Luxury Institute News

October 29, 2010

Exclusive Invitation

The Paris Biennale – an event dedicated to the finest art and antiques in the world – has once again wowed jewellery lovers by playing host to an eye-popping abundance of jewels with price tags in the millions, says Claire Adler

By Claire Adler
Canary Wharf
October 2010

This September, Paris saw jewellery presented to the super-rich and connoisseurs on supremely elaborate exhibition stands. It was all part of the Paris Biennale – the bi-annual invitee-only art and antiques fair – which recently took place for the 25th time, in the palatial setting of the Grand Palais.

The Paris Biennale des Antiquaires is the most prestigious fine art and antiques fair in the world. First held in 1962, the exhibition’s original organisers hoped the beauty of the objects on show would rival the beauty of the women who came along to ogle them.

French jeweller Cartier has been an exhibitor since the show’s beginnings, while this year Chanel, Van Cleef & Arpels showed for the third time, and Dior for the second time. Harry Winston is the only American jeweller at the show, but with a shop in Paris since 1955, it first exhibited at the Paris Biennale in 1974, then again 2000 and has been a regular ever since.

“The Paris Biennale is a rendezvous of all the world’s jewellery connoisseurs,” said CEO of Harry Winston, Frederic de Narp, before the show opened. “As a French person, I’m thrilled to be part of it. We have 20 salons round the world, but this is where we’re launching our newest collection, the Royal Garden collection, and we’ll meet with all our important clients here.”

When it comes to the rarest, most exquisitely crafted and precious jewellery on the planet, it’s all very much a ‘by appointment, guest list only, price on application’ affair.

Behind the scenes information is hard to come by, but at the same event two years ago, jewellery transported by Harry Winston alone was said to be worth £50 million, though it may easily have been more.

This year, Chanel’s most expensive piece on show was the intricate Plume necklace, for sale at a cool €1.6 million, along with the matching brooch – yours for €220,000.

The Plume, or feather, is a variation on a theme originally dreamed up by Mademoiselle Chanel for the launch of her very first fine jewellery collection in 1932. The brooch might be a tad expensive, but it’s certainly versatile. The experts say it can be worn over a shoulder, as a sparkling headdress, or pinned onto a hat or a (inevitably Chanel) skirt suit.

Over at Van Cleef & Arpels, certain individual pieces just skirted the €3 million mark, with some jewels having already been snapped up by July time, based on drawings alone. Dior’s display included pieces designed up to 11 years ago, including delectable, intricate cocktail rings by Dior designer Victoire de Castellane, from her collection Les Incroyables et les Merveilleuses, made in 1999, which went on to spark a trend for enormous, bold and beautiful rings.

Chanel upped the ante this year by filling a booth twice the size of the space it took in 2008, and bringing in New York architect Peter Marino to design it. Marino is the man behind Louis Vuitton’s Bond Street flagship store, which opened early this summer.

Meanwhile, the display of this year’s Van Cleef & Arpels collection, Les Voyages Extraordinaires, inspired by the books of Jules Verne, bore a far greater resemblance to a fantastical art installation than any display you’d expect to see at an antiques fair. But that was hardly surprising, given that Alfredo Arias – the Argentinian artist, actor and director who had created it – has conceived sets for opera houses from La Scala in Milan to the Opera in Paris, and is the proud owner of a five-page CV enumerating his books, films and fantastical theatre productions, as well as the accolades he has received in Italy, Argentina and France. This includes the multiple French honour of being appointed Chevalier, Officier and Commandeur des Arts et des Lettres.

“I would not miss this occasion, which is a high-level artistic event, for anything in the world. Jewellery is an art form,” said Arias.

“The dreamlike world of Jules Verne resonates with that of a Maison whose artistic heritage is built around the beauty of flora and fauna, the sky and the stars, imaginary creatures,” said Nicolas Bos, creative director of Van Cleef & Arpels.

One question remains. Is there a market for this extraordinary and outrageously expensive jewellery? New York-based luxury expert, CEO of the Luxury Institute Milton Pedraza believes there is: “There will always be a market for these products and especially in Greater China, India and the Middle East, where wealth continues to grow. Wealthy people just want the best and they will pay for it. The concept is an old one with new price levels,” he says.

http://issuu.com/runwildmedia/docs/cw_oct_10_combined

October 28, 2010

Slim chance of Mr Tod’s taking over Saks

By Antonella Ciancio and Phil Wahba
Reuters
October 27, 2010

(Reuters) – When Italian businessman Diego Della Valle overtook Mexican billionaire Carlos Slim as top shareholder in U.S. retailer Saks (SKS.N) last week, markets jumped on speculation of a possible takeover bid.

But the man who turned Tod’s (TOD.MI) from a family shoe factory into the world’s fourth biggest shoemaker by market value, is more likely to do what he knows well — rake in lucrative returns from selling to the highest bidder.

Della Valle, one of Italy’s most powerful industrialists, is also a keen investor, with interests from French luxury giant LVMH (LVMH.PA) to Vespa scooter maker Piaggio (PIA.MI) and eyewear maker Marcolin (MCL.MI).

He also has interests in banks and soccer.

“A bid by Della Valle for 100 percent of Saks is highly unlikely,” an Italian banker close to Della Valle told Reuters on conditions of anonymity. “If he can make a double-digit profit by selling his stake, he will sell,” he said.

In less than two years, Della Valle has splurged more than $170 million to acquire a 19.05 percent stake in Saks, his second biggest holding after Tod’s.

The size of the investment has prompted questions over whether Della Valle aims at enhancing Tod’s or his stock portfolio.

“Della Valle has strategic holdings only in niche companies, such as Marcolin,” a Milan-based luxury analyst said, asking not to be named. “When someone makes such a big investment, it is for making capital gains,” he said.

Asked about his plans, Della Valle said last week Saks was a “great opportunity,” declining to give detail.

“I bet Della Valle will try to sell his stake in 12 months, if Slim lets him do it,” the analyst said. “Slim is in the best position to make an offer and might want to regain his status.”

Saks has become a target of takeover talk since last year when it removed a so-called poison pill aimed at averting a potential hostile bid by Slim.

“I think they view (Della Valle) as friendly because he is a vendor,” said Paul Swinand, Chicago-based Morningstar’s analyst.

Slim last reported a higher stake in February, when he had 25.6 million shares. He owns 15.9 percent of Saks, according to Reuters data.

LITTLE MECCA

Tod’s, which includes the Fay, Hogan, and Roger Vivier brands, was seen as too small in the United States to justify a major investment there. The U.S. market accounted for around 7 percent of first-half revenue of 377.5 million euros for Tod’s.

“I do not expect Tod’s to grow fivefold in the short term in the U.S.,” Centrobanca analyst Simone Ragazzi told Reuters.

Whatever Della Valle plans are, they will have to suit Saks.

The Italian has raised the possibility of expanding Saks internationally, but Saks’s chief executive Steve Sadove has repeatedly said the retailer would focus on domestic growth.

“(Saks) is a little mecca which everyone visits,” Milton Pedraza, chief executive of consulting firm Luxury Institute, told Reuters. “Della Valle looks at Saks and sees a global brand,” he said.

The company, which operates 48 full line stores and 56 Off 5th outlets, has closed seven stores this year, saying it wanted to focus on its best-performing locations.

Saks shares have been on a tear in recent weeks, at first buoyed by speculation it could be a takeover target by a group of British private equity firms, and then by the spectre of a fight between Della Valle and Slim.

But last month, JP Morgan analyst Charles Grom lowered his price target on the stock to $8, saying luxury spending remained uncertain.

Saks, expected to eke out a small profit for its 2011 fiscal year after two years of losses, has a price-earnings ratio of 54.8 based on 2012 profit forecasts and a stock price of $10.96.

Rival U.S. department store chains Nordstrom (JWN.N) and Macy’s have price-earnings valuations of 12.6 and 10.3 respectively.

(Reporting by Antonella Ciancio and Phil Wahba; Writing by Antonella Ciancio; Editing by Dan Lalor)

http://www.reuters.com/article/idUSTRE69Q2LE20101027

October 20, 2010

Apps Go Upmarket

Significant numbers of wealthy Americans are getting into the apps act as they deploy mobile devices as tools for luxury shopping

By Mark Dolliver
Adweek
October 19, 2010

No, the typical “mobile app” for today’s affluent consumer is not a butler who scurries around to do the master’s bidding. A new report from the Luxury Institute finds significant numbers of upmarket Americans getting into the apps act as they deploy their mobile devices as tools for luxury shopping.
 
A survey for the report finds 34 percent of affluent respondents saying they’ve downloaded applications to their smartphones, with another 11 percent saying they intend to do so in the near future. Those who’ve already done so have downloaded an average of 13 apps and use seven of them regularly. Fifty-seven percent report using mobile apps “multiple times per day,” and affluent downloaders average 13 instances of use per week.

The most popular categories of apps for this population include weather, news, games, travel, business/finance and music. (Polling for the report was conducted in March among consumers with gross annual income of at least $150,000.)
 
While 76 percent of affluent downloaders said they’re “familiar with applications that are associated with known consumer brands,” many fewer — 29 percent — said they’ve downloaded such apps. Naturally, brands whose apps these people have downloaded are often connected to luxury goods. Nine percent of such respondents have downloaded apps from BMW, and the same percentage has downloaded apps from Mercedes-Benz. Eight percent have downloaded from Louis Vuitton, matching the number that downloaded from Ralph Lauren or Chanel.
 
BRANDS SLOW ON THE UPTAKE
Overall, though, luxury brands have been slow to embrace mobile apps and to make the best use of them. “They should be using them to enhance the in-store experience and to let people buy directly from their mobile device,” says Milton Pedraza, CEO of the Luxury Institute. “They may not have something rich and relevant that allows the consumer to buy directly.” He suggests luxury retailers ought to be tapping into services like Foursquare “so that when you walk into the store they can immediately address you by name.”
 
Luxury marketers’ sluggish pace in using mobile apps reflects a more general slowness in employing new media, Pedraza adds. “They were slow to have a Web site, and then slow to put their inventory online. Now they’re feeling all bushy-tailed because they’ve started to use social media. They think of mobile as a separate channel when they should think of it as a unifier of all channels.” Part of the problem is that many luxury brands are small operations that lack new-media savvy.

“They’re often led by a family that may or may not listen to its younger generation,” Pedraza says. Still, luxury marketers aren’t a bunch of bumblers, even if many are, as Pedraza puts it, “neophytes” at using new technologies. “They’re smart, they’ll figure it out.”
 
When luxury brands do offer mobile apps, they’d better think twice about making affluent consumers pay anything to use them. Living up (or, perhaps, down) to the stereotype of the skinflint rich, 39 percent of affluent consumers who download apps confine themselves to the free ones. Indeed, the report says, “Having to pay extra for downloaded applications is the leading barrier to more widespread use of mobile apps,” cited by 54 percent of non-downloaders. Sure, these people can afford to pay. (Among those who do pay for apps, the average outlay in the past year totaled a less-than-bank-breaking $84.) But many don’t want to.
 
“Consumers have gotten so used to getting everything online for free,” Pedraza notes. “Even the wealthiest consumers will say they want free shipping, even though they can afford to pay for it.” Moreover, people who spend a lot with luxury companies are accustomed to some pampering in return, and this also limits their willingness to pay for apps. “Wealthy people feel entitled because they’re so used to getting freebies,” says Pedraza.

NOTICING ADS ON MOBILE APPS
Happy to get things for free, affluent consumers are also happy to have someone else pay their way for them. And, as is the case with media more broadly, this translates into a willingness to encounter advertising on the mobile apps they download. Fifty-eight percent of the survey’s affluent downloaders agreed (including 22 percent agreeing “strongly”) with the statement, “I’ve noticed advertising on mobile applications.”

 Pedraza doesn’t think they take it amiss. “I think they are willing to tolerate it,” he says, since they understand the revenue to support such apps has to come from somewhere. “Since they’re averse to paying for things, they’re willing to have advertising be the revenue driver, as long as it’s not too intrusive. It’s a pact that they’re willing to make to get things for free.”
 
Another of the survey’s findings suggests that brands score points with some of the well-to-do by offering mobile apps, even if the consumer doesn’t use them. Fifty-six percent agreed (25 percent “strongly”) that “I consider brands that have a mobile application to be innovative and cutting edge.” And 38 percent agreed (14 percent “strongly”) with the statement, “I view brands that offer a mobile application more favorably than brands that do not.”
 
The caveat, of course, is that the application can’t be a stinker when affluent downloaders go to use it. Offering an app “gives you a little more sizzle,” says Pedraza. “But there’s a second level of scrutiny. If it’s trivial or not relevant, it will set up expectations and then disappoint the consumer. Reputation is everything. It’s part of the customer experience.”

http://www.adweek.com/aw/content_display/news/digital/e3i39cbc5228150ebab2fc66bd8e6bc8f56

October 14, 2010

Mobile devices key to luxury brand sales experience: study

By Kaitlyn Bonneville
Luxury Daily
October 13, 2010

Mobile devices play a key role in luxury brand client experience, according to a study released by the Luxury Institute.

Luxury brands are increasingly creating mobile applications to engage on-the-go consumers. Instead of coming in last on the mobile playing field as they did with Web, luxury brands are eager to be a step ahead.

“In the last year, luxury brands are looking how to change this,” said Milton F. Pedraza, CEO of Luxury Institute, New York.

“Mobile devices play a major role in the client experience, and can help create a great experience for the sales professional and the customer,” he said.

“We came late to the ecommerce party and we still have Web sites full of flash that the customer can’t navigate. Let’s not miss it with mobile.”

The Luxury Institute works with the top luxury brands to turn their organizational cultures into beneficial, customer-centric ventures.

Luxury on-the-go
The Luxury Institute’s study found that 76 percent of affluent consumers use their mobile devices to compare prices and 27 percent have made a purchase via a mobile device.

Twenty-one percent of consumers have used their mobile phones to look up product information in-store while shopping.

According to the study, luxury brands are lacking primarily in the sales experience.

“We have great products and we may even have great store venues, but the people interactions are lacking,” Mr. Pedraza said. “They are not listening to customers and their needs.

“The customer engagements are in a sorry state,” he said. “The companies recognize that they are not customer-centric.

“They are looking at how to transform their systems and training.”

New track for luxury
Over the next year, many of these enhancements will come by way of mobile devices.

The Luxury Institute predicts more upscale brands will develop mobile applications over the next year and that they will use devices like the iPad to scan business cards or collect customer information without having the sales professionals leave the floor, creating a seamless experience.

They can also guide customers through rich sales presentations, search for out-of-stock inventory within the system, make online transactions and schedule a delivery.

Consumers can also opt-in to have their mobile devices sync with the store’s, allowing sales professionals greet the consumer by name when they enter, creating a more personal feel.

“There will be a tremendous critical mass of activity in 2011 in rebuilding customer experience using technology, but it still requires people,” Mr. Pedraza said. “It’s fantastic for the luxury industry.

“After two years of a recession, the top tier brands finally get it.”

http://www.luxurydaily.com/mobile-devices-key-to-luxury-brand-sales-experience-study/

October 12, 2010

Neiman Marcus embraces Gilt Groupe model with flash sale

By Kaitlyn Bonneville
Luxury Daily
October 12, 2010

Neiman Marcus promoted a midday flash sale held early Friday afternoon via an email campaign sent out to a list of dedicated subscribers.

The sale was held from 11:30 a.m. CT to 1:29 p.m. CT on Neiman Marcus’ Web site. Consumers were offered free shipping with a promotional code that they entered at checkout.

“I think Neiman Marcus is just trying to compete with the Gilt Groupes of the world,” said Milton F. Pedraza, CEO of Luxury Institute, New York. “I think they have the client base to try to do it with.

“I don’t know if they have the chemistry or brand imagery to do it with,” he said. “Neiman, more than Saks or Nordstrom, has suffered during the recession.”

“They are trying to make it exciting and copy the Gilt Groupes and Net-A-Porters and make it more of an exciting experience.”

Neiman Marcus is an Irving, TX-based luxury department store chain.

Neiman Marcus did not respond by press deadline.

Copying the competition

The email blast prompted consumers to click on an image of an hour-glass, bringing them to the flash sale’s landing page.

The sale featured various marked-down merchandise from all departments.

Notable sale items on the Neiman Marcus’ landing page included an Oscar de la Renta coral colored Bow-Waist dress, originally priced at $2,390, on sale for $836, and a Marchesa long black sequin gown, originally priced at $5,940, marked down to $2,079.

The sale was available for the two hours specified or until merchandise sold out. Once the sale was over, the consumer was prompted to shop for Neiman Marcus items at full price.

“I think obviously they are trying to make the sale exciting,” Mr. Pedraza said. “But I don’t know if there is a tremendous strategy behind the timing other than that Friday is a good day for people to start thinking about online shopping.

“The competition and limited offer and limited time is copied from the discount Web sites [such as Gilt Groupe],” he said. “I think that what they are trying to do is test it out and see how it goes.

“I don’t know that the timing is as premeditated as we may think, they may have just put the technology in place and now they want to test it.”

Flash email
Email campaigns and special promotions for consumers are a choice tactic among luxury brands and retailers.

Fashion designer Salvatore Ferragamo recently targeted a list of dedicated subscribers via an email campaign, pushing the new W bag that it launched at Fashion’s Night Out last month (see story).

Likewise, London-based department store Harrods has been pushing sales via targeted emails.

It sent out an email campaign promoting its Christmas hampers last month, offering free shipping when a consumer spent over £100 (see story).

Harrods subsequently encouraged consumers to sign up for its rewards program by offering a limited-time 10 percent discount on most items online and in-store via an email offer last weekend (see story).

In the future, flash sales and email promotions to dedicated shoppers will likely become a staple of luxury brands online, because of their need to make shopping entertaining. Efforts such as Neiman Marcus’ sale on Friday are an attempt at innovation and a way to generate excitement.

“This is eBay-ing it, if you will, and a lot of brands have adopted it online,” Mr. Pedraza said. “Neiman is tapping into it – let’s see it if will last.

“There is a lot of dynamic [marketing] going on and I think it is a wonderful test of something that is going on everywhere else,” he said. “A little late to the party, but its better late than never.

“They are starting to innovate now, retailers are starting to rethink everything and this is just one example of trying to reinvent yourself a bit.”

http://www.luxurydaily.com/neiman-marcus-takes-cues-from-online-discount-retailers-and-hosts-flash-sale/

What Upscale Buyers Want for the Holiday

Luxury retailers are banking on an inspired mix of rose gold, antique cuts, and offbeat materials. But one thing is certain: The prices had better be right.

By Kristin Young
JCK Magazine
October 2010 Issue

Forget what you’ve heard about the lousy economy: Consumers are buying fine jewelry. At least that’s what luxury retailers are counting on for the holidays. But the category is still unpredictable, and when it comes to the most important selling season of the year—stores are staying on their toes.

The nation’s finest jewelers say they are upbeat about the holidays and have inventoried gold, antique-cut stones, natural materials, and even a few whimsical pieces to lure the wary shopper. Most are anticipating flat to single-digit growth in the period compared with last year. Still, last year’s anemic numbers shouldn’t be hard to beat, despite consumers’ odd spending patterns and erratic reactions to price points. And that’s on top of the challenge of predicting just what—exactly—will make shoppers slap down the plastic. “It’s really hard to identify the light at the end of the tunnel right now,” says Milton Pedraza, CEO of the Luxury Institute, an organization that does research on the high-end consumer.

Statistical evidence suggests the luxury sector slowed considerably over the summer. During the 12 months ended in June, the sector’s sales declined 6 percent, according to the NPD Group, with fine ­jewelry representing approximately one-quarter of total jewelry units sold, but three-quarters of the value. Yet many retailers are up for the year.

Saks Fifth Avenue posted a 6.1 percent increase in sales during the first quarter. Macy’s Inc., Bloomingdale’s parent, has been posting monthly same-store sales in the positive territory, year to date—from a low of 1.1 percent in April to a high of 10.8 percent in March. In July, which marked the end of the fiscal year for the Neiman Marcus Group, parent of Neiman Marcus and Bergdorf Goodman, the company recorded a 6.5 percent increase over last year. (JCK requested interviews with all of the major department stores, but all declined to comment on their holiday strategies.)

Even more positive signs are coming from independent jewelers. Jim Rosenheim, owner of Tiny ­Jewel Box in Washington, D.C., an institution that counts Madeleine Albright among its VIP clients, says his business has been outperforming projections. “We’re not booming,” he says. “But, locally, I’m thinking a 5 percent growth during the holidays.” Rosenheim says he’s betting on colorful gems—“Color is happy”—as well as bold yellow gold and multicolored South Seas pearls. Washingtonians have embraced designers Cathy Waterman and Stephen Webster, so the store has stocked up on both collections.

Learning your customers’ magic price point is critical, say retailers. And while it seems simplistic, chances are that sweet spot has shifted radically, and not always predictably, in the past year. Rosenheim expects most shoppers will spend between $1,000 and $10,000. “But we still sell jewelry between $10,000 and $30,000,” he says. “We’re not abandon­ing that price point. We know we’ll sell some of those goods.”

The Luxury Institute has found more and more jewelry designers have introduced secondary lines to help retailers mitigate their price points and retain their business. “They’re replacing precious metals with less precious metals and stones, ratcheting back their offerings because they have to make it affordable to consumers,” says Pedraza.

Kathy Rose, owner of Roseark (formerly Kaviar & Kind) in Los Angeles, is one designer who launched a less expensive line for her celebrity-frequented ­jewelry outpost. Roseark has a customer for pieces like Alon Shina’s 18k yellow-gold labradorite and moonstone bib necklace for $21,000, to be sure. But at press time, her eponymous secondary line, made of 22k gold and semiprecious stones and rarely priced above the $1,000 mark, had been on the floor for about a week. “I’ve sold three units,” she says. “That’s a lot for my first low-end line launch.”

Price point is top of mind for Jennifer McCurry, accessories buyer at Marissa Collections in Naples, Fla. Consumers are either spending less than $2,000 or more than $10,000. The middle range? Crickets. “I’m seeing that a lot in our industry,” she says.

Not even the Big Apple has been immune to shifts in spending habits. “In 2007 and 2008, we’d have $20,000 purchases,” says Franklin Edward-Flewelling Getchell, co-owner of Moss in SoHo. “Now it’s very hard to convince someone to buy over $4,000. It’s a different business.” Getchell expects the holidays to be in the flat to 5 percent growth range, but many of the players have changed, too. Moss used to carry lines like H.Stern. Today, the boutique features lesser-known designers out of Europe such as ultra-minimalist German-born jeweler Erich Zimmermann, Italian modern artist Monica Castiglioni, and Eva Eisler, an industrialist based in Prague. Prices range from $800 to $3,900.

Materials are another hot topic for fine ­jewelry purveyors. Back in Naples, Fla., Marissa Collections has posted a 20 percent growth in sales thanks to the popularity of one-of-a-kind “investment” pieces—specifically, gold. And the funkier, the better. Rougher, tougher gold—like oxidized black gold from Arunashi, rose gold from Lucifer Vir Honestus, and “gilver” (a gold/silver hybrid) from Yossi Harari—is particularly popular, and McCurry expects the trend to continue through the holidays. She expects mid-single-digit growth, noting her business depends on the snowbirds who flock to South Florida between January and April.

Melissa Geiser, veteran fine-jewelry buyer at Stanley Korshak in Dallas, agrees gold will be a strong seller. “Whether it’s diamond hoops, stack rings or pendants, they are easy gift-giving items,” she says. “My clients want the gold and they will spend for the gold because they see its intrinsic value.”

Rose gold is in high demand at Roseark. L.A.’s glitterati (Cameron Diaz, Nicole Richie, and Jennifer Aniston are Roseark fans) go for diamond pavé manta ray cuffs, snake cuffs, and eagle cuffs—all set in the skin-tone-flattering metal. Feminine pieces like the quartz-on-quartz Thousand Petalled Lavender Necklace by Gintare and sculptural items such as Anndra Neen’s Cage Cuffs are also doing well. “It’s going to be an easier holiday for everybody,” says Rose, predicting flat to single-digit growth. “I’d put money on it.”

Gold may be a staple, but retailers are also confident in unusual designs made from rustic natural materials such as horn and ebony combined with sliced and raw gems. Woolly-mammoth ivory, the ­fossilized prehistoric stuff found in the Arctic, is blowing out of Stanley Korshak. “It’s a casual trend, even if it does have a diamond edge,” Geiser says. The sting of a big purchase—in the $1,000 to $5,000 range at Korshak—is lessened by the fact that designer Monique Péan collaborates with Alaska Native Eskimos and sends some of the proceeds back to their villages.

Like Tiny Jewel Box’s Rosenheim, Geiser is not backing down from the $20,000 price point and is “psyched” about designer Wendy Yue’s whimsical over-the-top monkey and garden rings made out of every gem under the sun—from brown diamonds, black agate, and orange sapphire to garnets, amethysts, and blue topaz, sometimes all piled on one piece. (For more Yue, “JCK5: Carved Gems.”)

Antique-cut stones—specifically rose cuts, which retailers often describe as “quiet” or “subtle”—are another booming category. Paul Schneider, owner of Twist in Portland, Ore., says more and more shoppers are going for the Old World–style stones. The primary reason, Schneider says: “Natural materials just don’t work with brilliant-cut stones that scream.”

Twist does particularly well with designers Cathy Waterman and Monique Péan, and business has been better this year. “Shoppers are back, but they’re not the same people,” says Schneider, who is expecting 10 percent growth during the holidays. Again, price is key for Twist shoppers. “We’re not buying as much over $8,000 as we used to,” he says, noting most purchases are between $500 and $1,000. “Over $10,000? We bought them cautiously. Now we’re not even buying in that category.”

For most of this year, online sales across all categories have posted double-digit increases, with fine jewelry proving itself one of the more resilient categories, according to MasterCard Advisors’ SpendingPulse. This seems to be true for Ylang23, a 25-year-old brick-and-mortar store in Dallas with a growing e-commerce business. Joanne Teichman, who owns the store along with her husband, Charles, says she is forecasting a record holiday season.

“The level of substantial orders for more expensive pieces surprises us every day,” she says. Designer exclusives, such as a charms collection from Irene Neuwirth and one-of-a-kinds from Cathy Waterman, Lucifer Vir Honestus, and Jamie Joseph, help drive traffic. To celebrate the store’s 25th birthday, a dozen designers are collaborating with Ylang23 on limited-edition charms, whose proceeds will go to charity.

In the end, retailers agree on one thing: Times are tough, but you can’t keep fine jewelry down for long. Even small gains during the holidays will be welcome, and there’s optimism for the future. “People love to adorn themselves,” says the Luxury Institute’s Pedraza. “As long as the opposite sex is around, that will happen till the end of time.”

http://www.jckonline.com/2010/09/29/what-upscale-buyers-want-holiday

How to Bring in Luxury Shoppers—And Keep Them Happy

The rules of engagement in the luxury sector are tougher than ever.

By Rob Bates
JCK Magazine
October 2010 Issue

For a while, it seemed the “new normal” for the luxury market would resemble the old one. Upscale retailers like Nordstrom, ­Tiffany & Co., and Saks Fifth Avenue logged impressive sales jumps in the first half of 2010, reflecting pent-up demand that came spilling out when affluent consumers finally opened their wallets after two years of uncustomary frugality. But then…something changed. 

In June, MasterCard’s SpendingPulse report, which estimates total U.S. retail sales, announced that luxury spending fell for the first time since November. By July, sales of fine jewelry were down 13 percent, according to the same metric. No one is sure why consumers put on the brakes again, but as with the overall economy, improvement in the high-end will likely occur in fits and starts.

“The luxury market bounced back, but I think we are going into a bit of a decline,” says Andrew Sacks, president of the Affluence Collaborative, which performs market research for upscale firms. “There is a general feeling that we averted [economic] catastrophe. But now that we are beyond that, there is also the feeling of, ‘Okay. We survived, but things still aren’t that good.’ ”

Milton Pedraza, CEO of the Luxury Institute, predicts that “we will not see the heady days we saw in 2007 until the unemployment rate is 7 percent.” However, he doesn’t expect to see that number for several years. (Unemployment is currently at 9.5 percent.)

One major hurdle: The “aspirational consumers” who occasionally splurged on big-ticket shoes or watches have fled the market, says Greg Furman, founder and chairman of the Luxury Marketing Council. The remaining shoppers are a smaller but wealthier group-and when they do spend, they are more demanding than ever.

JCK spoke to a group of market gurus about the post-recession luxury landscape. Here’s how they see things shaping up:

Consumers will seek justifications to buy things.

After two years of watching every expense, affluent consumers still frown upon frivolous consumption. Today, people want to spend smartly. “If you are going to buy jewelry that will be seen by others, you will get questions about it,” Sacks says. “You will need to tell a story about why you bought this ring at this time, or why the watch was a good value.”

Consumers are also quicker to question a product’s price, though Sacks complains that most jewelry companies don’t even try to make their case: “If you look at Town & Country, 80 percent of the ads have photographs, a logo, and no copy. They are expecting consumers to notice the difference between the brands. But they are not taking the opportunity to say why and how they are different and worth what they are charging.”

By contrast, Sacks singles out Patek Philippe’s ad campaign-”You never actually own a Patek Philippe. You merely look after it for the next generation”-as one that “hits on everything. There’s a rational justification, but there is a picture of a father and son, so it’s also emotional.”

Consumers expect more from brands.

Buyers today stay true to a brand “only to the extent that it’s doing backflips to keep them happy,” says Furman. “Time was when the brand was enough to close the sale. Now that just gets the consumer in the door.” Pedraza thinks we are moving from a time when “brands validate customers” to a period where “customers validate the brand.”

“Because of the transparency of the Internet and the ease of communication, customers can talk to each other a lot more on Twitter, on Facebook, on rating sites,” he continues. “Word of mouth is amplified. And these instant reactions are what make the brand.”

Luxury companies will engage more with their clientele.

Pedraza advises companies to screen comments about their company on blogs and websites, and to send every customer a post-sale e-mail requesting feedback. “That gives you information about your company on a regular basis,” he says. Interaction is particularly important on social networks, Sacks argues. “If a luxury brand is on a forum where they are actively asking for feedback, it’s part of the social contract of these networks to respond,” he says. “Otherwise, they will turn off more than they will attract.”

Devotees are building communities around their brands.

This is taking place online and off, says Thomas Bodenberg, director of consumer economics and research for Unity Marketing, who predicts the “Tupperware party will go upscale” as consumers gather to view and discuss new products.

Social issues count…to a point.

While luxury consumers consistently talk up their humanitarian commitments in surveys, Sacks doesn’t believe this translates to actual sales. “A small percentage of consumers is willing to pay more for a green product,” he notes. “But that can’t be the only strategy.”

Still, he thinks social issues and other ethical concerns serve as “a great tie-breaker. If someone is looking at two similar products and one has a really committed program, it will work in their favor.”

Luxury stores will listen more to their front-line staff.

“Companies are realizing that people on the line are their greatest source of intelligence,” Furman says. “If they are treated as strategic partners, and their opinions are genuinely solicited, that is a huge advantage.”

Affluent consumers are demanding more personalized service.

Experts cite Patek Philippe as a brand whose image resonates with generations of buyers.

Sacks’ best advice for brands is to “hire people who know how to talk to people. So many brands are engaged in these intricate customer relation management programs,” he says. “They send out e-mails, but they are totally impersonal. Affluent customers need to be dealt with more intimately. They are used to personalized service and really resent it when they don’t get it.”

Pedraza suggests companies not “just send e-mails saying, ‘These products are 70 percent off. ’ That comes across as spam. Tell them that the navy sports coat they bought would go great with this pair of pants. That kind of customization is easily done, but very few do it.”

Brands will forge longer-term relationships with their customers.

Pedraza frets that many luxury companies still train their salespeople like they are “ ’60s car dealers.”

“They teach their salespeople to overcome objections, as if they can hypnotize people into buying something,” he says. “The affluent are smart. If they don’t want to buy, they are not going to buy.” Instead, the wealthiest consumers desire knowledgeable sales­people who treat them as more than a dollar sign, Pedraza says. “That doesn’t require a lot of money,” he says. “Just a lot of humanity.”

http://www.jckonline.com/2010/09/29/how-to-bring-luxury-shoppers-and-keep-them-happy

October 6, 2010

Hey big spender, Neiman Marcus wants you back

So much for ostentation being gauche in the new U.S. economy.

By Phil Wahba
Reuters
Tuesday, October 5, 2010

Luxury retailer Neiman Marcus published its 2010 holiday gift catalog on Tuesday, marking a return to excess after a recession-mandated frugality.

Items for sale include a $1.5 million privately commissioned art installation by glass sculptor Dale Chihuly for the bottom of a swimming pool. Spending $250,000 gets you a his-and-hers luxury houseboat.

In 2009, Neiman Marcus offered a more modest catalog in deference to tough times. But as the wealthy gain more confidence, they spend more money on luxury goods.

“There’s a segment of the population that has gotten even wealthier: Goldman Sachs bankers, Silicon Valley venture capitalists,” said Milton Pedraza, chief executive of consulting firm Luxury Institute. “They have so much money, they don’t know what to do with it. They’re in the mood to spend and that’s what Neiman Marcus is tapping into.”

Neiman Marcus Group, which includes the eponymous chain as well as Bergdorf Goodman, is enjoying a rebound. In the most recent quarter, combined same-store sales at both chains rose 6.5 percent.

Department store rivals Saks Inc and Nordstrom also reported a sales resurgence in recent months.

Other standout items in Neiman’s Christmas Book catalog include an edible, life-size gingerbread playhouse with a price tag of $15,000.

A private party by celebrity event planner Colin Cowie, where premium Tequila Avion liquor will warm up the guests, goes for $125,000. Photography aficionados can own a Leica M9 Neiman Marcus camera for $17,500. For $75,000, car lovers can drive a 2011 Neiman Marcus Edition Camaro convertible.

The catalog, which began as a Christmas card for shoppers in 1915, showcases the latest in fashion, shoes and luxury items from jewelry to wallets.

But Neiman Marcus is also aware of the need to cultivate “aspirational” shoppers, and has a tiny section on items costing less than $100 on pages 152 and 153.

http://www.reuters.com/article/idUSTRE6945O120101005