only unbiased measure of true customer experiences of leading brands among wealthy and ultra-wealthy Americans. A national sample of 1,265 wealthy consumers was surveyed online in January 2010.

For Further Information, Please Contact:

The Luxury Institute, LLC
Martin Swanson
Business Development
(914) 909-6350
mswanson@luxuryinstitute.com

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February 21, 2010

Exclusive men’s wear only stores

Posted in Luxury Market,Retail

By Simon Brooke
Published: February 20 2010
FT.com

As the biannual string of women’s wear shows shifts its axis from New York to London this weekend, a litany of predictably extreme outfits will filter on to the catwalk. And while the men’s wear shows have steadily shifted up the divorced-from-real-life scale with each new season, when it comes to the shops in which the clothes are sold, it’s a rather different story. Here practicality is key.

As the men’s wear market flourishes, luxury retailers have started to launch their men’s collections into boutiques of their own, differentiating their men’s wear offering from their women’s wear in both atmosphere and aesthetic.

Earlier this month, Hermès opened its first men’s store on New York’s Madison Avenue. It measures 2,450 sq ft and boasts an interior akin to a traditional tailor’s shop. Further along Madison Avenue, Ralph Lauren is planning to convert its Rhinelander Mansion flagship store later this year so that it caters purely for men’s clothing and accessories. Upmarket bag brand Coach will open a new men’s store in Bleecker Street in May.

Across the pond the patterns are similar: the Parisian luxury brand Lanvin closed its women’s wear store on London’s Bond Street in September 2008 and opened a men’s emporium in the celebrated tailoring district of Savile Row in the same month. Vivienne Westwood opens a new men’s boutique in Conduit Street in March, following the success of her Tokyo men’s-only outlet. And last year Louis Vuitton opened an exclusive men’s section in Harrods alongside the department store’s revamped men’s wear department, as well as a “men’s universe” in its own Singapore store.

For Hermès, the new male-oriented store is designed to offer everything under one roof. As Veronique Nichanian, the brand’s artistic director for men’s products, explains: “We had a desire to showcase the entire Hermès world for men, through clothes, shoes, bags and luggage.” According to Mike Tucci, president of Coach’s North American retail, their new men’s store is, “a laboratory where we can handpick pieces and pilot emerging collections.”

Max Reyner, insight editor at trend forecasters LS:N Global, says: “Men’s wear has not been as badly affected by the recession as women’s wear, so there is more potential here.” But men still need to be courted. “It’s about creating something like a den or gentleman’s club with dark wood and no funky music where they’ll feel comfortable about spending time ‘grazing’.”

Milton Pedraza, chief executive of research organisation the Luxury Institute, believes emporiums of masculine luxury, such as Bourdon House, are part of a broader trend in the luxury sector towards a focus on service. “These stores present an opportunity to deliver that excellent customer experience,” he says. Unlike women, says Pedraza, men don’t particularly enjoy shopping and so brands have to work harder to appeal to them. “Male luxury customers are used to service by experts such as their tailors.”

Read the full article at http://www.ft.com/cms/s/2/5d69e730-1ce2-11df-aef7-00144feab49a.html

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February 18, 2010

How Custom Eyewear Will Change the Industry and Your Look

Posted in Eyewear,Retail

FastCompany.com
March 1, 2010
By Jeff Chu

We live in the age of customization. You can customize almost anything: your sneakers, your Twitter interface, your car, your kitchen cabinets, your own face. And yet, says British eyeglass designer Tom Davies, “almost nobody has glasses that really fit them.”

Prescription eyeglasses are always, in a sense, custom-made, but the focus in this $16 billion U.S. industry has been “the lenses, not the fashion statement,” says Diane Charles, president of the Opticians Association of America. “Most frames are made in one size. So is there a need for custom? You bet.” And Tom Davies wants to meet it.

Ironically, Davies doesn’t need glasses. He began designing them in 1997, after graduating from college with a degree in film production. “All my friends were going to Asia for a year, so I went too. I applied for every single creative job in Hong Kong,” he says. “This one watchmaker wanted to start into eyewear. He didn’t have a clue and I didn’t either.” But Davies learned.

After returning to England in 2001, he built his own eyeglass business, creating a bespoke service after a friend suggested he could make a living from it. He arbitrarily set his price at £5,000 (then about $10,000). He has fitted Middle Eastern royals, and Kevin Spacey and Rowan Atkinson have worn TD Tom Davies glasses on-screen.

Davies’s service, in which he designs a frame based on measurements he takes himself, was — and is — a nice niche, but he has leveraged the Internet and skilled, low-cost labor in China to pursue mass customization. His product runs about $600, what you might pay for a high-end pair of designer frames but well above the U.S. average of $126. It draws from an existing range of shapes, finishes, and about 60 colors, and Davies is training opticians to do the measuring.

The linchpin in Davies’s production process is a proprietary Web-based system called Supertool, which links his growing network of opticians to his Chinese workshop. After your optician measures you and helps you choose style and color, he’ll plug the measurements and choices into Supertool; instantly, the data will pop up on a designer’s screen in Shenzhen. Within two hours, that designer will have created a blueprint and a parts list for your frames. Then a team of technicians chooses the right arms — for efficiency, “they are semifinished,” Davies says — and builds the front piece to order. Three to four weeks later, the glasses can be on your face.

“His point is spot-on: More and more people want customization,” says Milton Pedraza, president of the Luxury Institute. But because it’s new to eyewear — a couple of firms custom-make frames from atypical materials like wood and the Web-based Indivijual perilously asks you to measure yourself — “there’s an education process,” Pedraza says. “He will need to create a willingness to pay.”

In 2009, TD Tom Davies made 36,000 frames, triple his 2008 tally. Sales have been strongest with buyers who need unusual sizes. “This has been a godsend for men with really big heads and little women that I had to put in kids’ frames,” says optician Arlene White of Optical Heights in Roslyn, New York, one of Davies’s first U.S. stockists.

But Davies knows his toughest task will be to sell consumers with normal-shaped heads a product they never knew they needed. He has launched his own YouTube channel, with videos showing people how his glasses are made, but he’s reminded of the challenge every time he tries to make a pair for his own father. “My dad has 15 pairs of glasses. He got them from Walmart,” he says. “It’s heartbreaking.”

http://www.fastcompany.com/magazine/143/next-design-golden-eye.html

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February 15, 2010

What’s a Dress Worth?

Posted in Luxury Market,Retail

The online retailer Gilt Groupe offers a great deal: Buy designer clothes at deep discounts. But is it good or bad for fashion?

By Andrew Rice Published Feb 14, 2010

“There is always a risk to the integrity of your brand whenever you discount,” said Milton Pedraza, CEO of the Luxury Institute, a research and marketing group. “What you’re telling consumers is ‘We’re really kidding, it’s not really as valuable as we told you it was.‘ ”

The wave rolls in every day at noon Manhattan time. It gathers invisibly, out in the digital netherscape. A few minutes before the hour, the online retailer Gilt Groupe blasts out an e-mail, and a hush falls over many a workplace, as phone calls are cut short and spreadsheets minimized. Gilt Groupe is in the business of selling high fashion at deep discounts, and as you might deduce from the company’s name, with its Frenchified “e,” it presents itself as an exclusive club. In reality, that’s just artifice-Gilt is a viral-marketing phenomenon. During the hour after its weekday sales kick off, between noon and 1 p.m., the company claims, its site is visited by an average of roughly 100,000 shoppers. For that time, it might as well be the most crowded store in New York.

Countering predictions that a deep recession would mean the death of demand for luxuries-a new flagellant aesthetic-Gilt has thrived through the downturn, selling labels like Rodarte, Derek Lam, Christian Louboutin at prices around 70 percent off retail. Within the e-commerce sector, what Gilt does is called a “flash sale,” or a virtual version of a designer sample sale. The site’s best finds disappear immediately, and scarcity promotes covetousness, competition, and loyal attention. A number of other recently launched sites employ a similar business model, but none has had as much of an effect on the New York fashion industry as Gilt Groupe. Its executives say that in 2009, just two years after its launch, it posted revenues of $170 million-a stunning figure for a start-up. (Internal sales and site-traffic numbers are impossible to confirm, however, as Gilt is a private company, so caveat emptor.) This year, the company is forecasting that its revenues will more than double.

Gilt Groupe recently surpassed 2 million members, three quarters of whom are female, and they’re disproportionately young and high-income: basically a designer’s notion of the ideal customers. Gilt seldom advertises; instead it crawls through personal networks, offering current members incentives to invite their friends to join the Groupe. “All of a sudden, one day, every woman I knew was on it,” says a friend of mine who worked last year as an executive at a major New York corporation. She says her colleagues would often push lunchtime meetings back a few minutes just so they could check out Gilt promptly at noon. Nobody wanted to miss the wave.

The success that Gilt has enjoyed stands in stark contrast to the gloomy mood that has gripped the rest of the fashion industry. “What Gilt did, I think it’s a combination of vision and smarts and timing,” says Steven Kolb, executive director of the Council of Fashion Designers of America, which has been working in partnership with Gilt Groupe, acting as a bridge between the company and designers. Last year, as incomes tightened and the fashion industry was left with ruinous amounts of inventory, the company’s business model proved to be a countercyclical savior, sucking up goods that otherwise would have moldered. “There was an abundance of merchandise that needed an outlet,” Kolb explains. “They created a genuine fashion space that felt right and had an aesthetic and clearly had a consumer base.”

In the view of Gilt Groupe executives, this is what makes the business work: It offers designers a safety net-and potentially more. Some designers have found Gilt’s model lucrative enough that they’ve decided to do away with their brick-and-mortar sample sales; others are now making clothes specifically for the site. “We really strategize with these brands,” says Alexandra Wilkis Wilson, one of Gilt’s founders. “We’re not just about taking leftovers.”

To a fashion business racked by losses and self-doubt, Gilt’s success suggests that however pestilential the times, consumers still desire finer things. The bad news is, they don’t want to pay retail. Gilt executives say that customers prize the site as an experimental channel, a way of trading up to a label that they might not be able to afford at full price. But another possible scenario-one more troubling to the industry’s future-is that Gilt customers are taking a good deal where they can find it, and, perhaps, adjusting their cost expectations downward.

Designers take a Victorian stance toward discounting: Almost everyone does it, but nobody likes to admit it. Before the recession, many high-end labels wouldn’t have been caught dead disposing of their overstock in a forum as public as a website, for fear of debasement, but these days, brand integrity looks like, well, a luxury. Still, many designers wonder about the long-term consequences of the bargain they’ve struck. They worry that Gilt and its brethren may be undermining the expectation, carefully cultivated over many years, that the finest things always come at a premium. “There is always a risk to the integrity of your brand whenever you discount,” said Milton Pedraza, CEO of the Luxury Institute, a research and marketing group. “What you’re telling consumers is ‘We’re really kidding, it’s not really as valuable as we told you it was.’ ”

Read the full article: http://nymag.com/fashion/10/spring/63807/

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February 7, 2010

Zale pines for shoppers’ love on Valentine’s Day

Posted in Jewelry,Luxury Market,Retail

Sun Feb 7, 2010

NEW YORK (Reuters) – U.S. jewelry chain Zale Corp must win back the love of its shoppers this Valentine’s Day to stay afloat, but may not have the resources to do so.

Zale, the largest North American jewelry store chain with about 1,900 stores, missed out on the sector’s fledgling recovery over the holiday season and has been trying the patience of suppliers and creditors alike.

It is heading into the critical Valentine’s cycle just after it purged several top executives, including its CEO, and is facing serious concerns about its financial health.

“It’s more important from a perception standpoint than a cash standpoint that they have a good Valentine’s Day,” said Michael O’Hara, an expert in jewelry restructurings and founder of Consensus Advisors in Boston.

“If they have another negative comp for February, that might really spook the vendors. And if that spooks the vendors, they could tighten up their trade terms or they might walk away from proposed long-term trade credit deals,” he said.

Zale has posted losses in seven of the last eight quarters and suffered a 12 percent same-store sales drop over the holidays. A liquidity crunch is curbing the Dallas-based chain’s ability to put together a proper advertising campaign.

The Wall Street Journal reported last week that Zale was pulling back on much of its Valentine’s Day and Mother’s Day ads, leaving it with few tools with which to woo shoppers. It may also hire turnaround firm Peter J. Solomon & Co to advise it, according to the Journal.

However uncertain its next steps, skimping on the marketing could be a deadly mistake, said Milton Pedraza, CEO of the Luxury Institute.

“It’s part of that vicious cycle: it’s another nail in the coffin,” Pedraza said. He estimates it will take another two years for the market “to really come back.”

Zale is offering discounts online — like 75 percent off a diamond heart-shaped pendant — to entice early shoppers, and a February sweepstakes as sales this month may determine how much wiggle room it will get from suppliers.

The company is now squeezed between Tiffany & Co on the high end, and by Wal-Mart Stores Inc on the cheaper end. It is also in cutthroat competition with its most immediate rival, Signet which operates the Kay Jewelers chain, and saw holiday sales rise 7.6 percent.

Some $670 million in jewelry inventory has been liquidated into the marketplace since 2008, according to Silverman Jewelers Consultants, a disposition company that oversaw going-out-of-business sales at Friedman’s and Whitehall, once the third- and fifth-largest North American jewelers, respectively.

Zale is getting some relief from pricing pressure from going-out-of-business sales for the first time in years as the liquidations of rival chains Fortunoff and Finlay are over.

CRUNCH TIME

Valentine’s Day, the industry’s third-biggest yearly event, could boost Zale’s coffers ahead of a lull in sales until bridal and Mother’s Day shopping pick up. The April through June period is the second busiest after the holiday season.

As of October 31, 2009, Zale had cash holdings of $24 million, down 31.7 percent from a year earlier. It does have another $129 million available under a $600 million credit line that expires in August 2011.

But Zale has to keep the amount available on the line above $50 million or it will trip its covenants.

It was not clear how much cash Zale has to spare. In November it seemed to have a stash as it bid $755,000 to buy back the trade name of its former luxury unit Bailey Banks & Biddle at a Finlay bankruptcy auction. It lost to a rival.

Even if shoppers do return, they remain price conscious.

“The dollar spent per unit is lower because at Valentine’s Day, you are only buying for one person,” said Gary Kulp, president of the retail division at Gordon Brothers Group.

Zale declined to comment for this story, citing a “quiet period” ahead of the company’s upcoming earnings report.

Still, the company’s poor performance in December has left a question mark over its long-term prospects.

Zale’s shares are down 75 percent from a September peak. As of January 15, shortly after CEO Neal Goldberg left the company, 13.6 percent of Zale shares were held short by investors betting shares would fall further. That is far above the 3.5 percent average of New York Stock Exchange-listed stocks.

Just before Christmas, Zale canceled some orders with suppliers and delayed payments. Some of Zale’s vendors have also tightened their credit terms.

Silverman’s Chief Executive Bob Epstein said he has gotten more calls from suppliers looking to sell their wares through a liquidator because of the industry contraction.

“In the past, vendors were able to go to a chain like Zale’s and sell them millions of dollars of jewelry. Now nobody wants to sell to Zale’s because they don’t know what is going on there,” Epstein said.

Adding to its woes, Citibank told Zale last year that it would not renew an arrangement for Zale’s U.S. customers private-label credit cards after it expires next year. Those credit cards are used in about 40 percent of its U.S. purchases.

Zale is also using more part-time staff, but that may have alienated shoppers who prefer individual attention. And the company lowered inventory levels 10 percent in the year that ended in November to cope with falling sales.

“A jewelry retailer has to have a broad enough assortment in size, shape, in quality so that they (clients) don’t walk out the door if they don’t find what they need,” said Leonard Polivy, a vice president with Gordon Brothers Group.

(Reporting by Phil Wahba and Emily Chasan; Editing by Maureen Bavdek)

http://www.reuters.com/article/idUSTRE61617O20100207

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February 1, 2010

Musical Chairs – Changes in Leadership in the Watch Industry

Posted in Luxury Market,Watches

This season, the watch industry’s top trend seems to be a change of CEOs. Whether shrouded in secrecy or accompanied by emotive expressions of regret and frustration, a slew of CEO departures leaves the luxury watch industry facing its biggest shake-up in three decades.

Published in Plaza Watch No. 10, 2010
By Claire Adler

Following five years of remarkable growth, the watch industry is now going through a wind tunnel, with CEO s and top level executives seemingly dropping everywhere. What will this crisis in leadership bring, asks Claire Adler.

As industry heavyweights switch positions, sometimes moving between the most powerful brands, some have called it a game of musical chairs. From Zenith’s apparently indefatigable Thierry Nataf, now the head of communications and senior vice president at auction house Phillips de Pury and recently replaced by former Chopard executive Jean-Frédéric Dufour, to Lange & Sohne’s Fabian Krone being replaced by his former chief operations officer Jerzy Schaper as interim CEO, to chair of the Swatch Group Nicolas Hayek taking over the helm at Jaquet Droz – resigning and re-assigning is all the rage.

“I am above all a creative designer with little inclination for corporate politics, plotting and U-turns,” wrote a disillusioned and exasperated Rodolphe Cattin in a press release marking his split from the Franck Muller group in July. “I strongly deplore the attitude and behaviour of some of my closest associates who may well see in my departure a chance to grab the spotlight….I maintain my creative soul, my entrepreneurial spirit and am truly relieved to be regaining my freedom.”

No other departure was so publicly emotive, but the list goes on. Baume & Mercier lost Michel Nieto, Romain Jerome lost Yvan Arpa, Perrelet lost Marc Bernhardt and Jacquet Droz lost 37 year old Michel Emch, who was rumoured to have struggled with old school thinkers. Elsewhere, in the most upbeat development of them all, in a long anticipated move, Patek Philippe now sees third generation Thierry Stern in charge, having taken over from his father.

Yet in the process of these moves, some brands have sacked entire departments. Thierry Nataf left Zenith after seeing a 25% decrease in sales and making redundant 24 employees – 10 per cent of Zenith’s staff. Earlier this year, Franck Muller cut 92 of its 550 jobs.

- The CEO shake-up is down to three key factors, says Milton Pedraza, CEO of the New York based Luxury Institute, as focussed as ever while speaking on the phone from a beach in Florida.

- If you’re in charge, you get the blame when the economy is out of control. Secondly, if boards are dissatisfied or if people haven’t seen eye to eye, there is no better time than now to make a change or disconnect if things aren’t working out smoothly.

Thirdly, some executives themselves are looking for a change, while companies are taking the opportunity to hunt for top talent. where did the profits go? The economic crisis certainly seems to have proved billionaire investor Warren Buffett’s observation true. “It is only when the tide goes out that you learn who’s been swimming naked,” he said when news of the crash first broke last year.

According to a forecast released by consulting firm Bain & Co. in October, the luxury goods industry is unlikely to recover from the downturn until 2011 or 2012. Claudia D’Arpizio, a Bain consultant in Milan, told the Wall Street Journal she expects the industry’s heavyweights, LVMH, Richemont and Gucci Group, to hold up better than smaller players. Retailers have drastically cut their inventories of luxury products over the past year, contributing to a steep decline in LVMH’s watch sales of 22% in the third quarter of 2009. Sales of watches at Richemont dropped 18% in the five months leading up to August. In the first six months of 2009, Swatch Group’s gross watch and jewellery sales were down 16.4%.

In light of the fact that the luxury goods industry is in a slump, it’s hardly a surprise that people aren’t getting on as famously as they used to, marketing departments are slimming down, glamorous, gold-edged invitations are harder to come by and high profile, opulent new watch releases are fewer and further between.

But what is harder to understand is what happened to the industry’s mega-profits amassed during the last five years of the boom. From 2003 to 2008 the total value of annual Swiss watch exports jumped from 10.1 billion Swiss francs to 17 billion Swiss francs. But from January to August 2009, the figure for Swiss watch exports stood at just 8.1 billion Swiss francs.

PAYBACK TIME

Many companies who are now suffering expanded too fast and too heavily, according to Dr Scilla Huang Sun, portfolio manager for the Julius Baer Luxury Brands Fund, Swiss and Global Asset Management.

- Some luxury watch companies invested in non-profitable areas like megastores in bad locations, she says. Others didn’t have an innovative and authentic product offering but too many me too products. Some companies over-priced their products and some others took on too much credit and didn’t plan for a rainy day.

Jean-Daniel Pasche, president of the Federation Horlogère, the Federation of the Swiss Watch Industry, puts the multiple CEO moves down largely to the economic crisis and remains convinced the future of the watch industry is safe.

- The Swiss watch industry went through a deep crisis in the late 1970s with the advent of electronic watches, he says, pointing out that the change in technology at the time cost the industry 60 000 jobs.

- Companies should now try to control the distribution in order to avoid big inventories, he advises.

But some believe this game of musical chairs can be explained by problems that are more deeprooted. Currently consulting an increasing number of world-class luxury goods brands on customer relationship management strategy, Pedraza of the Luxury Institute believes the watch industry needs to get cracking on initiating some radical changes and serious brand building. He says a “triage” is at play and refers to the recent slew of CEOs leaving their jobs either through resignation or sacking, as part of a “Darwinistic game” in which only the best luxury goods companies will survive.

Pedraza is now seeing a change of focus at play amongst top leadership. He is noticing huge demand in the luxury industry for CEOs with a new skill set – particularly in corporate social responsibility, customer relationship management and knowledge of how to exploit online media and social networks.

“While a novel idea today, online marketing will become traditional luxury marketing in the next few years,” states the Luxury Institute’s 12 Rules for the 21st century luxury enterprise.

- The watch industry is too product focused and needs to become customer-centric, says Pedraza, pointing out that luxury is lagging far behind other industries.

- Luxury goods are behind hospitality and automobile brands when it comes to gathering, analyzing and using customer data, and combining sales force and online social networks in their marketing strategy. The fashion industry, with sophisticated brands like Chanel, Gucci and Louis Vuitton are also more customer-centric. But in comparison jewellery and watches are in the Stone Age. They are still watchmakers and jewellers, not brands whose primary goal is to create a relationship with the customer, maintains Pedraza, who runs in-depth annual surveys of the most coveted and respected luxury brands amongst the American market.

Pedraza believes that the criteria by which most jewellery and watch brands evaluate their success are stuck in the distant past. He says the mistake some top executives are making lies in their focus on metrics for products and channels, such as sales per square foot and inventory turnover. Some CEOs and top management are just starting to turn their attention to customer retention, crossselling and up-selling and this is the switch that is needed, he says.

In line with Pedraza’s predicted luxury success formula, some watch industry CEOs have clearly been upping the ante in the last year when it comes to investing in customer relationships and online presence.

ONLINE ACTIVITIES

Roger Dubuis is a brand which underwent a dramatic change in leadership in 2008, when owner and CEO Carlos Dias sold the company he had founded. Current CEO Matthias Schuler, who honed his skills at Procter & Gamble, is determined to make Roger Dubuis more customer-centric. At the impressive and beautifully designed factory outside Geneva earlier this year, Schuler explained to me his commitment to significantly improve repair times, developing an interactive website and a VIP after sales service – all missions he has since accomplished.

Max Busser, CEO of MB+F, who make 120 watches a year with a starting price of $66 000, created a Facebook page in May which currently has 2600 members. Some of Busser’s earliest online fans have since turned out to be his most important customers. Meanwhile, Busser’s blog A Parallel World, draws in readers with postings about art and design and science and technology as well as horology, including a recent post about a eye-wateringly beautiful Wally yacht with a Hermès designed interior. Having boosted revenue seven fold during his time in senior management at Jaeger leCoultre and nine fold as CEO of Harry Winston, Max Busser is now delighted that while his young, niche brand has a limited marketing budget, his internet activity is impacting sales remarkably well.

NEW LEADERSHIP

IWC recently came up trumps, rated number one by ultra-wealthy consumers in the Luxury Institute’s 2009 Luxury Brand Index survey, for, amongst other things, its online community of over 100 000 collectors from around the world and its impeccable service.

Meanwhile, at the Venice Film Festival this September, Jaeger-leCoultre CEO Jerome Lambert demonstrated his commitment to building close and lasting connections with top clients. He flew in a British collector and his wife to Venice to attend a dinner in the company of the Duchess of York and Catherine Deneuve, introducing them to the spectacular Hybris Mechanica, rumoured to have a price tag of 2 million euros. The couple could be seen chatting non-stop from breakfast till twilight with the London boutique manager, who had years ago introduced them to the brand’s watches and with whom they now enjoy a strong friendship.

For those companies now tasked with identifying new CEOs or those adapting to new leadership, the future could still be bright. In the 1980s and 1990s, the consumer goods industry underwent a shift in senior leadership parallel to the current experience, says Pedraza. Companies like Procter & Gamble went through a globalisation and standardization process when they moved from the factory age to the global age. Pedraza cites Colgate Palmolive as an example of a company which used to be structured for localised operations, with departments duplicated in many countries but which went through a process of three turnovers of staff before succeeding in operating brilliantly today.

Still, with fewer buyers around, the aspirational affluent having left the market, and the richest people reluctant to buy, brands now need to fight for every customer. The new CEOs will certainly have their work cut out.

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