Luxury Institute News

September 28, 2010

The Mobile Apps That Affluents Download

Wealthy smartphone owners use an average of seven apps on a regular basis

By Tobi Elkin
Monday, September 27, 2010

More than one-third of wealthy Americans have downloaded apps to their smartphones and another 11% plan to do so in the near future, according to the Luxury Institute‘s September 2010 “Wealth Report.”

The Institute polled smartphone owners earning at least $150,000 per year (the average income was $247,000) and found that 61% of them paid for at least some of their apps. Similarly to average smartphone owners, affluent users polled downloaded weather-related, news and gaming apps the most.

Leading Mobile Applications Downloaded by US Affluent* Smartphone Users**, 2010 (% of respondents)

The survey found that 40% of affluents downloaded travel apps and 39% business-related apps. The findings suggest that there are plenty of opportunities for luxury marketers to do in-app advertising and content sponsorships within apps. Interestingly, the majority of affluents were willing to pay for apps and spent an average of $84 in the past year on downloads. Further, the survey found 24% the affluents polled are willing to pay between $2.00 and $4.99 for an app.

Downloading apps is only part of the equation-wealthy smartphone users report using an average of seven apps on a regular basis, with 57% using five or fewer apps at several points during the day. Repeat usage is the key for luxury brands looking to get into the palm of their customers’ hands.

Mobile Applications Most Frequently Used by US Affluent* Smartphone Users**, 2010 (% of respondents)

The survey noted that nearly one-third of affluents who have downloaded apps have downloaded consumer brand apps for shopping and for product and store location information. Affluents are using mobile comparison shopping sites as well, Milton Pedraza, CEO and founder of the Luxury Institute, told eMarketer.

High-end brands such as BMW, Mercedes-Benz, Ralph Lauren, Louis Vuitton, Chanel and iLuxury were the top branded apps downloaded by affluents. The top three functions performed with these mobile apps, each cited by 63% of those who had downloaded them, are clicking through to a website, communicating with others and locating a store. More than half (53%) of users look up product or service information and 30% actually make purchases via an application.

Retailers and brands that have mobile apps create favorable impressions with affluents-56% of wealthy respondents said they view brands with mobile apps as “innovative” and “cutting-edge,” according to the survey.

September 27, 2010

Connecting with the Wealthy Through Social Media: Can You Reach a Luxury Box From the Bleachers?

By April Rudin
Huffington Post
September 24,2010

Something I once read likened the lives of high net-worth individuals to all others attending a sports event. Although some fans are in the bleachers while others are in luxury boxes, everyone is watching the same game at the same time. How to “upgrade” your seat?

Understanding the rules of the high net-worth space are easy. Exclusivity and privacy prevail. That said, it is easy to understand why there has been a reluctant migration to social media sites for high-net worth individuals. While “mainstream” social networking sites have become commonplace for the fans in the bleachers, the trickle down from social networking sites to the high net-worth has been slow for the most part. According to Milton Pedraza, CEO of the Luxury Institute, “Its taken a while for wealthy consumers to be using networking sites, mostly due to privacy issues and concerns.” Luxury Institute is a NYC-based research firm which focuses on high net-worth individuals. Pedraza goes on to say, “Now they want to leverage all of those social-networking advantages. In the past, most needed to attend many annual international meetings but now they can connect to like-minded people in Dubai or anywhere in the world in an instant.”

Peer-to-peer insight is available for the high net-worth on exclusive websites such as: A Small World, or Quintessentially. There is also a growing number of private member forums such as Institute of Private Investors (IPI) Memberlink. These like-minded subscribers are looking to exchange information on advisers, fees, tax strategies, insurance/legal matters, succession planning, and any number of lifestyle topics such as luxury travel, entertainment, family governance issues, etc.

Even areas formerly clandestine like private equity and venture capital have ventured in to the social media area due to the ability to grease the dealflow pipeline to allow investors and money to “meet-up” in a vetted forum. It allows for more targeted funneling of investment money to be allocated to specific deals. David Teten and Chris Farmer report in the June Issue of Harvard Business Review that social media is a “best practice” among more than 150 venture capital and private equity firms surveyed.

More and more specialty sites are starting up to link the affluent with a variety of service providers and other like-minded people. Striking the balance between the two and coming up with a successful revenue model without “selling” out your members is key. Some firms have annual fees to forego accepting advertising. And others accept fees for referrals, etc.

If any of you reading through this article is thinking of joining any of these groups, remember that you probably have to know someone who matters. For some sites, you need a recommendation from a member and others you must complete a rigorous vetting process. These sites spend a tremendous amount of time selecting the right members as those are the gate-keepers for the next group of invitees and so on.

As usual, you can tell them “April sent you” although you may be asked, “April who?”

September 20, 2010

They were late to the Internet, but brands like Ralph Lauren, Hermès and Tiffany are now making a real splash with their Websites. Some winning features: Live fashion shows, edgy blogs and Q&As with trendsetters. Oh, and nice merchandise. We rank the 10 best sites and window shop at upstarts like ideeli and Gilt.

By Jay Palmer
Saturday, September 18, 2010

With lean times discouraging conspicuous consumption even among those who can afford it, the posh stores on Los Angeles’ Rodeo Drive, New York’s Madison Avenue, Paris’ Rue du Faubourg Saint-Honore and London’s New Bond Street all have been feeling the pinch.

But there’s one road where luxury sales suddenly are booming: the digital highway. As global sales of high-end goods dropped 20% last year, the category’s online sales jumped by at least 10%, and still are climbing.

It’s not that the well-to-do are only now discovering the Internet. Far from it; wealthy baby boomers were online pioneers. Instead, it’s the makers and sellers of luxury products who are finally getting comfortable with the ‘Net.

“To suggest the Internet had an important role to play in the rarefied world of luxury used to be an act of misplaced bravery, or outright heresy,” says Mark Dunhill, CEO of Faberge. “Today, however, all the major players in this sector are falling over themselves in a rush to embrace the online world.”

In other words they’re not walking on eggshells anymore, not even of the Faberge variety. From Burberry to Louis Vuitton, from Bergdorf Goodman to Tiffany, big-name brands and retailers are setting up inviting, and sometimes dazzling, Websites. At the same time, a whole new generation of online retailers such as Gilt and Ideeli are offering fresh deals every day on a wide array of luxury goods.

“Whether its diamond necklaces, designer cocktail dresses, opulent fur coats or trendy name-brand handbags and shoes, it is now no more than a mouse-click away,” says Milton Pedraza, CEO of New York’s Luxury Institute, a research firm focused on high-net-worth consumers. “Some categories are smaller and some are bigger. But overall, Internet sales account for perhaps 15% of luxury revenue. And as the Websites get better and the industry gains expertise, that could rise to over 40% within five years.”

That’s probably not a stretch.Unlike the early days of the Web, when and its ilk had to attract shoppers to an entirely new way of buying, consumers, especially well-heeled ones, now are now well-schooled in maneuvering online shopping-carts.

“Some of the wealthiest people around are from the leading decade of baby boomers, and these are the people who are the right age to be especially comfortable with computers,” says Susan Lyne, CEO of Gilt Groupe. Her Website offers discounts of as much as 70% on select luxury items in 36-hour sales. To provide a sense of exclusivity, Gilt requires that shoppers become members, which they can do only by invitation — but it offers invitations generously, and there are no fees.

Sites like that are a natural for any upscale consumer who doesn’t like fighting the crowds, and who takes pride in saving a buck.

Says Pedraza: “Wealthy shoppers are usually the best educated, the best connected and the most entrepreneurial. They are tech savvy, ready to appreciate the ease and convenience of buying online.”

The manufacturers and retailers of high-end wares increasingly get the message. Forrester Research says that of the nearly 200 global luxury firms they survey regularly, only a third sold merchandise on the Internet in 2008; today more than two-thirds do so, or are trying to do so.

Just about everyone who launches into Web selling assumes that there are some things that shoppers, rich or poor, wouldn’t be too keen to buy without first smelling, touching or tasting. But in practice, such items are proving few and far between. What sells and what doesn’t sell isn’t always predictable.

Expensive perfumes, exotic foods and snappy clothing are among the categories in which Internet traffic is high. So too are luxury-hotel getaways, rare vintage wines and jewelry fit for a princess.

Then again, some seemingly Web-ready products are proving to be tough sells. Although it’s now easy to sit down at your computer and select options for a BMW or a Benz, few people are driving off digital sales lots; they prefer to kick real tires and meet dealers in the flesh. Nor are luxury timepieces from the likes of Rolex, Breitling and Philippe Patek big sellers on the Web, partly because the watch makers fear antagonizing their traditional distributors.

Many luxury brands initially saw the Web as little more than a sales outlet for excess inventory. But the severity of the recession pushed them to look for new revenue wherever they could, and that meant taking the Internet more seriously. Furthermore, the cost of doing business the classic way has continued to climb, especially for luxury brands looking to build new bricks-and-mortar stores.

“A sophisticated Web store can be created for a few-hundred-thousand dollars now,” says one luxury executive who didn’t want to be identified. “That’s less than the legal fees to review a lease for a new store.” Adds Dunhill of Faberge: “The price of a piece of real estate on any prestigious luxury street or shopping mall around the world has become prohibitive to all but the wealthiest brands. The cost of creating a presence online is less intimidating.”

None of which is to say online luxury sales are a cinch. Most purveyors of luxe are still unsure exactly how to blend their image with the reality that the Internet is a mass-market selling forum. They have been slow off the mark and have a long way to go before their presentations catch up with top ‘Net retailers like Amazon, Expedia and Netflix, whose sites are comprehensive and easy to use. With only a few exceptions, existing luxury Websites tend to be heavier on glitter than on utility, blending music with high-quality photographs of products placed in up-market settings (think Tuscan villas and gardens).

On Prada’s site, for instance, which opens with singer Katey Judd’s sexy rendition of “Fever,” it’s hard to find the e-store amid the other info, including links to fashion catalogs, videos of runway shows and the Fondazione Prada, which publishes books and sponsors art installations.

But the luxury sites are steadily improving. Most have added editorial features, including fashion blogs and videos. Nordstrom, for example, displays photos of customers showing the clothes they chose for work, home life and weddings. Better still, the company broke down its traditional walls, tying its Website into its full inventory. If there is just one handbag available of a particular style, even if it’s on the other side of the country, a shopper would still see it come up as available online, ready to be shipped.

Gucci has managed to create a site that is both stylish and easy to browse. Though you can’t rotate images, you can view them from four different angles and quickly surf through lines of matching accessories. Another well-regarded success story is Louis Vuitton, the maker of leather goods and clothes. Unlike many of its peers, it offers nearly all its products on the Web.

The biggest innovation in online luxury retailing is the development of start-ups such as Gilt, Ideeli, HauteLook, Swirl and scores more. They sell designer clothing and shoes, electronic gadgets, home furniture and furnishings, tableware and luxury vacations, including accommodations at resorts and plush city-center hotels. The prices are often fantastic and on one, Rent The Runway, you not only can buy clothing but rent it for short periods.

These start-ups have been attracting big-money investors and may eventually go public. Kleiner Perkins Caufield & Byers, a venture-capital firm that backed Google and Amazon, has put money into One Kings Lane, a site selling home decor. Gilt Groupe got its start with $55 million from Matrix Partners.

“Luxury online is open to a potentially bigger audience than luxury brick-and-mortar stores,” says Paul Hurley, CEO of Ideeli. “You can reach everyone everywhere who has a computer, including those who are maybe not especially rich, but in this particular case want to buy luxury. Everything is super-convenient, and this is an entirely new retail channel that is in my view ideal for luxury goods.”

The new sites are offering far more than clothing. Last week, Gilt Groupe’s Jetsetter subsidiary was selling a South African tour ($5,800), a plush Jamaican resort ($180 a night) and the Berlin Grand Hyatt ($180 a night). The only real drawback: Nearly all sales are nonrefundable.

The major brands and retailers are making some clear progress on their own Websites. Just look at the 10 in our ranking on this page. As the sites work to perfect their presentations — from the background music to the blogs about luxe living and tools for zooming in on merchandise — they are sure to attract and keep more shoppers. With a little more competition from the likes of Gilt and Ideeli, they may even start trimming their prices.

In the discriminating world of luxury, the Internet might yet become the most luxurious place to shop.

Luxury brands must regain focus on customer experience: study

Posted in Luxury Market
Tags: ,

SEPTEMBER 16, 2010

Half of luxury consumers have noticed a decline in the quality of high-end products and services, according to Luxury Institute.

Fifty-seven percent of high-income shoppers identify superior customer service as a defining quality of luxury goods, yet 50 percent have noticed a marked decline in the customer experience. This downturn poses a significant threat to upscale brands, per Luxury Institute.

“Luxury brands need to start focusing on what customer service means,” said Milton Pedraza, CEO of the Luxury Institute, New York. “They need to start to out-behave – not just outperform – the competition.

“The customer experience at the store and Web site has to be extraordinary, and consistently so, in order for luxury consumers to develop long-term relationships,” he said. “There’s very little clienteling right now – no follow-up.

“We know from previous reports that consumers will give you twice as much of their wallets if they have relationships with sales people, but we also know that the state of clienteling right now is dismal.”

Luxury Institute surveyed U.S. consumers earning at least $150,000 per year to compile its semiannual State of the Luxury Industry report.

The average yearly household income of respondents was $286,000. Their average net worth was $2.7 million.

Back to basics
The luxury industry is fighting the perception that the qualities that differentiate luxury brands – superior quality, craftsmanship, customer service and design – are declining.

Seventy-six percent of respondents said that superior quality is a defining quality of luxury goods. Fifty-one percent say quality is declining.

Meanwhile, 56 percent of consumers said the craftsmanship of luxury products is down.

Finally, 48 percent said luxury products are losing their design value.

While many luxury brands have sacrificed quality, craftsmanship and service, not all brands are getting it wrong, Mr. Pedraza said.

Luxury icons such as Ritz-Carlton, Four Seasons, Lexus, Porsche, Louis Vuitton, Chanel and Tiffany’s have maintained strong customer experiences and have enjoyed success as a result, even amidst a recession.

However, the luxury industry as a whole has taken a step back.

“To their credit, some brands are trying to make customer experience better,” Mr. Pedraza said. “Still, outside of the luxury world, brands like Zappos are outbehaving and outperforming luxury brands in terms of experience, and they shouldn’t be.

“Kudos to Zappos, but luxury brands should be famous for service,” he said. “When you’re paying for the best, you’re paying for the best quality, craftsmanship, design and service.

“Those create a compelling experience that consumers are willing to pay for.”

Outbehaving and outperforming
Customer service is vital to creating long-term relationships with consumers, according to Mr. Pedraza.

However, maintaining a rich consumer experience can prove challenging for large, global brands, especially during the middle of a worldwide spending slump.

The key to developing the exceptional customer service regimen that luxury shoppers demand is scalability.

“Bigger brands that can scale their cultures are going to be winners,” Mr. Pedraza said. “It’s not just about great products – it’s important that the customer experience is scalable.

“That’s easy when you have a small bakery, but not so easy when you have 30 or 100 or 200 points of sale,” he said.

Shift to thrift
In the long term, an increased emphasis on customer service is of utmost importance for luxury brands looking to regain their luster.

However, in the near term these brands should prepare for a dip in consumer expenditure for high-end products.

Thirty-six percent of respondents said they plan on decreasing overall spending on luxury goods and services through year-end, versus 6 percent who say they plan to spend more.

The jewelry sector could take the worst hit, per Luxury Institute.

Meanwhile, other luxury categories susceptible to consumers’ tightening purse strings include home furnishings, gifts, watches, handbags, shoes and cars.

Additionally, as brands lower the prices of their high-end products, consumers could start spending.

Twenty percent of luxury consumers plan to spend more on marked-down luxury goods and services this year.

Likewise, 25 percent already paid out more for discounted upscale offerings in the first eight months of 2010 than they did in all of 2009.

Mr. Pedraza said that overall luxury spending could be up compared to last year.

Still, some sectors such as leisure travel, dining, fitness and technology should expect above-average increases in spending.

“We’re still going to be scraping along the bottom in luxury,” Mr. Pedraza said. “I expect [overall] sales to pick up a bit, but that’s compared to a dismal last year – comparables will be easy this year.

Final Take
Peter Finocchiaro, editorial assistant at Luxury Daily, New York

September 14, 2010

News Release: Luxury Institute’s WealthSurvey Shows Wealthy Consumers Still Frugal On Luxury Spending, Willing To Splurge On Quality

(NEW YORK) September 14, 2010 – The objective and independent New York City-based Luxury Institute surveyed U.S. consumers earning at least $150,000 per year-$286,000 average household income and $2.7 million average net worth-to compile the latest semiannual “State of the Luxury Industry” WealthSurvey.  This outlook for luxury spending shows 36% of respondents report planning to decrease overall spending on luxury goods and services through yearend. Just 6% will spend more. 

Areas that should see above-average increases in spending include leisure travel, dining, fitness and technology.  Categories vulnerable to further retrenchment are led by jewelry, followed by home furnishings, gifts, watches, handbags, shoes and cars. 

Lower prices spur purchases. One-fifth of wealthy shoppers say that they plan to spend more on “discounted” luxury goods and services for the remainder of the year; 25% have already been spending more on discounted luxury in the first eight months of 2010 than they were in 2009. 

Some dangers in perception lie ahead. The most frequently cited qualities that define luxury-superior quality (76%), craftsmanship (65%), and customer service (57%)-are the areas where wealthy consumers are finding the greatest dissatisfaction. More than half (56%) say that craftsmanship of luxury products is on the wane; 51% say that quality is decreasing; 50% notice a slippage in customer service quality and 48% say that luxury products are losing their design value. 

“The greatest danger for a luxury firm is to lose its status as a differentiated, premium brand, but wealthy consumer perceptions suggest that luxury overall may be in danger of losing its cachet,” said Milton Pedraza, CEO of the Luxury Institute. “This calls for a renewal of efforts to be unique and exclusive and to execute well on customer service.” 

About the Luxury Institute

The Luxury Institute is the uniquely impartial, independent and objective ratings, research and Luxury CRM consulting organization that is the global voice of the high net-worth consumer. The Institute delivers a portfolio of quantitative ratings and research, qualitative research, and Luxury CRM consulting services that deliver profitable solutions to the world’s leading luxury goods and services professionals and brands. The Luxury Institute also operates, a membership-based online research portal.

The Luxury Institute, LLC
Martin Swanson
(914) 909-6350

September 13, 2010

International Gem Tower: Bid to revive Manhattan’s diamond district

By Claire Adler
Financial Times
September 10, 2010

A 34-floor, 750,000 sq ft tower being built in Manhattan is intended to put New York back at the heart of the international diamond trade.

Slated for a late 2012 opening in the heart of the city’s diamond district – 47th Street – the developer and former diamond dealer Gary Barnett, of Extell Development, believes “companies buying space are building equity”.

The International Gem Tower will be the only place on 47th Street with secure underground truck delivery. Plans include a vault complex, offices with 360 degree views of Manhattan, cutting edge security systems, a concierge service, a luxury shopping centre on ground level, parking, restaurants and a health club.

Click below for the entire article which includes quotes from Milton Pedraza, CEO of the Luxury Institute.