Luxury Institute News

July 26, 2010

Love Thy Customer, The Importance of Client Relationship Management

The 2010 American Express Survey of Affluence and Wealth, which surveyed 2,500 respondents with discretionary spending between $100k-$500k, unveiled that 86% of participants prefer to shop in stores with a reputation for great pricing. The recession has affected consumer mentality even at the affluent levels of the spectrum where value is now paramount.

Earlier Fashion’s Collective introduced the importance of luxury brands cultivating a personal approach as a means of engaging customers (Cultivating a Personal Touch ). Now more than ever taking that personal approach with customers is a major focus for the luxury sector to garner sales.

Previously luxury brands only gave special attention to customers who proved themselves worthy through their spending habits with the brand. However today the tables have turned, customers seek more personal approaches as a means to justify paying premium prices, if a brand does not acknowledge them from the start it fails at capturing lifetime customers.

For instance a customer can spend $2,000 on the first purchase, he also has the propensity to come back three times a year to spend that same amount over the next four years, bringing the net value of $24,000. However such propensities need to be cultivated through positive experiences and relationships between the customer and the brand.

According to Milton Pedraza, the CEO of New York based Luxury Institute who specializes in consulting CRM initiatives for brands,”Luxury brands have become too transactional as opposed to relationship focused. Even if someone buys a simple necktie, there needs to be a level of consumer acknowledgement. This is the essence of clientelling, the foundation of building long lasting relationships between the brand and their customers”.

Rather than just acknowledging the customer who spends heavily on a first time purchase, luxury retailers are aligning to pay attention to lower tier customers. By building up a relationship with smaller spenders over time builds their customer spend and customer lifetime value to the brand as a whole.

As consumers evaluate their spending habits, Clienteling or otherwise known as Client Relationship Management (CRM) has become a major focus ever since the recession hit luxury retailers. Clienteling is the essence of a brand taking the time to get to know their customer, continuing the conversation after purchase, remembering special occasions and over all offering a bespoke customer service.

As brands aim to cast a wider customer net with clienteling inatiives we at Fashion’s Collective are seeing a few savvy luxury brands extending clienteling inatives into the web experience.

Over the next couple of weeks we will be sharing how certain brands and companies are innovating within the CRM space.

July 24, 2010

If It Causes Stress, Is It Really a Vacation Home?

Published: July 23, 2010

EVERYONE needs a place to live, but no one needs a second home. So choosing which vacation home to buy and where should be enjoyable. Still, people routinely buy second homes that end up being less than they expected, or worse.

I speak from experience here. My wife and I own a condominium in Naples, Fla. One of our neighbors is as bad as neighbors come. In Florida real estate parlance, he is a “condo commando” – a busybody who questions other residents on what they are doing and then routinely complains to the condo’s board about them.

Bad neighbors abound everywhere, but they seem particularly bothersome when they are in places where you go to relax. Shouldn’t everyone just be grateful to be sitting in the sun or at fireside near the ski slopes?

The dynamics of second homeownership often conspire against this, said Milton F. Pedraza, chief executive of the Luxury Institute, an organization that does research on wealthy consumers. “People become slaves to their homes. They buy into the headlines and that makes them pretty miserable with their vacation homes.”

Mr. Pedraza said one common cause of second-home misery was that owners failed to factor in how much time and money were needed to maintain a place from hundreds, if not thousands, of miles away.

My colleague Ron Lieber recently wrote about answering the tough financial questions that children ask their parents. That made me think that adults buying second homes should ask equally tough questions – of themselves. Why, after all, do you want a second home? What are you going to use it for? Do you have any idea how much it is really going to cost?

While many parts of the country are still struggling with falling home prices, a survey from the National Association of Realtors said sales of second homes were up 7.9 percent last year, compared with a 7.1 percent increase for primary residences. And this is the time of year when people begin to look for the winter rentals that often turn into second homes.

Before you jump in, here’s a look at what you should know before buying a second home.

IT’S NOT AN INVESTMENT If the recession taught people anything, it is that the value of a home can go down. Vacation properties are certainly not immune.

Beyond the ups and downs of the real estate market, Mr. Pedraza said most buyers underestimated the maintenance costs of a second home.

“Think of the 20 to 25 suppliers who come to your house for air-conditioning, heating, landscaping, the pool man, the plumber – now you’ve got to procure those same suppliers for another property,” he said. “If you have the money and it doesn’t mean anything to you from an investment point of view and you can hire the staff, then fine.”

Deb Howard, a realtor in Lake Tahoe and chairwoman of the National Association of Realtors’ resort and second home committee, said many people looked at the properties as a place for the family to gather and as something to leave to the children. But they still need to consider the carrying costs of the property.

Ms. Howard says her first question to buyers is always what kind of lifestyle they expect to have. But her second is whether they need to rent the home to cover the costs. “Sometimes it’s not the right decision,” Ms. Howard said. “You’re not going to use it enough. Or it’s not going to meet your financial goals.”

IT’S LESS RELAXING What persuades people to buy a second home is usually a vacation. A second home, they think, will keep the party going with the added benefit of having a place of their own.

“They only see the benefits – sitting by the pool, having a piña colada, driving into the driveway and leaving the Rolls Royce there,” Mr. Pedraza said. “They never figure the gate is going to be broken and they will need an electrician.” (You will also be making your own piña coladas and cleaning out the blender.)

Enthusiasm for a place can also lead to a hasty purchase. Barry Peele, of Sotheby’s International Realty in Beverly Hills, said a client recently bought a waterfront home in Miami only to find out after the closing that the dock would not accommodate his yacht. Suddenly, the convenience of walking out to his boat – the original attraction – was gone.

And then there is the pressure to use the place. “People have high expectations of their usage,” said Brian Sharples, chief executive of HomeAway, which runs several vacation rental Web sites. “The industry average is 30 days of use per year.”

For full article see: or A version of this article appeared in print on July 24, 2010, on page B6 of the New York edition.

July 20, 2010

Luxury Retailers: Cautiously Shoptimistic

Posted in Luxury Market
Tags: ,

Karen Katz, EVP of luxury retailer Neiman Marcus Group, would just as soon forget 2009.

“Luxury retail in general took the hardest hit during this recession,” Katz recently commented. “Our customers pulled back dramatically from spending… that being said, we are very happy to see that business is coming back. The customer is definitely back in the stores.”

Katz, who will take over as CEO of Neiman Marcus in October, hopes she has a recovery ahead of her. The company’s sales did indeed see an uptick in revenue for the first half of the year, but Neiman Marcus was forced to do something out of character: use discounting to prompt sales.

That’s always a risk for an upscale retailer, but Katz “remains confident the brand was protected as Neiman’s kept its focus on exclusive merchandise.”

Milton Pedraza, CEO of The Luxury Institute, believes Neiman’s discounting had “some short-term impact on the brand’s reputation for exclusivity,” but, he adds, “I think the brand clearly survived.”

With customers drifting away from luxury brands and stores in 2008 and 2009, Neiman Marcus and other luxury retailers were forced into territory that is typically occupied by its down-market competitors.

Saks, another luxury retailer, tried everything from store discounting to online sales and, in the first half of the year, implemented a new ad campaign designed to get customers to “think about” the value of their brand.

Saks Fifth Avenue has struggled but it, too, has seen modest increases so far in 2010. Saks CEO Steve Sadove, like Katz, is hopeful the worst is over, but he isn’t being bullish on the recovery just yet.

“We’ll continue to be cautious, Sadove told CNBC. “I think you’ll see a little bit more ‘opportunity buying’ in certain categories, like the shoes, like the handbags. I would say inventories will be growing a little bit less than consumption, but we’ll still continue to be cautious.”

For her part, Neiman’s Katz is looking at a future that includes more than just in-store selling.

“I believe that the intersection of traditional retailing, e-commerce retailing and social networking… all of that is going to come together in a very different way than we can see it today,” says Katz. “We are just starting to understand how powerful that intersection can be, so we’ll see where it evolves to.”

Luxury retailers feeling hopeful as wealthy shoppers start spending again

High-end retailers open discount stores and outlets to capture more of the market

By Arlene Satchell, Sun Sentinel, July 19, 2010

On this trip, Guzzi bought a $100 Lily dress for $46, while Picarello snagged a $300 pair of Gucci glasses for $149.

Luxury sales matter because increased spending at these retail stores are a boost to the local economy and job creation. South Florida’s concentration of wealth means it supports more luxury retail than many other parts of the country.

A recent Gallup poll found self-reported spending by upper-income Americans rose roughly 16 percent to an average of $126 a day for the week ending June 20, up from $109 a day when surveyed the same week a year earlier.

By contrast, middle- and lower-income Americans spent an average of $59 a day that week, which was unchanged from last year, the survey noted.

At Nordstrom, year-over-year sales were up 14 percent in the five weeks ending July 3, in stores that had been open a year or more.

“Overall, we’re encouraged,” said Nordstrom spokesman Colin Johnson. “But we’re mindful of the fact that customers remain cautious and are mindful of how and where they shop.”

While some luxury retailers have fared better this year, experts say growth is tepid given last year’s dismal sales.

In the first quarter of 2009, luxury retailers Saks, Nordstrom and others had double-digit monthly sales declines – as high as 31 percent for some.

“The real test will be if luxury [spending] can show growth as we enter into the early fall period,” said Marshal Cohen, chief industry analyst with the NDP Group, a market research firm in New York.

A significant rebound in the segment is unlikely until the national unemployment rate falls to 6 percent or 7 percent, said Milton Pedraza, chief executive of the Luxury Institute in New York. Unemployment was 9.5 percent in June. That’s when so-called “aspirationals” – middle-class shoppers with an affinity for luxury goods – are likely to return.

To combat the recession’s lingering effects and attract affluent buyers who have turned frugal, some retailers have had to reduce prices.

“There’s a lot more affordability in the luxury sector today,” Pedraza said. A pair of shoes or handbag that cost $1,200 two years ago is now selling for $800 or $900, he said.

Luxury retailers have reduced the number of apparel brands they carry to the most popular, newest and most innovative, said Cynthia Cohen, president of Miami-based Strategic Mindshare, a national retail consulting firm.

“Anything that’s not selling, they’re getting rid of,” she said.

Another result of luxury retailers’ adapting to the marketplace is more off-price and clearance outlet stores.

Nordstrom, for example is opening more Nordstrom Rack stores, which sells its goods at a 50 percent to 60 percent discount.

Bloomingdale’s also plans four outlet stores this year, signaling its foray into the luxury discount market. Two of the outlet stores will be in South Florida.

Experts say it’s an effort to capture business from stores like Macy’s and Dillard’s.

“It’s an attempt to go down market, without saying so,” Pedraza said.,0,1245303.story

July 16, 2010

2010 is shaping up to be the year of rebounding sales.

Posted in Luxury Market,Retail

After a two-year recession left accessory and apparel retailers embroiled in a battle for shoppers

Dallas Business Journal
Kerri Panchuk Staff Writer

 “I still don’t think we are back to the place we enjoyed in 2008,” said Rod McGeachy, president and CEO of fashion accessory firm Tandy Brands Accessories Inc. (Nasdaq: TBAC). “But I do think the numbers are getting better than what they were in 2009.”

McGeachy added that retailers and companies like his, which profit from product orders from other retailers, are seeing “pent up demand.”

That recovery – although welcomed – is mostly statistical, he said. The increase in same-store sales “it’s not a real recovery just yet,” McGeachy said.

Rising tide

Real or statistical, the recovery is a welcomed change from 2009, when luxury retailer Neiman Marcus, for example, saw its April same-store sales drop 22.5 percent from the same period a year earlier. The retailer saw same-store sales grow 10.9 percent, hitting $301 million in the past month, up from $271 million a year earlier.

“I think it’s just that a rising tide lifts all boats,” said Milton Pedraza, CEO of retail analyst The Luxury Institute LLC in New York. “I think consumers last year went to the extreme in saving. Now, after the fourth quarter, they are starting to spend a little bit more. They were tired of being frugal.”

Pedraza said a bottoming out in the housing market, a stock market that seems to be maintaining its own and a general feeling that the economy is no longer bleeding jobs is fostering more consumer confidence.

Ted Vaughn, a partner at BDO Seidman LLP, said because companies like Neiman’s experienced significant drops in prior year sales, 2010 sales may look more dramatic on paper. Even so, Vaughn and other retail experts don’t doubt the pendulum is swinging in a more positive direction.

Not every retailer can credit the economy for a rise in April same-store sales.

Fort Worth-based leather goods and accessories retailer Tandy Leather Factory saw monthly same-store sales grow 11 percent, hitting $4.9 million, up from $4.4 million a year earlier.

“A lot of our sales growth (in April 2010) resulted from changes that we made,” said Jon Thompson, CEO of Tandy Leather Factory. “We changed the way we send inventory to our stores and handled our items.”

Thompson said the company focused more on maintaining a strategic sales mix while pushing aggressively for Tandy Leather stores to stock shelves with best sellers.

“We noticed a lot of stores were not ordering items that we thought they should have in stock,” Thompson said.

Once the corporate office focused on inventory selection, sales improvements took root.

Thompson said Tandy Leather tends to run contrary to market conditions.

When the market is down, Tandy Leather generally performs better than other retail outlets, he said. He said in tough economic times shoppers come to Tandy Leather stores to buy materials to make dog collars and other custom-made leather items.

These items, he said, are generally popular among consumers who are buying leather for the purpose of making other goods for them to sell in a distressed economy.

In the past, “when we’ve gone into a down market, we have seen this same type of customer come back to us,” Thompson said.
Confident consumers

Despite improved demand, Plano-based J.C. Penney saw same-store comparables fall 3.3 percent in April. That was less than the 6.6 drop between the same periods in 2009 and 2008.

Earlier this year, J.C. Penney began feeling the lift of strengthening consumer confidence as same-store sales jumped 5.4 percent for March. J.C. Penney was not available to comment on what factors pushed sales higher in the first part of the year. The retailer’s March sales reflected strong performances in the children’s apparel and apparel segments, according to J.C. Penney sales reports.

But perhaps the biggest rebound in same-store sales happened at Neiman’s.

During the downturn Neiman’s “took the brunt of it” with wealthy shoppers curbing their discretionary income, Pedraza said.

Pedraza added that while high-end shoppers are the first to leave, they are also the first to come back.

But until retailers get to the fourth quarter, most are remaining cautious. There is momentum, Pedraza said, but he calls it “a tepid positive momentum.”

Neiman CEO plans growth, Brand-loyal customers returning to recession-riddled retailer

Dallas Business Journal
Kerri Panchuk, Staff Writer

Incoming Neiman Marcus CEO Karen Katz says she is committed to building a consistent pattern in sales and merchandising – two staples of the Neiman Marcus brand. For the moment, that’s about all she is saying.

Katz is quietly plotting her course and spending the summer conducting research leading up to her Oct. 7 start date.

A three-decade veteran in the retail industry, Katz spent 25 years at Neiman’s before being named CEO in late spring.

“We have this amazing culture at Neiman Marcus,” Katz, who is currently executive vice president of Neiman Marcus Group said. “We still operate the business on the founding principles of merchandise excellence and high levels of customer service … Those things will not change, but the way you do those things could very well change as we move forward.”

Milton Pedraza, CEO of The Luxury Institute in New York, believes change is needed at Neiman’s.

Neiman Marcus saw its sales rebound in the first part of the year, but Pedraza says double-digit sales gains in the first part of 2010 subsided with the company reporting only single-digit sale increases in the most recent period.

Many analysts had expressed concern about how the high-end retailer would weather a storm that sent all shoppers – including those at the luxury end of the spectrum – running. In response, retailers like Neiman’s rolled out some discounting that had not previously been part of their sales plans.

Katz admits 2009 was a rough year.

“Luxury retail in general took the hardest hit during this recession,” she said. “Our customers pulled back dramatically from spending, so I think some of the nice increases we’ve seen these last number of months are because a year ago we were in the depths of the depression.”

She added “that being said, we are very happy to see that business is coming back. The customer is definitely back in the stores.”

Katz remains confident the brand was protected as Neiman’s kept its focus on exclusive merchandise while trying to make sales in 2009.

Pedraza says some of the discounting he saw at Neiman’s did have some short-term impact on the brand’s reputation for exclusivity, but he believes the Neiman Marcus brand remains intact overall.

“I think the brand clearly survived,” he said, “but it needs to reinvent itself in terms of the customer’s experience.”

Brian Sozzi, retail analyst with Wall Street Strategies, said Neiman’s wasn’t alone in efforts to create price points needed to make up for anemic sales. He agrees Neiman’s brand remains strong.

“I don’t think they are overexpanding along the lines of other retailers,” he said. “I don’t think they have as unfavorable a debt position as Saks.”

He does, however, see room for improvement.

“I think Neiman’s probably stands above Saks,” he said, while adding that the company may be below Nordstrom in terms of the upscale industry’s standard for customer experience.

Katz recognizes that change is inevitable, noting that e-commerce and online technology have changed the face of retail. She said those factors will continue to reshape how shoppers buy and retailers sell. While she remains coy about what the future holds, she hints that online will be an integral part.

“I believe that the intersection of traditional retailing, e-commerce retailing and social networking … all of that is going to come together in a very different way than we can see it today,” she said. “We are just starting to understand how powerful that intersection can be, so we’ll see where it evolves to.”

Pedraza said Neiman’s actually hit the online platform as one of the first to meet early expectations on the e-commerce side, but said other high-end retailers, such as Nordstrom, eventually pushed the online standard a bit higher. He, too, sees online as a major component of future retail, and one Neiman’s cannot ignore.

Martini Media Announces Milestone Affluent Study with Crowd Science, Morpheus Media, Luxury Institute

SAN FRANCISCO, July 15 /PRNewswire/ — Martini Media, a media network representing the world’s largest targetable affluent audience, today announced the launch of the groundbreaking Martini Affluent Study with partners Crowd Science, Morpheus Media, and the Luxury Institute. The Martini Affluent Study will generate deep audience profile data about the 45M unique affluent consumers across a publisher network of 1,100 sites in lifestyle & business. Martini Media will bring the findings and insights of this targeted research study to the public in Q3 of 2010.

“Our study so unique because we look at the specific behavioral profile of each respondent, and the context of that response, to control, verify, and supplement the survey data itself.  These behavior-survey profiles are not only interesting, they are very valuable in helping us serve our clients,” says Skip Brand, Martini CEO.  “We are very excited to take advantage of Crowd Science’s best-of-breed online market research platform in our study, and are certain that this will hugely increase the overall understanding on the media side, while simultaneously growing the overall field of research.”

“Martini’s focus on the affluent audience makes them a very interesting research partner for us,” says John Martin, Crowd Science’s co-founder & CEO.  “Because we combine behavioral and survey data, our research applications are able provide a much more comprehensive view of the affluent audience. That helps Martini’s brands get better value for their inventory in the media and advertising community.”

Martini’s Affluent Research Platform, powered by Crowd Science, to date has brought key proprietary insights to partners, including a wealth of understanding into Financial Advisor engaging with their businesses & lifestyles online, and a unique finding on automobile make and model purchase intent amongst consumers at HHI $100K-$249K versus HHI $250K+.

Morpheus Media, an independent digital agency, and the Luxury Institute, will be co-sponsoring the study, providing guidance to ensure utility to all brands seeking to understand and reach the $100K+ HHI audience online.

Shenan Reed, Morpheus Managing Director, says: “It is research like this that allows us to better serve our clients and their customers. We are thrilled to be working with such great partners to help break new ground.”

Milton Pedraza, CEO of the Luxury Institute, finds the groundbreaking nature of the study in line with the goals of the Luxury Institutes goals. “We always look to innovate and cooperate in leading edge research,” Pedraza states. “This multi-dimensional research concept breaks new ground in the luxury industry.”

The Martini Affluent Study & Conference is expected in October, 2010. In addition to solidifying their prominence in the area, the study is expected to make Martini Media the thought leader of the affluent, online space.

About Martini Media Network (

Martini Media Network is a horizontally focused media company reaching American consumers with household incomes over $100,000 -25% of the US internet population. Sophisticated audiences require sophisticated strategies – Martini’s high-engagement media in Lifestyle & Business, robust custom solutions & formats, deep data, targeting & technology, ensure success for Advertisers, Publishers & Consumers. With our invite-only publisher network of world-famous traditional titles & new media sites, Martini seeks to revolutionize the role of the media company in the 21st century with expertise in audience aggregation, technology solutions and advertising execution.

About Crowd Science:

Crowd Science ( is redefining online market research by combining the benefits of web analytics and survey research in a single research platform. This revolutionary approach enables easier, faster, and more accurate online research results via low-overhead and highly automated research apps, opening up a new world of research possibilities.

July 12, 2010

A shift in meaning for ‘luxury’ as shopping habits change

By Bruce Horovitz, USA TODAY

Steve Hundley dumped his Jaguar convertible. He stopped taking Baltic cruises. And he stopped buying his wife pricey jewelry.
But last year, just as the recession raised its head, the San Diego resident paid $6,500 for an outdoor artisan pizza oven.

“We don’t need the Jaguar or cruises to the Baltic,” says Hundley, who at 56, is semiretired following a heart attack two years ago. “But cooking healthy food is a big priority.”

Americans are dipping their toes back into the luxury pool — but with a mindset that’s been smacked down and radically reshaped by the recession, the lure of new technologies and emerging lifestyle twists that are often as much personal as cultural.

“The luxury brands are all trying to reinvent themselves and deliver a better experience,” says Milton Pedraza, CEO of the Luxury Institute, a research firm that consults for designer brands. “Apple is making all these companies rethink their business models.”

It wasn’t long ago that luxury primarily meant the accumulation of designer clothes, expensive jewelry and fancy cars. For some, it still does. But for many consumers, the new luxury is something seriously different.

For some, it’s about owning top technology-based products. Consider: The four brands most admired by Americans with six-digit incomes in a recent survey by the marketing specialist Affluence Collaborative were Apple, Microsoft, Best Buy and Sony.

For others, such as the Hundleys, the new luxury is about investing in a lifestyle experience that not only can help improve health but also escalate the experience of such mundane acts as baking a pizza at home. Sales of outdoor artisan pizza ovens at Kalamazoo Outdoor Gourmet — similar to ovens used at pizza parlors — were up 48% last year and are up 74% so far this year.

“It creates an experience — and isn’t consumable,” says Pantelis “Pete” Georgiadis, president of Kalamazoo. “You can keep enjoying it for a long, long time.”

For others, it’s about buying luxury goods only when they’re on sale — or at a steep discount. Nearly three in four wealthy women say they’ll only purchase luxuries if they can get a good deal, reports a recent survey by AgencySacks, a branding firm that consults for some of the nation’s top luxury brands.

Luxury spending slid 7.8% last year to $10.1 billion, says Spending Pulse, a consumer spending monitor from MasterCard. It’s bounced back up for the first five months of 2010. But even affluent customers continue to seek out discounts, bargains and sales, says Tim Murphy, chief product officer at MasterCard. In a recent MasterCard poll, some 64% of all consumers said they were shopping sales. “A few years ago, you’d just market access to the affluent. Now, you must market access — with a discount.”

All this was driven by the recession. “The recession made everyone stop and rethink luxury and value,” says Pedraza. “Even though we’re coming back, that realization has stuck.”

The new world of luxury is less about designer labels and glitz and more about shopping savvy and an I-feel-good-owning-this mentality. Marketers want to know: Will it last?

Pedraza certainly thinks so. He says that Apple and Sony are emerging as the newest luxury designer labels.

“With Apple, you get a better design, a better function and a better luxury experience than you do with most other luxury brands,” he says.

Pedraza recently asked the CEO of a giant European luxury apparel brand to name the company that he viewed as his toughest competitor. Without batting an eye, the CEO, whose company Pedraza won’t name due to client confidentiality, said it was Apple.

Apple declined to comment.

Not a need, but a want

But Yolanda Cummings, who works as a finance professional in Columbus, Ohio, says that to her, there are few things closer to luxury than owning her new Apple iPad. “I don’t need it. I just wanted it because it’s new, different and intriguing,” she says. She paid about $699 for it. She already has a $300 Apple iPod touch and $1,600 Apple MacBook.

“I used to go overboard buying clothes,” she says. “Now, I’m more inclined to purchase new technologies.”

Andrew Sacks, who is president of AgencySacks, says he bought an iPad the first week it was introduced.

“Part of it is escapist luxury,” he says. “We’re living in a world where it’s difficult to control a lot of things, so there’s a feeling that owning new technology allows me to be more organized, more efficient and have more time.”

The recession, he says, has helped to rejigger his own definition of luxury.

Recently, Sacks says, he reached into his closet and discovered a black leather John Varvatos jacket that he’d casually purchased several years ago for $1,500 at a New York boutique. He put the jacket in his closet — and forgot it about it.

But when he recently rediscovered it — post-recession — his view of the jacket had changed entirely. “I was a little embarrassed that I could take something so expensive and put it away and not even have it on my mind,” he says. “Today, I’d do a lot more research before even considering such a purchase.”

For Don Contreras, luxury is the flat-screen Sony TV that he plans to buy and install in the gazebo in his backyard.

On weekends, the federal government physician from Albuquerque likes to do yard work and prune the fruit trees he has in his backyard. But he also likes to watch sports on TV. By placing the Sony TV in his gazebo, he says, he’ll be able to do both.

He only wants a Sony, he says, because that’s the only electronics brand that he trusts. But he’s waiting to buy it until he finds a really good deal.

“I’m not an impulsive buyer,” he says. “I can wait.”

Executives at Sony have concocted a new term for the brand: “functional” luxury.

In a tough economy, says Stuart Redsun, marketing chief at Sony Electronics, “You don’t have to worry about your product breaking down quickly.”

Beyond that, he says, the functional luxury is from the product providing a new experience — such as the new Sony Cyber-shot camera that lets folks shoot panoramic photos or new 3D TV sets that let folks experience home viewing of movies in a new way.

Another example: Sony soon will be the first consumer electronics maker with a Google feature built into its TV sets. Folks watching any show will be able to use a special remote to search Google on the same TV screen.

Sony also has pushed the value message hard. Over the holidays, for example, it bundled a new Sony TV, PlayStation gaming system, game and Blu-ray movie for $900 less than it would cost to buy the items separately.

“We sold out of all the units in that promotion,” notes Redsun. It recently rolled out a similar bundled deal that ends July 17.

Value and luxury have become synonymous.

At Neiman Marcus, “our customers’ way of shopping has changed,” says Karen Katz, CEO of Neiman Marcus Stores. “She is responding well to the opening and middle price points.”

For example, many Manolo Blahnik designer shoes at Neiman Marcus typically sell for at least $500 — and some for upwards of $900. But in the spring, Neiman Marcus had great success selling a Manolo Blahnik ballet flat for $395. “Our customer was very happy to have a Blahnik shoe for under $500,” says Katz.

Bargain in the bag

It’s no accident that Coach, whose handbags used to start at about $250 — and whose average retail price for a handbag hit close to $350 before the recession — launched a new line last year, Poppy, which starts at $198.

Beyond that, Coach has added more bags at lower price points — and made them more function for women carrying devices from iPhones to iPads, says Michael Tucci, president of Coach’s North American retail division. “The last thing I want you to get from this is that Coach got cheaper. We got more compelling from a value standpoint.”

Consumers have responded. Coach sales are up 8% for first nine months of its fiscal 2010

Value, of course, is in the eye of the purchaser.

To Lori Wachs, a hedge fund partner from Philadelphia, nothing says luxury value like getting top-notch designer clothing at 40% to 70% off — simply by visiting a website.

Several times a week, she visits the luxury discount site, where shoppers have a restricted amount of time — sometimes a matter of hours or even minutes — to order luxury goods before someone else beats them to the limited number of items.

While Wachs won’t say exactly what she’s spent in the past 18 months, she says she’s spent “thousands” of dollars on the 100 or so items she’s purchased. Among them, a Chloé handbag, originally priced at $1,500, that she snatched for about $600.

“There’s an adrenaline rush when there is a certain brand that you love,” she says, “and after you click on it, you wait to see if it’s been added to your basket — or to someone else’s cart.”

In two years, Gilt Groupe has amassed more than two million members, says CEO Susan Lyne.

“A lot of people feel like chumps if they pay full price,” says Lyne. “When you get a deal on a luxury item, it makes you feel smart.”

July 10, 2010

A Stitch In Time

Posted in Luxury Market

Sphere Magazine

The economic turndown has seen luxury brands refocus on the quality craftsmanship of their products as customers once more value substance over style.