Luxury Institute News

July 22, 2013

Are These “Artsy” Picks Safe From e-Tailers?

By Arturo Cuevas
The Motley Fool: To Educate, Amuse, and Enrich
July 19, 2013

Investing in art and jewelry just might be too capital-intensive and/or too speculative for the average retail investor. The practical option here perhaps would be to invest in companies catering to the luxury or high-end markets like Sotheby’s or Tiffany & Co.. The U.S. economic recovery may be not as robust as many would wish, but certainly the recent fundamental strengths it exhibited, such as gains in employment and the rise in disposable incomes, augur well for these equities’ respectively iconic fine arts and jewelry.

Both companies are established brand franchises. Sotheby’s has been pounding its gavel in auction sales in global centers, while also enticing retail consumers internationally for more than two and a half centuries. The same is true for Tiffany, established 1837, whose blue box provides delight through its 115 stores across the globe, and strong online presence.

Robust stand vs. marauding Amazons

While these ladies constitute only a small segment, their preference as consumers provides an indication that the high-end domains of Tiffany and Sotheby’s are unlikely to be successfully invaded by mass market e-tailers like Amazon (NASDAQ:AMZN). After having established a beachhead in wines recently, Amazon is now reportedly hot on the comeback trail in selling fine arts through tie-ups with galleries, a venture it tried but abandoned years back with Sotheby’s.

The element that Amazon obviously lacks is what Luxury Institute CEO Milton Pedraza calls “relationship selling,” which when cultivated enough, can help bolster sales in both size and frequency. A majority of the elite patrons of Tiffany, for instance, appreciate handwritten thank-you notes from the jeweler’s salespersons they deal with.

When emotions rule

Such an emotional experience can be equated with the “theatrical performance,” which one

My take, therefore, is that the forays of Amazon and its ilk in taking e-tailing into high-end market, are unlikely to shake the foundations of Tiffany and Sotheby’s as investment possibilities. Those artsy investors who may even be thinking of having Amazon as an alternative pick with its reported ambitions to rejoin the art circle, are likely to be turned off by the current “nosebleed valuation” of this equity. It trades at a forward one-year P/E around the mid-90s, which seems like betting heavily on the works of a fledgling artist.

Looking more attractive, Tiffany has a forward one-year P/E ratio that barely touches the 20s, The jeweler also had an appreciable 2013 first quarter with its worldwide sales rising 9% and net profit gaining 3%. With faster growth in Asia and lower-price silver jewelry as the main primers, it expects 6-8% sales growth for this year, a pace that Wall Street sees as a return to more robust gains for the company. Notably, Tiffany is adding 14 company-operated stores this year; seven in Asia-Pacific, six in the Americas, and three in Europe.

Although Sotheby’s 2013 first quarter was a bit rougher, its one-year P/E valuation close to 18 appears inviting. For the most recent quarter the auctioneer had a 3% drop in revenues to $101.7 million, despite an increase in auction sales. Its auction commission margins, which trended lower for the quarter, have been strengthened recently to help in revenue improvement.

Conclusion: Ready for the challenge

As a final take, Sotheby’s looks ready to fend off any incursion of e-tailers like Amazon on its turf by adopting the same technological tools wielded against it. Company chairman, president and CEO Bill Ruprecht said Sotheby’s is “continuing to redefine and personalize the company’s client experience.” These initiatives, he said, include the delivery of web-based tools so that company clients across the globe can engage Sotheby’s “anywhere, at any time on any device” and access private sales shows be it in New York, London, Hong Kong, or China and elsewhere.

July 17, 2013

Facial recognition software can create personalized retail experiences

By Jen King
Luxury Daily
July 16, 2013

A new facial recognition software could help give affluent consumers a personalized shopping service while taking the guesswork out of identifying VIP customers for retail employees.

The Facial Recognition software, developed by NEC IT Solutions, will help boutique employees better cater to their customers, even if they do not recognize them at first glance. On the brand side, it will also help ensure that retailers never miss out on a potentially lucrative sale.

“A luxury retailer would include a wall mount display or kiosk that would allow customers to preregister themselves, and opt-in either at time of purchase or online,” said Allan Ganz, account development manager for NEC Corporation of America, Irving, TX.

“The kiosk would have two potential locations,” he said. “The first at the sales counter and second at the service counter for instance at alterations. The key is to allow for an enhanced customer experience.

“Face recognition allows for the storage and real-time analysis of this vast amount of data to gauge and modify the effectiveness of brand promotions.”

Face time
NEC IT Solutions has created similar software with security, rather than retail, in mind.

Similar to the software that helps to identify criminals and terrorists, the facial recognition software is checked against an opt-in database of shoppers.

The software will scan customer’ faces as they enter the boutique. If the software recognizes a face in the database, an alert will be sent to the employees via computer, tablet or smartphone.

Once alerted of the shopper, the boutique employees will be able to access the customer’s clothing sizes, favorites and spending history.

NEC IT Solutions has been conducting software trials in designer boutiques and hotels in the United States, England and Asia. The company has not disclosed the retailers and hotels used in the trial.

Although privacy is a big concern of affluent consumers, NEC IT Solutions found that many high-profile customers did not mind sharing their private information if it meant a more personalized and quicker shopping experience as per NEC IT Solutions.

“I can see an issue with privacy being a concern for most shoppers,” said Brittany Mills, vice president of client solutions at B Culture Media, Atlanta.

“Even though NEC IT Solutions addressed the privacy concern, I am not sure that most shoppers would want to be identified before a purchase.

“If a customer is a frequent shopper, the store associates should already have a relationship with the shoppers and can determine the amount of attention to give,” she said.

To track or not to track
Although many affluent shoppers are looking for an easier, more personal shopping experience there is some degree of hesitation in providing their personal information to luxury retailers.

For instance, sixty-three percent of affluent consumers would choose to keep their online history and Internet activities private through an opt-out tracking policy, according to a survey from the Luxury Institute.

Affluent consumers do not want their personal information used for other purposes and many consumers do not trust the safety of their information when giving it to a brand. This means that luxury marketers need to earn the trust of their consumers before asking for their participation in online tracking.

Other mobile tracking technologies have been used to draw consumers into stores.

For instance, luxury retailers can benefit from using geo-targeting mobile technologies to keep affluent consumers coming into their stores and not their competitors’ locations.

Retailers can use geo-targeting in a variety of ways, which include targeting consumers in a store, outside a store or in specific neighborhoods. By using these technologies along with consumer data and research, retailers can access their target consumers and drive them into store locations.

Facial recognition is not the only way to identify affluent consumers.

“A more discrete and practical way of identifying these affluent shoppers is with an NFC signal from a personal device that can transmit their presence as well as personal shopping preferences,” said Dave Rodgerson, senior management consultant of retail strategy and change at IBM Canada, Toronto.

“Companies like iSign Media in Toronto are making great strides in this area,” he said.

July 16, 2013

The Luxury Institute survey says Graff Diamonds and Tiffany are stand out brands

By Diamond World News Service
Diamond World
July 15, 2013

A survey conducted in the U.S. by New York based – The Luxury Institute, revealed names of Graff Diamonds and Tiffany & Co. as being ‘stand-out brands’ for the most affluent shoppers in the U.S., reports say. The survey was conducted online in April this year, with 500 consumers who had a net worth of at least $5 million.

Graff Diamonds featured as the most prestigious jewelry brand with a score of 7.98 out of 10, in reference to its products, client experience, reputation and whether the consumers would consider returning to shop at Graff again, reports say.

The survey also collected data based on gender segmentation. The ultra-wealthy women segment ranked Tiffany as the most preferred jewellery brand, with David Yurman and Cartier following next. This segment also noted these brands to be the top three in reference to ‘preferred salesman’. More than half of this female segment was impressed with handwritten thank-you notes, reports say.″

July 15, 2013

Ferragamo Seen as Luxury Target After Loro Piana Deal: Real M&A

By Andrew Roberts and Brooke Sutherland
Bloomberg Businessweek
July 12, 2013

After LVMH Moet Hennessy Louis Vuitton SA (MC)’s deal for clothier Loro Piana SpA, Italian luxury companies from Salvatore Ferragamo (SFER) SpA to Tod’s (TOD) SpA may be the next targets for cash-laden conglomerates in search of growth.

After LVMH announced the $2.6 billion transaction, shares of Italian luxury retailers surged, with Ferragamo and Yoox SpA (YOOX) closing at records and Brunello Cucinelli SpA and Tod’s rising as much as 4.5 percent and 2.8 percent. Shoemakers Ferragamo and Tod’s are the most likely next targets, Equita Sim SpA said. Online retailer Yoox and Loro Piana-rival Cucinelli offer sales growth through 2015 of 88 percent and 45 percent, according to data compiled by Bloomberg.

As growth stalls at LVMH and Gucci-owner Kering (KER) SA, both conglomerates will be among the most active buyers, said Sanford C. Bernstein & Co. Five years into the global economic crisis that sent the Italian economy into free fall, it was the Loro Piana family who approached LVMH about buying a stake in the maker of $10,500 cashmere cardigans to help fund expansion. Other Italian companies also may turn to buyers instead of lenders to help finance growth, said Bryan, Garnier & Co.

Click the link to read the entire article which includes a quote from Milton Pedraza, CEO of Luxury Institute:

July 12, 2013

Nordstrom Captures Luxury Customer

By Sharon Edelson
July 11, 2013

In the last 12 months, Nordstrom captured the largest percentage of luxury shoppers — those with a net worth of more than $5 million — according to a recent Luxury Institute survey.

Click the link to read the entire article which features a quote from Milton Pedraza, CEO of Luxury Institute (subscription required):

July 11, 2013

Nordstrom Tops Digital Department Store Study

By Rachel Strugatz
July 10, 2013

NEW YORK — Nordstrom is leading the way for department stores in the digital space.

The Seattle-based retailer took the top spot in a study by New York University…

Click the link to read the entire article which features a quote from Milton Pedraza, CEO of Luxury Institute (subscription required):

July 3, 2013

Survey: Wealthy Women Prefer Jewelry From Tiffany & Co.

Tiffany & Co. is the jewelry brand most widely purchased by ultra-wealthy women, according to a study by The Luxury Institute.

By Daniel Ford
JCK Online
July 2, 2013

The institute surveyed ultra-wealthy U.S. consumers with minimum net worth of $5 million about luxury brands they buy and the relationships they have with luxury sales professionals.

David Yurman and Cartier followed Tiffany on the list. The women surveyed said they have a preferred salesperson at all three jewelers. And never underestimate the power of the pen: 
More than half of ultra-wealthy women who purchase from both jewelry and fashion brands say they appreciate handwritten thank-you notes.

“Relationship selling is not something exclusive to markets like high-end automobiles, real estate and wealth management services,” said Luxury Institute CEO Milton Pedraza in a statement. “Even in luxury jewelry and fashion, relationships cultivated by trust and an understanding of customer preferences can help boost both the frequency and size of sales.”

July 2, 2013

Highest Net Worth Consumers to Reign in Luxury Spending

What are the luxury spending preferences of the highest net worth consumer

By Donald Liebenson
Spectrem’s Millionaire Corner
July 1, 2013

Despite an improving economy, the highest net worth consumer is reigning in spending on luxury items, and plan to use discretion with their discretionary income. according to a recent Luxury Institute survey.

Of the more than 500 millionaires with a net worth of at least $5 million surveyed, more than 80 percent aid that such purchasing luxury items as jewelry, watches and handbags is not as high a priority. Among these highest net worth consumers, noted Luxury Institute CEO Milton Pedraza in a statement, “luxury goods and services are considered less important in today’s economy.”

Just 6 percent said they expect to spend more on handbags through the end of the year and 4 percent said they will increase their spending on watches and jewelry.

Respondents said that their non-luxury spending has increased by almost half. The trend of “less is more,” the survey found, applies not just to luxury goods but also household items and clothing. The highest net worth consumers, Pedraza said, are not as resistant to shopping at big box or chain retailers.

What is of increasing value to the highest net worth consumers is creating experiences and lasting memories. One-third of respondents said they plan to spend more on travel.

In a fourth quarter survey conducted by Spectrem’s Millionaire Corner of investors with a net worth of at least $25 million, the highest percentage of these highest net worth consumers were more likely to spend up to $10,000 annually on entertainment ranging from cultural events (56 percent) to sporting events (52 percent), with less than half spending that amount on clothing (48 percent) and jewelry (46 percent).

Not that these consumers are less loyal to their cherished brands. Another Luxury Institute surveyed highest net worth consumers about the luxury brands they do buy and with whose salespeople they have developed the closest relationships. When it comes to jewelry, Tiffany & Co. is the brand ultra-wealthy women buy most, followed by David Yurman and Cartier. Tellingly, these are the three top jewelers where ultra-wealthy women have a preferred salesperson.

In women’s fashion and accessories, the preferred brands are Michael Kors (36 percent), Prada, Burberry, Louis Vuitton, Chanel, Gucci, and Mark Jacobs.

Among men, Ralph Lauren and Brooks Brothers are the men’s fashion and accessories brands of choice.

The highest net worth consumers most appreciate from their sales people a comfortable environment, honest communication, trust, being personally recognized and handwritten thank you notes.

Tiffany Leads Purchases for Ultra-Wealthy Women

By Danielle Max
International Diamond Exchange (IDEX)
July 1, 2013

(IDEX Online News) – Forget Breakfast at Tiffany’s, ultra-wealthy women are ordering lunch, dinner and a midnight snack at the luxury jeweler. According to the latest survey by the Luxury Institute, Tiffany & Co. is the go-to jewelry brand for individuals with a minimum net worth of $5 million.

David Yurman and Cartier follow Tiffany in the spending stakes. And it’s not just because of product offering. The survey found that the three market leaders are also the top three jewelers where ultra-wealthy women have a preferred salesperson.

“Relationship selling is not something exclusive to markets like high-end automobiles, real estate and wealth management services,” said Luxury Institute CEO Milton Pedraza. “Even in luxury jewelry and fashion, relationships cultivated by trust and an understanding of customer preferences can help boost both the frequency and size of sales.”

The survey also found that ultra-wealthy men are less likely than women to build relationships with salespeople.

Pentamillionaire men and women both agree that the top ways salespeople build lasting relationships are by making them feel comfortable, communicating honestly, earning their trust and recognizing them on store visits.

More than half of ultra-wealthy women who purchase from both jewelry and fashion brands say they appreciate handwritten thank you notes.