Luxury Institute News

March 29, 2010

The Millionaires Are Back

Posted in Luxury Market

Alexandra Zendrian, 03.30.10, 06:00 AM EDT

Luxury retailers are reaping the benefits of a more confident, wealthy consumer. Buy Nordstrom and Coach.

During the housing boom in the middle of the last decade, luxury retailers reaped the benefits of home-rich consumers, many of whom sucked out their home equity as soon as it built–or even more quickly–taking out home equity lines and spending like the proverbial drunken sailor, but these sailors had style and a taste for the finer things.

All of the flashy spending made everybody a little giddy. In May 2005 private equity investors Texas Pacific and Warburg Pincus paid $5.1 billion for Neiman Marcus Group, parent of the eponymously named poster child for needless indulgence, Neiman Marcus, and its Bergdorf Goodman subsidiary.

When the housing market headed south and eventually imploded, there was a lot of omelette du fromage on the face to go around as the erstwhile nouveau riche profligate home buyers came up dry on equity and went back the dollar store. For many of the high-end retailers, comparable sales numbers plunged more than 20% for three quarters in a row at the end of 2008 and into 2009.

With the housing market minting no more millionaires, the luxury market if it were to boom again would need a new driver of wealth creation–and it found it in an old friend, the stock market.

Nordstrom, like other high-end retailers, has seen a sales boost lately as consumers emerge from the recession more confident and better able to spend more–not to mention a little richer than they were a year ago thanks to the sharp rebound in stocks since last March.

Investors in luxury retail stocks have already benefited handsomely, maybe even enough to indulge in a few $25,000 Neiman Marcus cupcake cars. Since the market bottom last March, Nordstrom shares have zoomed higher by 246%, Coach is up 247% and Saks has been a monster stock, gaining 395%. The consumer recovery is concentrated at the higher end, which benefits luxury retailers such as these.

Now the millionaires are back and ready to spend. The number of U.S. households with a net worth of $1 million or more went up 16% to 7.8 million from the end of 2008 to the end of 2009, according to a recent Spectrem Group survey. The millionaire count had dropped 27% in 2008.

It’s not only the millionaires who are back. The mega-millionaires, or those with more than $5 million of net worth, were up 17% last year to 980,000, and the affluent population with more than $500,000 in net increased 12% last year to 12.7 million people.

In the market downturn, consumers at every economic level fled the retailers. Luxury Institute CEO Milton Pedraza says millionaires and multi-millionaires came back into the market in the fourth quarter of last year after their fears of continued balance sheet losses were quelled.

Proof of the high-end consumer retail recovery is in the pudding. Nordstrom’s February same-store sales were up 10.3% from a year ago. Saks’ comps were up 2% in February, building on a strong January with sales up 7% from a year before. Even Neiman, which routinely posted monthly drops in same-store sales in excess of 20% produced a 6.2% increase in February–the chain’s third straight month of positive comps. Retailers overall posted a 3.7% gain in same- store sales last month, according to the International Council of Shopping Centers. The low end fared the worst; Wal-Mart came in with a minuscule 1% gain in February.

Thomas Weisel analyst Liz Dunn has buy ratings on Nordstrom and Coach. Of Nordstrom, Dunn says it was able to maintain its top-line well as well as focus on inventory control and cutting costs. Coach has also done well adjusting its price to suit the more value-conscious consumer, she adds.

Sterne Agee analyst Jennifer Milan also has a buy rating on Coach based on the store lowering the price of about half of its collection to under $300, which has allowed the retailer to stay relevant during the downturn and broaden its customer base. Although excessive discounting runs the risk of diminishing a luxury brand’s luster, she’s confident that Coach hasn’t dented its reputation excessively through the lower price point items.

http://www.forbes.com/2010/03/29/coach-saks-millionaire-intelligent-investing-nordstrom_print.html

March 23, 2010

News Release: Luxury Institute Survey: U.S. High Net-Worth Consumers Rank the “Best of the Best” Luxury Brands in Four Fashion Categories

(NEW YORK) March 23, 2010 – The objective and independent New York City-based Luxury Institute reported today the results of the “Best of the Best” luxury brands in the U.S. based on the 2010 Luxury Brand Status Index (LBSI) survey. This survey identifies the top brands that deliver true luxury based solely on the unbiased ratings of wealthy U.S. consumers. The following four luxury categories were rated: Women’s Fashion (37 brands), Women’s Shoes (38 brands), Men’s Fashion (32 brands), and Men’s Shoes (20 brands).

The LBSI asks high net-worth consumers to rate luxury brands by category across four equally weighted components: Consistently Superior Quality, Uniqueness and Exclusivity, Making the Customer Feel Special Across the Entire Experience and Being Consumed by People Who Are Admired and Respected. 

Which luxury providers deliver the best combination of quality, exclusivity, customer experience and peer prestige in the U.S.? 

The “Best of the Best” are: (LBSI score out of 10)

Women’s Fashion

  • o Roberto Cavalli-7.89
  • o Hermes-7.81
  • o Balenciaga-7.80

Women’s Shoes

  • o Christian Louboutin-8.54
  • o Manolo Blahnik-8.18
  • o Zac Posen-8.15

Men’s Fashion

  • o Ermenegildo Zegna- 7.50
  • o Brioni-7.44
  • o John Varvatos-7.29

Men’s Shoes

  • o Ferragamo- 7.69
  • o Hermes-7.46
  • o Louis Vuitton-7.30

“Each year we try to increase the number of brands that are rated by the wealthy and this has brought about some interesting surprises,” said Milton Pedraza, CEO of the Luxury Institute. “Brands that might not be expected to be top-rated by the fashion experts have made the top three. While unexpected, we see consumers as the ultimate experts on brand prestige and this year they are voting on the entire perceived price/value equation of the brand as well as prestige.” 

The proprietary Luxury Brand Status Index (LBSI) survey is the only unbiased measure of the prestige of leading brands among wealthy Americans. A national sample of 1265 wealthy U.S. consumers, half male/half female, with an average household income of $287,000 and average net worth of $3.8 million was surveyed online. Males rated only the men’s categories and females rated only the women’s categories.

About the Luxury Institute (www.LuxuryInstitute.com)
The Luxury Institute is the uniquely independent and impartial ratings, research and Luxury CRM consulting institution that is the trusted and respected voice of the high net-worth consumer. The Institute provides a portfolio of proprietary publications, research and consulting services that guide and educate high net-worth individuals and the companies that cater to them on leading edge trends, high net-worth consumer rankings and ratings of luxury brands, and best practices. The Luxury Institute also operates LuxuryBoard.com, the world’s first global, membership-based online community for luxury goods and services executives, professionals and entrepreneurs.

For Further Information, Please Contact:
The Luxury Institute, LLC
Martin Swanson
Vice President Business Development
(914) 909-6350
mswanson@luxuryinstitute.com

March 22, 2010

Classic to the Core

Posted in Luxury Market

Luxury companies that stayed true to their roots didn’t merely survive the recession, they thrived.

By Jonathan Tepperman | NEWSWEEK
Published Mar 19, 2010
From the magazine issue dated Mar 29, 2010

Feb. 9 seemed like an odd night for a party. New York City was locked in the jaws of one of the coldest winters on record, and the economy was in deep freeze. Yet few of the guests at the Park Avenue Armory, sipping French champagne and munching on Wagyu beef sliders, seemed to notice. They were there for a gala thrown by Hermès, the 173-year-old French bag maker and fashion house. The pretext for the party was the next-day opening of Hermès’s new 278-square-meter men’s store, in a jewel-box Madison Avenue townhouse. The store would be the company’s 24th in the United States and its 250th in the world, but the first anywhere dedicated exclusively to men.

If that was the ostensible cause for the gala, however, Hermès had more profound reasons to celebrate. The company is one of a handful of luxury brands that have not only weathered the global financial crisis but thrived. Most fashion houses slumped last year: according to Bain & Company, the overall luxury market fell for the first time ever during this recession, dropping 10 percent in the U.S. and 8 percent worldwide in 2009. But Hermès managed to increase sales by 8.5 percent, including an 11 percent bump in the final quarter (and a whopping 20 percent gain in the Americas). Its secret? Rather than slash prices, follow fashion, or go downmarket, Hermès decided to focus on what it does best: produce expensive but timeless classics with unimpeachable quality that will last a lifetime.

Call it the end of the trend: as the experience of Hermès and a few other deft brands shows, the crisis hasn’t killed the luxury market. Buyers have just become more discriminating, “moving away from conspicuous consumption, fat logos, and lively colors,” says HSBC analyst Erwan Rambourg, toward tried-and-true stalwarts. As Bernard Arnault, the chairman of LVMH-which saw sales by its flagship, Louis Vuitton, grow by double digits last year-puts it, “with the crisis, bling bling is passé.” Instead, there’s been what Luca Solca of Sanford C. Bernstein calls a “flight to quality,” which a few smart companies have capitalized on by getting back to basics. Even as trendier houses such as Christian Lacroix have gone bust, heritage brands have kept customers loyal by redoubling their focus on what they do best-classic bags and scarves for Hermès, old-fashioned luggage for Louis Vuitton, and for Burberry raincoats based on a World War I template.

Something similar is happening in the hotel industry, where trusted old firms like Ritz-Carlton are holding steady and Asian companies such as Raffles and Shangri-La are expanding by carefully replicating their traditional look and feel in new places. In the car business, Bentley-which traces its lineage back to the ’20s-has just introduced a superpowered new model that gestures back in time even as it roars forward. And the airline industry is trying to get in on the act, with its highest-end carriers introducing first-class air suites that harken back to Victorian rail carriages and the luxe golden age of air travel.

All these firms seem to have recognized that during downturns, people-especially at the high end-don’t stop spending, but they do become much more conservative. A woman who, during the boom, might have bought five expensive handbags a year may now purchase only one or two-but those are even more likely to come from brands known for quality and timelessness. “People are looking to be reassured,” says Rambourg. So they are turning to products, like Louis Vuitton luggage, that isn’t “just a nice bag, but an inherently precious object, almost a piece of art,” says Solca-something “investment grade,” in the words of Tod’s chairman Diego Della Valle. This process favors big, established companies that stand outside seasonal fashion. Milton Pedraza of the New York-based market research firm the Luxury Institute says that at a time like this, successful firms can be “trendy along the edges, but they don’t bet the whole brand on something too edgy. People are not going to buy Versace.”

Having recognized this, heritage brands are doing everything they can to emphasize their traditional core. During New York City’s recent Fashion Week, Louis Vuitton-a 156-year-old company best known for its stodgy suitcases, which are selling briskly even as newer offerings like watches suffer-held an event called “The Art of Craftsmanship,” to educate young hip designers on the importance of old-fashioned values such as artisanship and the mastery of traditional skills.

Hermès too-which got its start as a bridle and saddle maker-is emphasizing its leather goods and ultraclassic ties and scarves over more trendy fare. Though its new men’s store does feature burgundy leather sneakers and an $8,500 baseball glove, these are clearly not the focus. According to Bob Chavez, the CEO of Hermès’s American operation, the lion’s share of the company’s recent sales has come from its core products, while purchases of more evanescent goods like perfume have fallen. Pierre-Alexis Dumas, the 43-year-old Paris-based artistic director, stresses that the company’s core concept is simple: “What does quality mean, and how to you achieve it?” Chavez adds that the firm also aims to distinguish itself through service. “Hermès isn’t about trendy,” he told me. “It isn’t even a fashion house. We are a house of craftsmanship. We are committed to making products that have an enduring quality and are very versatile”-even if that means many longtime customers visit Hermès shops more to repair 20-year-old bags than to purchase new ones.

My own experience with the company bears this out. As I type, I have in my breast pocket a small, tan, pebble-grained leather Hermès notebook that neatly typifies the values Chavez and Dumas stress. A gift from a French girlfriend, the notebook seemed like a wild extravagance when I first got it; I was shocked to discover the price. But after almost five years of hard use, the thing hardly shows any wear (score one for quality). Meanwhile, the two times I’ve taken it into Hermès stores-once in New York and once to the Paris flagship on Rue du Faubourg Saint-Honoré-I’ve been startled by the princely attention I received, despite the fact that I was there to discuss what is basically the cheapest thing the company offers. (Score two for service.)

Hermès works hard to maintain such virtues in several ways. For one thing, it is quite cautious about expansion, even though luxury markets are booming in the developed world. China recently displaced the United States as the second-largest market for luxury goods after Europe, and Hermès’s sales there were up 29 percent last year. Even so, “you’re not going to find Hermès anywhere and everywhere,” says Chavez. Second, the company keeps service standards high by frequently sending all staff back to the mother ship in Paris for training. And the quality of goods is assured by producing most of them in France (as well as Italy and Switzerland)-a rarity in this age of global supply chains. Unlike most other luxury brands, Hermès also insists on producing everything itself, with no licensees. This has clearly cost the company money-for example, it refuses to get into the lucrative sunglasses business because it hasn’t found a way to produce them at an acceptable standard-but Chavez deems it a price worth paying.

But for how long? With Western economies finally starting to thaw, industry analysts and luxury executives are wondering how long this anti-trend phase will continue-and when, if ever, bling will bounce back. Sparkly brands continue to suffer; Bulgari’s sales fell 14 percent last year. And recent research on the psychological impact of downturns shows they can affect a generation’s buying habits for decades.

That said, there are two reasons to expect more trendiness and glitz in our future. One is our baser instincts. Scott Galloway, an NYU professor who studies luxury marketing, expects conspicuous consumption to resume as soon as people have money in their pockets again. “As long as men feel the need to spread their DNA to the four corners of the earth, they’re going to buy Porsches,” he says. “And as long as women look for as many offers for mating as possible, they’re going to keep buying Manolo Blahnik shoes.”

Even if sex appeal doesn’t drive us back to flash in Manhattan, it probably will in Beijing. Retailers are already enjoying a huge boom in emerging markets like China, India, and Brazil, all of which scarcely suffered from the downturn and have exploding middle classes and nouveaux riches. While these countries currently represent only about 20 percent of the global luxury market, Bain predicts that will soon shift as high-wealth individuals in these countries up their luxury spending by 20 to 35 percent in the next five years. The message for Hermès and other luxury brands, in other words, is that they’re unlikely to sell many $8,500 baseball mitts in the States. But a soccer ball in Rio-that may be a whole other story.

With Andrew Bast and Molly O’Toole

Find this article at http://www.newsweek.com/id/235143

Back to Nature – A Rewiring of the Wealthy Consumer’s Mind

The economic crunch and a respect for America’s great outdoors have rekindled travelers’ passion for camping

March 11, 2010
magazine.wsj.com

Sleeping in the wilderness is at the root of American culture. It’s tied to the very notion of the country’s identity: rugged, self-reliant and free. As people drastically rethink the way they travel in light of economic-as well as environmental-pressures, it’s reigniting a return to this simplicity. “It’s a rewiring of the wealthy consumer’s mind,” says Milton Pedraza, chief executive of Luxury Institute, a New York-based research company, of this decrease in materialism. “People are uneasy staying in marbled and gilded temples of opulence, even if they can still afford it,” he says.

This isn’t the first time the Great American Camping Trip has taken a detour. In the late 19th century, the U.S. Census Bureau declared the end of the American Frontier, noting that there were so many settlements, a line no longer existed. This caused alarm about the pace of industrialization and launched a back-to-nature movement. While President Theodore Roosevelt was in office, he enacted legislation establishing five national parks and 150 national forests, as well as protecting dozens of sites and monuments (including the Grand Canyon) under the far-reaching Antiquities Act of 1906.

Read the full article at http://magazine.wsj.com/hunter/nomad/back-to-nature/

March 19, 2010

The personal touch: Old strategy takes on a new meaning

By Claire Adler
Published: March 18 2010
FT.com

A côterie of top jewellers including Steinmetz, David Morris, Moussaeiff, Harry Winston and Tiffany and others – who prefer not to be named – are taking business very personally indeed.

They are making big sales behind closed doors to aficionados, Silicon Valley scientists, jewellery collectors and global powerbrokers in London, Palm Beach, the Napa Valley, Mumbai, Monaco and Hong Kong.

Steinmetz, a specialist in mining, cutting and polishing rare stones, has been selling jewellery in private homes and palaces for 40 years. “Private individuals are our whole business,” says Lior Levin, marketing director at the company that creates bespoke jewellery and partners Sotheby’s Diamonds, designed by New York-based James Taffin de Givenchy.

Steinmetz routinely holds appointment-only days in Hong Kong, London and Mumbai and intimate lunches at a private villa for eight to 10 guests during the Monaco Grand Prix.

“We maximise stock and can move it around efficiently,” says Mr Levin. “We don’t have stores draining our resources and we can retail at an effective cost. A hedge fund manager recently wanted to see pink, blue and yellow diamonds for his wife. We can take jewels and gemstones anywhere on the planet. Meeting sheikhs in their palaces in the Middle East is very common for us, more so than meeting at homes in the UK,” he says.

“When it comes to intimate social gatherings, the hosts are clients who have become our friends,” says Mr Levin who confirms that hosts typically receive a gift of jewellery.

“It’s a bit like an expensive Tupperware party. People are in their comfort zone, it’s less commercial, less pressing, less intimidating and more convenient than a boutique.”

Milton Pedraza, chief executive of the Luxury Institute agrees: “Going to the customer is an old strategy with great relevance in this economic environment. Selling high-end pieces without huge retail investments is a significant opportunity for the downtrodden luxury jewellery industry.”

 Read the full article at: http://www.ft.com/cms/s/0/f808bdfc-3155-11df-9741-00144feabdc0.html

Jewelers on the Web: Luxury jewelry brands have moved online with caution. Now an increasing number are leveraging the internet for ecommerce

Diamonds – Your Guide to Making the Right Choice
AN independent SUPPLEMENT TO THE WASHINGTON POST MAGAZINE
November 2009
Claire Adler

Many fine jewelers have long believed that jewelry needed to be touched and felt before it was bought. But the advent of Blue Nile, the online jeweler that simplified buying an engagement ring online; Net a Porter, a site that rendered buying luxury fashion and accessories online a fashion statement in itself; and Whiteflash, now one of America’s largest online diamond retailers, have helped changed that outlook somewhat.

Harry Winston’s updated website went live last month. Selected pieces are available to purchase online. It also offers access to experts on choosing rings, a behind the scenes look at handcrafting an engagement ring and includes a new ring created specifically for the website.

“With its Blue Book in 1857, Tiffany published the world’s first mail order catalogue,” says Peter Schneirla, Tiffany’s chief gemologist, which sells items online ranging from vases to baby gifts online.

De Beers now views its website as a research tool, an online shop and a point of sale for remote customers. Last year, Parisian jeweler Boucheron, which has one US store in San Francisco, began selling collections online across America. Designer Stephen Webster, one of Neiman Marcus’s top selling jewelers currently experiencing 20 percent growth, is upbeat about online sales. “Our SW collection has been hugely popular with fashion websites which are pitching higher price points by introducing fine jewelry as must-have items alongside fashion.”

While luxury jewelers have held back, believing consumers want them to replicate the store experience online, nothing could be further from the truth, according to Milton Pedraza, CEO of the New York-based Luxury Institute. “Luxury consumers want relevant content, great products, easy navigation, fast transactions and quick delivery,” he says, though he admits: “In the downturn, it’s hard to discern if it makes a difference to consumers in terms of discreet buying and in some cases, better pricing.”

Notably, jewelers including Van Cleef & Arpels and Montblanc prefer using the internet solely to encourage familiarity with their brand.

March 18, 2010

How Carrie Bradshaw Could Have Prevented The Recession

Wendy Furrer
March 18, 2010
STYLEITE

If you think luxury is dead, think again. The industry still has legs… long legs. Yes, 2009 was a rocky road for the industry, but it’s starting to look up. I caught up with luxury guru Milton Pedraza, CEO of the Luxury Institute, to assess the pulse of the market. He anticipates a slow but steady recovery in 2010, but he says unfortunately if unemployment hovers around 10% and housing remains stagnant, demand growth will be dampened.

I see exceptions to this, of course. I’m not condoning it, but if we all had the mindset of Sex and the City’s Carrie Bradshaw, and invested in Manolos before being able to pay for other necessities, like our rent (or a downpayment on an apartment, as it was in Ms. Bradshaw’s case), well then, the luxury industry might very well see explosive growth. Everyone, (moi included) loves beautiful shoes – and, they’re still considered very important necessities for the fashionable set. Perhaps this is why even last year, in a horrendous economic environment, apparel and accessories held up well.

One may argue it’s now more important than ever to look your best – job seekers need to look spot-on for their numerous interviews, before landing the perfect (or the only) job out there. Interesting to note that jewelry was a losing battle in 2009 – but if we’re creative, we accessorize various outfits using just a few special pieces. Pedraza also thanks Greater China for delivering specific demand to the luxury industry last year – after all, it’s an enormous market, with more fashionistas born every day… and they’re all looking to take over the world one day.

Our world looks much different today than it did a year ago – and there’s been a major shift in the consumer’s attitude. Milton Pedraza says consumers are looking for what they have always looked for in true luxury- superb design, quality, craftsmanship and service. He adds, “however, unlike in previous years, today they demand far greater evidence of those attributes and at a lower price. Today they place a very strong emphasis on the customer experience as a determinant of willingness to pay a premium.” Savvy consumers want luxury at a discount – thus, “luxe for less” is in. What’s another trend? With do-gooders on the rise, companies that give back to society are well-positioned with their clients. A recent survey from the Luxury Institute indicates consumers are more likely to be positively influenced by a brand’s charitable reputation. My advice to luxe brands? Keep on giving…

The million-dollar question is, how do luxury brands differentiate themselves going forward? Pedraza says they’ll need to reinvent their product lines for the 21st century even as they offer the classics. He says,

“with so many brands being able to deliver great design, quality and craftsmanship, the differentiator will be delivering an extraordinary customer experience beyond the product. Whether it’s online, at the point of purchase, or the after-sales experience, luxury brands have to go from being transactional to being relationship-driven.”

We know life is all about relationships… and we must cultivate them carefully. Luxury brands need to focus on superior service, deliver unique, one-of-a-kind experiences that will outperform any premium or mass brands. Time will tell, but this just may be the true test in determining future leaders in the luxe category.

http://www.styleite.com/retail/how-carrie-bradshaw-caused-the-recession/

News Release: Luxury Institute Launches the Luxury CRM Association: Luxury CRM Practitioners Network to Share Best Practices

NEW YORK (March 18, 2010) – The New York City-based Luxury Institute today announced the launch of the Luxury Customer Relationship Management Association (LCRMA), a network of Luxury CRM practitioners dedicated to building customer-centric luxury enterprises. The association’s key objective is to enhance the global education of the luxury industry on Luxury Customer Relationship Management (CRM) benchmarks and best practices through primary research, educational events, networking, and conferences.

LCRMA members’ benefits include: 

  • Networking events focused on best practices, benchmarks, and vendor reviews
  • Luxury CRM webinars dedicated to luxury executive research, consumer research, and brand case studies
  • Affluent consumer and executive research coupled with industry insights issued twice yearly
  • Luxury CRM vendor assessment research to identify best-in-class resources to build and support your CRM strategy issued annually
  • Luxury Institute CRM workshops and additional surveys at special LCRMA rates

“We were approached by CRM executives at The Ritz-Carlton® with the request to create an independent and objective body, a safe haven, where Luxury CRM executives could network and share best practices,” says Milton Pedraza, CEO of the Luxury Institute. “We were honored by the request and saw a tremendous need for luxury brand peers to gather and learn best practices from the Institute’s research and from each other. Although we began recruiting members only in January, we now have top-tier members including The Ritz-Carlton, Jurlique, Team One, Bacardi, Buccellati, Moet Hennessy, The Capital Grille, Polo Ralph Lauren, and David Yurman.”

“The Ritz-Carlton is delighted to partner with the Luxury Institute in creating the Luxury Customer Relationship Management Association,” says Kevin Walsh, CRM senior director at The Ritz-Carlton and vice chairman of the association.  “It will provide an opportunity to meet other marketing practitioners while building stronger relationships.”

As part of its member research benefits, LCRMA recently ran a survey with over 100 luxury executives globally using the Luxury Institute database and the database of top luxury and retail recruiting firm Martens & Heads. Following are some key takeaways:

  • Luxury brands recognize the true importance of CRM as it relates to short and long-term brand success:  Nine out of ten Luxury CRM executives believe that having a customer-centric culture and values is linked to long-term growth and financial success.
  • Luxury brands are still implementing the basics of CRM: Only about two-thirds of Luxury CRM executives know their current customer retention rate. For these companies, the average rate is approximately 57%. Traditional RFM (recency, frequency, monetary value) is the type of data most commonly found in Luxury CRM systems and used in marketing campaigns for luxury brands. 
  • Luxury brands are behind on the use of formal customer experience research: Reported data from front-line executives and staff are the most commonly used source of knowledge about the customer experience.
  •  Most luxury brands have not yet recognized the role of the employee selection process in creating a truly customer-centric culture: Just 36% of CRM executives say that their luxury brand selects employees that are service-oriented based on formal testing.
  • Luxury brand employee key performance indicators (KPIs) are not aligned with achieving basic CRM goals: Only one quarter (27%) of Luxury CRM executives say that their organization has financial incentives that encourage front-line staff to collect customer data. 
  • Online represents a significant growth opportunity in 2010 as it is the channel with the highest reported average customer growth rate 
  • The multi-channel luxury consumer is on the rise, but not a strong focus for all CRM initiatives: Most Luxury CRM executives surveyed report that they have multi-channel customers but only 33% of these executives report that they have specific retention and reactivation strategies in place to grow multi-channel customers.

“Today it is essential for luxury brands to be customer-centric at every organizational level,” says Felicity Lewis, senior global manager of interactive and direct marketing and LCRMA vice-chairwoman. “Jurlique strongly believes in the social approach of the Luxury CRM Association. Delivering extraordinary customer experiences to drive sales is a must for every brand in 2010.”

About the Luxury Institute (www.LuxuryInstitute.com)
The Luxury Institute is the uniquely independent and impartial ratings, research, and Luxury CRM consulting institution that is the trusted and respected voice of the high net-worth consumer.  The Institute provides a portfolio of proprietary publications, research and consulting services that guide and educate high net-worth individuals and the companies that cater to them on leading edge trends, high net-worth consumer rankings and ratings of luxury brands, and best practices. The Luxury Institute also operates LuxuryBoard.com, the world’s first global, membership-based online community for luxury goods and services executives, professionals and entrepreneurs.

For Further Information, Please Contact:
The Luxury Institute, LLC
Martin Swanson
Business Development
(914) 909-6350
mswanson@luxuryinstitute.com

March 17, 2010

Watch Brands Signing on, Uneasily, for E-Tailing

By VICTORIA GOMELSKY
Published: March 17, 2010
www.NYTimes.com

TheWatchAvenue.com is a virtual arcade of posh boutiques representing some of Switzerland’s finest timepiece brands. Using ambient street sounds, digital clips of walking, talking salespeople and cyberkiosks brimming with product information, the site attempts to recreate the chic ambience of the real-world salons where luxury watches are typically sold.

Unlike those salons, however, WatchAvenue’s boutiques are not equipped to sell anything. Among its 12 tenants, just one, TAG Heuer, sells its timepieces online – and even then only through links to the sites of its brick-and-mortar partners.

The luxury watch business is committed to offering a deluxe, tactile shopping experience. But as latecomers to Web 2.0, most brands have struggled with translating that to the Internet. Compounding their reluctance to sell online is the Web’s tainted reputation as a breeding ground for counterfeits.

The arguments deflect attention from a more pressing concern about e-commerce: the threat it poses to a brand’s traditional distribution network.

Recent developments, however, suggest that the industry’s entrenched views on distribution, and the Internet’s place in it, are changing.

Hermès was the first to introduce an e-commerce-enabled site, in 2008. While it is restricted to the U.S. market and has a limited selection, the site points to a future in which luxury watches may be accessible 24/7.

“It responds primarily to the need of convenience for buyers who are located far from a shop, so it’s particularly appropriate for countries with large geography like the U.S.A. or China,” said Luc Perramond, chief executive of La Montre Hermès.

TAG Heuer followed about six months ago with the roll-out of its e-tailing program, a portal that directs online shoppers to retail partner sites that are constructed and maintained by the brand for a fee. A sign that TAG Heuer is considering additional online models is the December introduction of Tagheuereboutique.com, where the brand sells eyewear, leather goods and accessories directly to consumers.

“Accessories is the ideal category for us to start in because we have no other channel to retail them,” said Jean-Christophe Babin, TAG Heuer’s chief executive. “If we see they are successful, we might be tempted to sell watches online for a simple reason: to grow the market.”

In the meantime, only one major player in the watch space has been bold enough to go direct with its timepieces. In December, Bell & Ross introduced its European e-boutique, which offers the French-Swiss brand’s entire watch collection, of about 300 models, to online customers in Europe. They can buy through the site directly or have watches shipped to authorized points of sale. In the latter instance, credit would go to the retailer.

“We felt it was more important to take a stand in the e-commerce world than to build the ideal conceptual store online,” Roberto Passariello, Bell & Ross’s director of marketing and communication, said. “Retailers are doing it, and have for a while. This is a way to control our brand image.”

The move has put pressure on other Swiss brands to address the issue. Although scores of them have flirted with Internet customers through expensive Web site redesigns, Facebook fan pages and iPhone applications – and a few, including Cartier, have introduced pilot e-commerce projects in discrete markets like Japan – most high-end watchmakers are missing a tremendous opportunity by not selling online, luxury goods strategists say.

“The future belongs to companies who have relationships with customers directly,” said Milton Pedraza, chief executive of the Luxury Institute, a marketing firm. “Not only does the Internet not cannibalize the retailer very much, it will probably drive business to the retailer.”

Mr. Pedraza’s conviction rests on the notion that luxury shoppers fall into one of two broad categories, the status-driven and the pragmatists, and that brick-and-mortar retailers will always appeal to the former. David Sadigh, managing partner of the IC-Agency, a digital marketing firm based in Geneva, said, “Most haute horlogerie consumers would prefer to buy offline – that is the current pattern. But there is a segment more open to buy online. They would like to put their American Express card down and get their product as soon as possible.”

As Internet retailing continues to outperform other retail channels, both Mr. Pedraza and Mr. Sadigh are confident that more Swiss brands will embrace e-commerce, though, by the latter’s reckoning, they will primarily come from the mid-range segment.

Read the full article http://www.nytimes.com/2010/03/18/fashion/18iht-acawecom.html

March 11, 2010

News Release: Burberry, Louis Vuitton Lead Luxury Firms For In-Store Customer Experience

Luxury Institute Mystery Shoppers Rate Retailers on Merchandise, Ambiance, and Store Personnel

NEW YORK (March 11, 2010) – “In-Store Customer Experiences,” the latest WealthSurvey from the objective and independent Luxury Institute (www.LuxuryInstitute.com), analyzes 240 visits to luxury retail stores in Manhattan by 78 students in Prof. Veronica Manlow’s Fashion Marketing and Research Methods class at Brooklyn College. 

The top three factors that shoppers consider before recommending a brand are merchandise, service and store atmosphere.  Two standouts across several criteria are British fashion house Burberry and French luxury outfit Louis Vuitton, with 77% of shoppers saying they would recommend Burberry to family and close friends, and 74% saying the same about Louis Vuitton. 

Polite, informed, articulate and appropriately dressed personnel lead to better experiences, as does the ability to put customers at ease while browsing the store. Mystery shoppers report that on 94% of Burberry visits the staff made them feel comfortable; Vuitton did the same 76% of the time.

Making customers feel special can also boost sales. “My salesperson made me feel important to the point that I ended up purchasing a pocketbook,” says one Louis Vuitton customer.  Burberry and Vuitton top the rankings for making customers feel special, doing it on 52% and 42% of visits, respectively.

“Stores are the front lines of luxury retail and this is where luxury brands can do some of the greatest good or ill for their reputations,” says Milton Pedraza, CEO of the Luxury Institute. “Putting polite, informed and well-groomed sales personnel on the floor is just the start, but done well it can be a true differentiator.”

 About the Luxury Institute (www.LuxuryInstitute.com)
The Luxury Institute is the uniquely independent and impartial ratings, research, and Luxury CRM consulting institution that is the trusted and respected voice of the high net-worth consumer. The Institute provides a portfolio of proprietary publications, research and consulting services that guide and educate high net-worth individuals and the companies that cater to them on leading edge trends, high net-worth consumer rankings and ratings of luxury brands, and best practices. The Luxury Institute also operates LuxuryBoard.com, the world’s first global, membership-based online community for luxury goods and services executives, professionals and entrepreneurs.

For Further Information, Please Contact:

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

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