Luxury Institute News

December 30, 2010

Wall St bankers, publicly modest, eye fancy toys

Wall Street execs research pricey goods ahead of bonuses
* Red Ferraris, Hublot watches still on most-wanted lists

By Phil Wahba
Wednesday, December 29, 2010

NEW YORK, Dec 29 (Reuters) – Wall Street executives may face smaller bonuses and a public that still eyes them with suspicion, but that isn’t stopping them from rediscovering their love of luxury cars, oceanfront homes and private jets.

A soaring stock market, a surge in merger deals and an uptick in hiring on Wall Street are allowing bankers to gradually return to the lavish lifestyles they enjoyed until the 2008 financial crisis came crashing down on their party.

Despite talk of bonus cuts, many businesses that cater to bankers’ whims, such as the luxury car dealerships on Manhattan’s Park Avenue, are teeming with Wall Street suits.

“Even if they are worried about bonuses, their egos are involved here,” said one dealership manager, who said requests have been filing in for $225,000 crimson red Ferraris and $170,000 Audi R8 convertibles.

Wall Street paid out $20.3 billion in bonuses for 2009, and the numbers for 2010 are expected to be up modestly, according to various estimates, including one from New York’s comptroller.

Hedge fund managers and investment bankers who advise on mergers should see some of the biggest increases, while bond traders can expect cuts of as much as 30 percent.

Financial industry employees will find out in January how big a bonus they’ll get, and those who aren’t sure if they’ll get much seem to be waiting before they spend lavishly.

Nonetheless, there are enough Wall Street tycoons expecting big paydays to feed luxury spending.

Swiss-made Hublot watches, which cost 6,500 euros ($8,500) on average, are still regarded as success symbols and remain popular in London’s City and on Wall Street. Chief Executive Jean-Claude Biver of Hublot, part of LVMH (LVMH.PA), told Reuters that December would be a record month.

“They still want their toys,” Luxury Institute CEO Milton Pedraza said of bankers.

Financial industry honchos have wasted no time lining up rentals months in advance in the Hamptons, a string of seaside hamlets on Long Island where New York’s elite summers.

One top banker shelled out $200,000 to rent an oceanfront house in Amagansett on Long Island for the month of August, said Paul Brennan, a Prudential Douglas Elliman broker.

Wall Street’s money is trickling back down to companies like Avantair (AAIR.OB), which offers private jet timeshares. John Colucci, Avantair’s executive vice president, said inquiries are up this year though many are waiting for their bonuses before actually committing.

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December 29, 2010

Neiman Marcus, Waterford drive post-holiday sales via discount email blasts

By Rachel Lamb
Luxury Daily
December 28, 2010

Luxury brands and retailers such as Waterford Wedgwood Royal Doulton, Frette, Kiehl’s, Neiman Marcus and Bergdorf Goodman are pioneering the art of cross- and upselling to drive foot traffic through discount email pushes in the post-holiday season.

Significant in-store discounts and free shipping when shopping online are the most prominent luxury brand email blasts. These emails serve not only drive sales but also to cement a brand’s value in the mind of luxury consumers.

“Email marketing continues to be a popular option for retailers when it comes to pushing out private or specific sales, especially around the holiday season,” said Kathy Grannis, director of media relations at National Retail Federation, Washington, D.C. “The week after Christmas is a very important week for retailers with as much as 10 to 15 percent of their holiday sales coming in that week alone.”

Specific promotions
A huge promotion for this year’s holiday aftermath is dramatic discounting.

Both retailers and brands such as Neiman Marcus, Tori Burch and Harrods are offering discounts through email basts.

Luxury home-goods manufacturer Frette is offering an astounding 70 percent off for a limited time after the holiday season.

“Especially this year, brands need to give incentives for consumers to buy products after the holidays,” said Milton Pedraza, CEO of The Luxury Institute, New York. “Brands are being expected to discount.

“The best way for a luxury brand to get in contact with its customer base about promotions like this is through email,” he said.

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December 23, 2010

Luxury brands approaching revolutionary CRM innovations: expert

By Peter Finocchiaro
Luxury Daily
December 22, 2010

Customer relationship marketing technology is nearing a point where prestige brands will be able to administer a quality of service that delivers on the promise of luxury in ways never before possible.

Luxury brands already emphasize CRM as key to maintaining lifelong relationships with consumers, keeping records on buys and preferences and reaching out with special offers for frequent shoppers. However, database analytics will soon render hyper-precise recommendations in real-time.

“Brands have a ways to go before they optimize the collection of data,” said Milton Pedraza, CEO of the Luxury Institute, New York. “They aren’t empowering the sales force or online experience with real-time data that gives the customer something special.

“That’s the next phase, where you walk into the store, I get your name, dial it into an iPhone and it immediately comes it with information that is relevant to the interaction I’m about to have,” he said. “I think it’s a two- or three-year target.

“But, the good news is that luxury brands are looking to innovate in the space and not just copy others.”

Premium on personalization
Luxury consumers define the value of the brand experience in terms of multiple factors, quality and service chief among them.

The degree of personalization shoppers expect from a brand is oftentimes a barometer for their value to the brand, as it drives loyalty and repeat purchases, according to Greg Furman, founder and president of the Luxury Marketing Council, New York.

“Luxury consumers define value as greater personalization, meaning they want to be better known by the store” he said. “They want to see evidence that the store or brand understands who they are and what their buying patterns are.

“They don’t want mass emails that have nothing to do with them,” he said. “The consumer is looking for evidence that they are known in a sophisticated way by the stores, because they are their best customers.”

Marketers frequently use customer data to send out targeted direct mail materials and email communications to hit consumers with more relevant offers based on the target’s history.

Certain brands such as Bergdorf Goodman are already adept at such offers, Mr. Furman said.

“I think what Bergdorf found, at a time when other brands were discounting helter-skelter, was rather than lop off a certain percentage of an item’s cost, was that it was better to offer time-limited and very specific offers to select customers based on their historical purchases,” Mr. Furman said.

In particular, such CRM strategies could be particularly effective for retailers in terms of cross- or up-selling items to customers.

For example, Bergdorf could send offers to loyal customers who have purchased within certain categories of items and offer discounts on complementary goods when shopping at a retail location within a certain timeframe.

A frequent customer who wears Chanel evening wear but never bought Chanel purses might receive an offer to buy a discounted bag within ten days.

Mr. Furman said that not all luxury brands engage in such practices currently, but that all should aspire to them.

“These tactics limit exposure to the offer and in cross-selling and up-selling into other categories than where the customer has entered,” Mr. Furman said.

“It shows the best customers that you understand their buying history,” he said. “And, it incentivizes them to transfer brand loyalty on to you, move into other categories and expand their portfolio in your store.”

Innovations approach
While such offers already offer substantial upside to luxury marketers, new technologies will revolutionize the luxury sales experience, according to the Luxury Institute’s Mr. Pedraza.

First, database analysis is getting to the point where marketers can get a more accurate idea of consumer preferences than ever before, tracking behavior across channels and synthesizing the information to render more complete behavioral pictures.

Additionally, the technology will likely be able to deliver analysis and recommendations in real-time.

Finally, mobile has progressed to a point where retailers can empower salespeople to access consumer data and analysis in real-time via a dashboard application.

Salespeople would be empowered to deliver recommendations based on preferences and buying history on the spot.

Such a system could provide retailers with metrics to track performance and progress.

“Each salesperson would know daily, weekly and monthly how many customers they captured,” Mr. Pedraza said.

“They would know how many they up-sold and cross-sold and what they bought, how much data they collected and email addresses they added, how many old customers and how many new, how many people to call because three days ago you sold them something,” he said.

“All of those things would be on a dashboard that sales personnel can use to measure themselves to take action – meaning actionable insights in real-time via CRM.”

December 18, 2010

Countering counterfeits: How luxury brands are challenging the knock-off culture

By Rachel Lamb
Luxury Daily
December 17, 2010

Prestige brands continue their epochal battle against piracy and counterfeiting in hopes of stemming both lost revenue and tarnished brand equity.

Louis Vuitton, Tiffany & Co. and Fendi are just a few of the brands in wars against those selling – or permitting the sale of – knock-off items that look like luxury goods. The results of such counterfeits are damaging to luxury brands, both in terms of sales and brand equity.

“The biggest risk is certainly the concern of reputational damage,” said Milton Pedraza, CEO of the Luxury Institute, New York. “People will see a knock-off that looks a lot like a luxury item, and they’ll be put off by the fact that it’s not great quality, or the craftsmanship is poor.

“Luxury items obviously have great craftsmanship and have high standards, but consumers don’t always know that the items are counterfeit,” he said.

Damage done
A luxury brand’s most valuable asset is its status – it is known for its heritage, its quality of work, the quality of materials it uses and its price.

However, counterfeit items are almost always shoddily made. Although they may look the same, the materials are of poor quality and the high standards of which luxury brands pride themselves are gone.

This is damaging to a brand’s status in the luxury sector because unknowing consumers will assume that the knock-offs are real, and that all items made by the actual luxury brand are not worth the price.

“All popular brands and types of luxury manufacturers are susceptible to counterfeiting,” said Mark Rosenberg, intellectual property attorney at Sills, Cummis and Gross PC, New York. “It is pure economics. The greater the demand for a particular brand, the greater the incentive for counterfeiters to knock-off that brand.”

Another obvious concern is the economic dip that brands take when consumers buy pirated items instead of luxury ones.

“From an economic standpoint, the longer economy remains relatively stagnant and discretionary income limited, the more likely it is that consumers desiring luxury goods will consider purchasing a less expensive counterfeit,” said Mr. Rosenberg.

“This is particularly true where sophisticated counterfeiters are able to produce knock-offs that are nearly indistinguishable from the genuine product.”

What can be done?
Insofar as legal action, there is only so much that brands can do.

EBay has been sued for selling counterfeit goods mimicking Louis Vuitton, Dior, Gucci, Kenzo and Guerlain.

Upscale jewelry designer Tiffany & Co. even tried to sue eBay for not properly monitoring the buying and selling of knock-off goods trying to pass off as luxury jewelry.

However, the Supreme Court refused to  hear Tiffany’s case, dealing a blow to luxury brands who had hoped to stifle piracy on the Internet.

“The greatest challenge facing luxury brands is the fallout from the Supreme Court’s recent ruling in the Tiffany & Co. vs. eBay case,” said Sills, Cummis’ Mr. Rosenberg. “That case places the burden of policing the Internet for counterfeits squarely on the shoulders of brand owners.”

“At the same time, that case absolves Web sites that permit third party sales such as eBay and of the responsibility to proactively police their own Web sites for obvious counterfeiting.”

Likewise, Fendi also took legal action against Burlington Coat Factory, when the former claimed its goods were being impersonated and sold.

“As far as legal battles go, sometimes [luxury brands] can do something, and sometimes they can’t,” the Luxury Institute’s Mr. Pedraza said.

“It’s hard for law enforcement to try to clamp down on something as huge as this, especially when so much money is involved,” he said.

While the Supreme Court found eBay not liable in the Tiffany & Co. case, Fendi won $10 million from its lawsuit.

Street sales, however, are an entirely different problem.

Brands can pressure law enforcement to try to crack down on fake luxury item street vendors, but the business is never going to be completely shut down.

There are always going to be people willing to sell and buy luxury items.

“The business is too profitable and too lucrative for vendors to stop selling pirated items,” Mr. Pedraza said. “Surreptitious people are always going to find opportunities.”

He also suggested strength in numbers. Almost every luxury brand is fighting a battle against knock-offs, and cooperation and collaboration across the globe is key.

Benefits of real luxury
With all of the much cheaper counterfeit products, it can be difficult for luxury brands to persuade consumers to buy the real deal, even though the prices are considerably higher.

“Luxury designers actually have a lot going for them,” Mr. Pedraza said. “They have heritage, quality, excellent craftsmanship and design and have a chance to build their Web sites and retail stores to reflect their image.”

While this may seem like a simple tactic, elegance and status are the things that set apart luxury brands from others.

Furthermore, many upscale brands have failed to make their Web sites easy to use and ecommerce friendly, or to build Facebook and Twitter accounts.

By adopting a more visible digital profile, high-end marketers could stimy efforts by counterfeiters trying to steal the ecommerce spotlight.

However, the most important thing that a luxury brand can do to fight knock-offs is to emphasize customer service.

This is almost a requirement when charging premium prices. A luxury brand needs to let people embrace more than just the product. Consumers should be able to embrace the brand itself.

“Why would a consumer want to go into a retail store to spend a lot of money and not be treated well?” Mr. Pedraza said. “Luxury brands need to make sure the people working in their stores are knowledgeable, friendly and reflect the brand’s values.”

“Consumers need to feel special and want to pay more money for a premium product,” he said. “If a brand wants its products sold, the experience needs to be dramatically different than anything a customer has ever had.”

December 14, 2010

Ralph Lauren is 2010 Luxury Marketer of the Year

By Peter Finocchiaro
Luxury Daily
December 13, 2010

…Ralph Lauren earned praise for the manner in which it weathered the economic storm of 2008 and 2009, emerging stronger than ever this year.

The brand opened new flagship locations, expanded its ecommerce and mobile operations, and maintained the quality of service that has helped distinguish its retail experience.

“Ralph Lauren creates in the mind-set of consumers a lifestyle that they feel they are attaining and accessing through its products,” said Milton Pedraza, CEO of the Luxury Institute, New York. “He’s done that for years, but really sharpened the focus to make it a wonderful art and science of luxury.

“[The brand] should be a wonderful example for luxury – especially during the recession – of how to manage the equity of a premium or luxury brand intelligently and in a financially powerful way,” he said.

“In the last two years, coming out the recession, Ralph Lauren has really shown the world how you can be resilient and how you can scale and how you can still do that and maintain your prestige and relevance as a brand.”

In the end, for Ralph Lauren, marketing is all about a narrative.

“This company was founded 45 years ago – it started with a tie,” Mr. Lauren said. “That tie was designed to tell a story about a world.

“The brand was called Polo because it gave you the feeling of a luxury world on and off the sports field,” he said. “Every aspect of our brand brings you into a world rich with imagery – like stepping into a movie.”

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December 13, 2010

Reviving Consumers Snap Up Tiffany Keys, Blue Nile Pearls

By Cotten Timberlake
December 13, 2010

Justin Rosenblatt plans to fork over $2,000 this month for a Roberto Coin stackable ring, Sonya Renee monogram necklaces and Wendy Mink hoop earrings for his wife and friends. That’s twice what he spent on sparkle last year.

“It’s a more extravagant and personal gift,” said 37- year-old Rosenblatt, the Los Angeles-based vice president of the CW Network, which airs “Gossip Girl.” “I am still cognizant of my budget, but feel there is a bit of reprieve in the economy.”

Rosenblatt is one of the shoppers driving this holiday season’s jewelry sales, which may rise 6 percent to $4.39 billion, according to Los Angeles-based market researcher IBISWorld Inc. Last year they sank by one-tenth. Tiffany & Co. expects sales to rise 10 percent in 2010; Blue Nile Inc. as much as 12 percent this quarter.

Such discretionary purchases show consumers have gained strength and presage a broader recovery, said Milton Pedraza, chief executive officer of the New York-based Luxury Institute.

“Jewelry is often the last category to turn upward,” Pedraza said. “It is probably the most discretionary of all the categories purchased in a store. This tells me that the economic cycle overall has turned.”

U.S. consumer confidence reached a six-month high, an economic report showed last week. Consumer spending may rise an average 2.6 percent in 2011, compared with a 1.7 percent increase this year, according to the median estimate of 56 economists in the latest Bloomberg monthly survey.

Rising Market

A rising stock market also has left some Americans primed to spend more this holiday season. Jewelers depend on the year- end period for annual sales more than any other type of retailer, according to the National Retail Federation, a Washington-based trade group.

A third of jewelers’ fourth-quarter sales take place in the 10 days before Christmas, said Michael McNamara, a vice president at MasterCard Advisors’ SpendingPulse, a Purchase, New York-based research firm.

New York-based Tiffany was “delighted” with the initial customer response to its new collection of exclusive yellow diamonds, Mark Aaron, a spokesman, said Nov. 24. The company’s popular keys — which come in a variety of shapes and sizes in diamonds, platinum and gold — were performing well, he said.

Last year the world’s second-largest purveyor of luxury jewelry saw sales fall 11 percent in the Americas. The sales rebound has helped shares rise almost 50 percent in 2010 before today. They climbed 38 cents to $64.06 at 9:34 a.m. in New York Stock Exchange composite trading.

Engagement Jewelry

In addition to gifts, engagement jewelry sells well at this time, Diane Irvine, CEO of online jeweler Blue Nile, said in an interview. Blue Nile shares rose 34 cents to $57.27 at 9:35 a.m. in Nasdaq Stock Market trading.

Purchases at Tiny Jewel Box Inc., a family-owned jewelry store on Connecticut Avenue in Washington, accelerated so much last month that the shop ran out of items it expected to sell in December, said CEO Jim Rosenheim. The strongest demand came from the top tier of wealthy customers, he said.

“People are feeling more secure that they are not falling into the abyss,” Rosenheim said. “People are not going ‘Oh my God, I really have to do this.’ Attitudinally, they are doing it more open-hearted, with their wallets more open.”

That has more jewelers flaunting trinkets online, in windows and in advertisements. Seattle-based Blue Nile is displaying its largest number of styles after sales improved in October and November, ranging from a $40 silver infinity love knot pendant to diamond eternity necklaces for $50,000. One customer even bought a $250,000-plus diamond engagement ring via the Blue Nile iPhone app in November.

‘Additional Juice’

The company had 80,000 diamonds available for custom jewelry orders, up from 65,000 last year, said Irvine, 51. Blue Nile also introduced new pearl strand styles, including a $185 “tuxedo” strand of alternating white, black and gray pearls, as well as colored gemstones.

Signet Jewelers Ltd., the world’s largest jewelry retailer, is putting “additional juice” in fourth-quarter ads, CEO Terry Burman told analysts last month. The Bermuda-based company operates Kay and Jared stores.

Signet is better positioned than some of its rivals, which foundered during the 18-month recession that ended in June 2009 and was the worst since the Great Depression.

Almost 4,000 U.S. jewelry retailers and suppliers went out of business between the start of 2009 and the end of November, or more than 10 percent, according to the Jewelers Board of Trade in Warwick, Rhode Island.

December 10, 2010

Borrowing from Avon and Dell to Sell Shirts

Dallas shirtmaker J. Hilburn combines direct sales with custom tailoring, and reaches out to an untapped male market

By John Tozzi
December 9, 2010

You can’t buy Dallas clothier J. Hilburn’s shirts in a retail store or online. Nonetheless, the company expects to sell 60,000 of them this year by dispatching salespeople to customers’ homes or offices to take measurements and suggest fabrics and styles. They send their orders to a factory near Macau, China, where shirts are cut and sewn from Italian fabric. Buyers receive them in two to three weeks and pay between $80 and $150, less than half the price of similar shirts sold in some high-end stores.

The company is the brainchild of a couple of former finance types who set out to serve men who see shopping as a chore. “No one’s really thought about how to engage male shoppers,” says Veeral Rathod, 31, one of the founders. Rathod and co-founder Hil Davis (the company took its moniker from his full name, J. Hilburn Davis IV) have borrowed from the direct-sales model of Avon Products (AVP), the supply chain management of Toyota Motor (TM), customization techniques pioneered by Dell (DELL), and’s (AMZN) ease of shopping.

Some 30,000 people have bought clothing or accessories from Hilburn, the company says. And 93 percent of its customers return for a second purchase, says Davis. Since Hilburn was founded in 2007, its sales have tripled each year and are on track to top $9 million in 2010, driven by growing demand for its shirts as well as newer products such as trousers, cuff links, and cashmere sweaters. “Customers are basically saying, ‘You’ve become my solution, now offer me more products,’ ” says Davis, 38.

Jim Pitkow started buying from Hilburn 10 months ago for the convenience and price. Pitkow, chief executive officer of a San Mateo (Calif.) software startup called Attributor, used to visit tailors during trips to London or send his measurements to shirtmakers, which sometimes resulted in a poor fit. Until he started buying from Hilburn, “nobody came to measure or fit me properly,” he says. The shirts cost about half what he used to pay.

While new customers can find sales reps through Hilburn’s website, most come through referrals. The company has 650 “style advisers” who earn commissions of up to 25 percent on clothing they sell after paying $399 for fabric samples, sales materials, and training. Most are women with school-age children looking for extra income, Davis says. As in other direct-sales companies, they get a cut of sales made by reps they recruit. Each Hilburn rep, though, can sign up only five others directly, which Davis says creates an incentive to find the best salespeople rather than simply recruiting as many as possible.

Amy Mancini started selling Hilburn shirts in 2008. A mother of three in West Boylston, Mass., the former nurse says she earns about $60,000 annually, spending between 20 and 25 hours a week managing other reps and visiting customers. “I have clients anywhere from college students all the way up to presidents and CEOs,” she says. The sales calls are crucial to getting measurements right and making customers feel comfortable about buying a garment they can’t try on. Clients’ measurements are stored in a database, and the company plans to launch an online store next year where customers can order new shirts once they’ve been fitted.

The model removes some traditional up-front costs of retailing. “You’ve got a sales force you’re not paying until they sell things. You’re not paying to make the shirt until the shirt is sold,” says Brian O’Malley, a Hilburn board member and partner at Battery Ventures. The Menlo Park (Calif.) venture capital firm has invested $7.25 million in the company. Hilburn is replicating custom tailoring on a mass scale, says Milton F. Pedraza, CEO of the Luxury Institute, a consultant to high-end brands. “They’re trying to scale a model that already works,” he says. The prices also give Hilburn an advantage: Pedraza says he pays more than $300 for similar shirts.

Making custom shirts, though, brings its own inefficiencies. The fabric for each must be cut individually, not in bulk from one template, the way off-the-rack shirts are made. The company’s contract manufacturer in China eventually created a new pattern-making department where the shirt shapes are sized on computers and cut automatically. Still, each seamstress can make only about six shirts a day.

Hilburn recently hired Lawrence Hagenbuch, a veteran of General Electric (GE), as chief operating officer to help streamline manufacturing and distribution. Davis and Rathod want to halve the time it takes to get clothing to customers. Among other steps, Davis wants to box individual orders leaving the factory in China so they can be shipped directly to customers instead of having to break up shipments once they reach the U.S. “The apparel supply chain hasn’t evolved since the 1920s,” says Davis. “That’s our opportunity.”

The bottom line: J. Hilburn is trying to create a new retail model for men’s fashion by combining customization with direct sales.

December 2, 2010

Supreme Court deals blow to luxury claims against online counterfeit sales

By Peter Finocchiaro
Luxury Daily
December 1, 2010

Luxury brands hoping for greater legal support for combating the sale of counterfeit goods online were dealt a blow as the United States Supreme Court declined to hear Tiffany & Co.’s trademark infringement lawsuit against eBay to effectively place the onus of counterfeit enforcement on brands.

The Second Circuit Court of Appeals had previously ruled that manufacturers are responsible for reporting cases of trademark infringement to eBay. The ruling will make it harder for luxury brands to combat counterfeiting online as sites that allow third-party sales account for tens of billions of dollars in commerce each year, according to one legal expert.

“What the Supreme Court has done by refusing to hear the appeal is place the onus on brands as opposed to Web sites hosting or providing counterfeit sales, “said Mark Rosenberg, intellectual property attorney at Sills Cummis & Gross PC, New York.

“The Appeals Court decision basically says that if eBay is not aware of the infringement, they cannot be held liable for the counterfeiting, which is relatively simplistic,” he said.

“EBay has not affirmative duty to see what’s going on – it’s silly.”

Court ruling
Tiffany originally filed its suit against eBay in 2004, seeking damages for the sale of counterfeit goods on the auction site.

A U.S. district court found that  eBay could not be held accountable because it did not intentionally induce anyone to infringe upon Tiffany’s trademark and because it lacked specific knowledge of infringement by any seller, according to Andy Lustigman, attorney at law and principal of The Lustigman Firm, New York.

Sills, Cummis & Gross’ Mr. Rosenberg said that eBay could conceivably develop an algorithm to detect suspicious items for sale based on the presence of keywords such as “faux” or “replica.”

However, the court ruling stops short of mandating such screening tactics.

EBay would likely lack the expertise to determine the presence of a counterfeit even if it did inspect every good on its site, according to Mr. Lustigman.

Therefore, the trademark holder has  to report infringement in order to legally oblige a Web site hosting such sales to remove the item in question.

EBay has argued that Tiffany’s legal challenges were not motivated by the threat of counterfeiting on the Web site, but by the prospect of legitimate branded items generating revenue for merchants in the second-hand market.

The online auction brand also noted that the Second Circuit Court of Appeals and the trail court found that it exceeds legal requirements for fighting the sale of counterfeits on its Web site.

How to counteract counterfeits?
Web sites that allow third-party sales such as eBay and Amazon account for tens of billions of dollars in commerce each year.

Which begs the question: How can luxury manufacturers protect their brand equity and minimize the impact of counterfeit sales on such Web sites if the law places the burden of enforcement in their hands?

One solution is to do the actual grunt work of policing the sites in question and proactively investigate potential cases of infringement and counterfeiting.

“Luxury goods marketers must be vigilant in policing Internet sales of their products and to notify the parties that are facilitating the transactions of counterfeit products,” Mr. Lustigman said.

“Brands should be signing up for product alerts on major Internet sellers such as eBay, and inspecting the listings to determine if a product advertised appears to be genuine, taking into account the description, country of origin, quantity being offered, the distribution channel and other similar indicia,” he said.

“If a brand becomes aware that a product being listed in counterfeit, it should affirmatively notify the Internet seller of the infringement.”

However, another solution could be to increase the brand’s visibility and commerce presence on the Internet.

The issue of counterfeiting and trademark infringement arose in the first place in part because luxury brands have been so slow to adopt strong digital positions, according to Milton Pedraza, CEO of the Luxury Institute, New York.

By expanding out their presence on the Internet with fully realized ecommerce strategies, while leveraging channels such as social media to galvanize brand advocates against countefeiting practices.

“Luxury brands should be aggressive online,” Mr. Pedraza said. “It’s good for combating counterfeiting, [as well as] great commerce and what consumers want.”