Luxury Institute News

October 1, 2014

Statement Sweats Have Proved Their Staying Power

October 1, 2014
By Ruth La Ferla

Rita Ora was traveling quasi-incognito when she was snapped this year at Los Angeles International Airport wearing outsize shades, a blush-tone carryall, Air Jordans and a cushy sweatshirt, its hood pulled seductively over her brow.

Olivia Wilde recently strode the same passageways, the picture of ease in a biker coat … and sweatshirt, as did Rosie Huntington-Whiteley, who sallied toward the airport lounge wearing a dark fedora and … hey now, you know the refrain.

At the airport, a hub for the paparazzi, who tend to treat its fluid corridors as a makeshift red carpet, off-duty models and Hollywood A-listers have been flaunting their sweatshirts with careless élan, wearing versions embellished with eye-catching slogans, cartoons and jewels and pretty florettes or, alternately, opting for standard issue, raglan-sleeve varieties meant to signal, one suspects, that the wearer is just like you and me.

Clearly civilians relate, which may be why this cozy insignia of slacker chic, once reserved for furtive cigarette jaunts to the 7-Eleven or late nights on the sofa, binge-watching “Revenge,” has become the would-be style-setter’s trophy of choice, an item for all seasons — and occasions.

Its transition from nondescript wardrobe standby, the fashion equivalent of mac and cheese, to luxurious fashion mainstay now seems to have been all but inevitable. “The world of luxury has gone somewhat casual,” said Milton Pedraza, chief executive of the Luxury Institute, a consulting firm. “A lot of people don’t see sweatshirts as basic items anymore.”

Conversely, Mr. Pedraza noted, “a lot of basic items have gone premium.” He may have had in mind the sumptuous interpretations of this humble item that appeared on fall runways and are sold at Neiman Marcus, Nordstrom and Barneys New York and on upscale websites. Prices veer from $30 for an orchid-printed top by Altuzarra for Target to more than $4,400 for a Fendi version ornamented with fake fur, felt, swaths of mesh and crystal, but then, who’s counting?

Such gussied-up sweats can still play down one’s wealth while conferring enough raffishness to suggest that the wearer is too young, too prodigiously gifted or simply too chic to go in for a conventional 9-to-5 uniform. Indeed, these days the only thing inelegant about this once unexceptional garment is its name. And even that has had an upgrade.

Statement sweats, as they’re known in fashion-speak, emerged on the runways over two years ago, making their debut on the runway at Givenchy in the form of a photo-collage sweatshirt, followed last fall with a Bambi-print variation that became an instant fashion hit. The look gained traction in the spring with the parade of high-end sweatshirts at Theory, Kenzo and Alexander Wang, whose white shirt, cheekily inscribed with a “Parental Advisory” legend, was a fashion editor’s favorite.

Photo

Rita Ora moved through Los Angeles International Airport in fashionable sweats and accessories.

Sweats were reprised for fall at Rag & Bone, where a satin shirt was paired with paint-splatter jeans; at 3.1 Phillip Lim, with burnt-orange leather hoodies; and at Isabel Marant, where a lustrous camouflage shirt was shown with baggy fatigues. Surviving yet another season, they emerged for spring 2015 in a boxy version with cutoff sleeves at Jil Sander, covered in multihued sequins at Dsquared2, in a sunburst design at Fausto Puglisi, in silver at Norma Kamali and as a sleeveless top with an extravagant bow and as an evening dress at Bottega Veneta.

Like biker jackets, sneakers and skinny jeans before them, statement sweats have proved their staying power.

“Today it would be a misnomer to use the word ‘trend’ in reference to the sweatshirt,” said Tomoko Ogura, the senior fashion director at Barneys. Ever-evolving, it is now cut in sophisticated fabrics, including but by no means confined to cashmere, chiffon, organza, leather and lace, and offered in varying textures and shapes. So lavishly garnished are some that they are hard to place as sweatshirts at all. Yet consumers are responding, Ms. Ogura said, “because, while the designer’s hand is apparent, their utility is not compromised.”

Their utilitarian provenance is a talking point, indeed a boasting point, among luxury consumers who like to wear their shirts subversively with tuxedo pants or furs or, conversely, to throw on a sequin-encrusted versions to lend dazzle to their leggings or jeans. It’s like wearing a Casio watch with your Brunello Cucinelli cashmere pullover, suggesting a kind of inverse snobbery. “Like you’re playing the game without quite really playing the game,” Mr. Pedraza said.

In some quarters, sweatshirts, like sneakers, remain the great fashion leveler. Paraded this summer in men’s shows as diverse as Bottega Veneta, Neil Barrett and Lacoste, they seemed intended to mask distinctions of class and income or to render them obsolete. “Turns out,” as Guy Trebay noted in a New York Times fashion review, “Mark Zuckerberg didn’t need to outgrow his hoodie and shower shoes.” (Which is not to neglect those 99-percenters repurposing their gym togs as everyday wear in apparent deference to Gap’s recent injunction, in a series of fashion ads, to “dress normal.”)

“Sweatshirts flourish because they work for every demographic and every retail category — men’s, kids, junior contemporary and designer,” said Sheila Aimette, a vice president at the trend forecasting company WGSN. “They are cross-generational and cross-gender.”

Madeline Alford, a digital editorial assistant at Luckymag.com, has incorporated sweats into her workday regalia. Taking her style cues from the Lucky fashion staff, she may, on any given day, combine her black tubular jeans or leather midi-skirt with an oversize sweatshirt. “Instead of a chunky sweater, you could definitely wear a fleece,” she said, “something still warm and efficient.”

Function trumps showiness among Ms. Alford’s priorities. Fashion, she noted, has been gradually turning its back on the flamboyant extremes of street style in favor of a more accessible look. “Much as we love all that crazy, out-there style, it’s not for everybody,” she said.

Sweatshirts, on the other hand, merit her unstinting approval. “They’re what real women wear all the time,” she said.

Source: http://www.nytimes.com/2014/10/02/fashion/statement-sweats-have-proved-their-staying-power.html?_r=0 

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September 25, 2014

Social network aims for country club status

StarTribune
September 25, 2014
By Katie Humphrey

It could be a story from “The Onion”: Join an online country club for the elite, memberships starting at $9,000.

Except it’s true. Last week, a Minneapolis man launched Netropolitan.Club, a social network for the rich and exclusive. Forget the commoners on Twitter and Facebook. Netropolitan founder James Touchi-Peters bills his site as “a place to talk about fine wine, fancy cars and lucrative business decisions without judgment.”

Its Sept. 16 launch got so much buzz — mostly of the snarky variety — that Jimmy Fallon mentioned it on “The Tonight Show,” imagining posts about firing the gardener and the caviar bucket challenge.

The site’s landing page got so many hits it was slow to load. Then the hackers descended. On Sunday evening, Touchi-Peters, who used to conduct the Minnesota Philharmonic Orchestra, pulled the site down for security upgrades.

“We were aware that people would try to hack the Netropolitan Club, but we were not prepared for the overwhelming amount of attacks,” he said in a statement posted on the Netropolitan Club’s Facebook page. (Because, apparently, even elite social networks need Facebook.)
He said it would be back up by the end of the week.

But will it catch on? We may never know. Touchi-Peters won’t say how many members have joined the site, or give any hint of their backgrounds. He also won’t give anyone a peek at the advertising-free network — unless they pony up the whopping membership payment.

“The attraction is that it’s private,” he said. “So far it’s exceeded our wildest expectations.”
Still, it could be a tough sell.

Privacy is valuable to the wealthy, but so is value, said Milton Pedraza, CEO of the Luxury Institute, a New York City research firm specializing in data and insights of high-net-worth consumers.

“I’m a bit of a skeptic,” Pedraza said of Netropolitan. “What are the benefits?”

Previous attempts to create elite-only networks have mostly fizzled, Pedraza said. One that is still active, ASmallWorld, is focused on jet-setting young adults, offering travel perks and hosting parties around the world. Membership, by invitation only, is $105 a year.

Touchi-Peters, a musician who travels frequently, said Netropolitan is aimed at like-minded people who may not have time to socialize in person, a group he calls the “working wealthy.” Or, he said, it could also appeal to rich people who live in rural areas and don’t have access to traditional social clubs. Users create profiles and can post on message boards organized by interest.

“Most people are going to join to meet other people,” Touchi-Peters said.

More specifically, people who can afford $9,000 upfront and the subsequent $3,000 annual fee.
So much for the idea of an open, egalitarian Internet.

That was a myth, anyway, said Seth Lewis, assistant professor of digital media and journalism at the University of Minnesota. Even Facebook started as the digital playground of Ivy League college students.

“It’s almost like [Netropolitan is] trying to put the genie back in the bottle,” Lewis said, referring to the site’s exclusivity. “The proposition is interesting. It’s hard to see how it succeeds.”As for the name Netropolitan, Touchi-Peters said, it’s a play on the words “metropolitan” and “Internet.” He wanted something that spoke to a cosmopolitan crowd, but the title “Cosmopolitan” was already taken.

“Netropolitan does not stand for ‘net worth,’ ” Touchi-Peters said.

But you’d better be worth a lot if you’re going to get past the virtual gate.

http://www.startribune.com/lifestyle/blogs/277098901.html

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September 23, 2014

Luxury Institute Survey Of High-Income Travelers from Europe, China and Japan Reveals Brand Status Ranking Of World’s Top Luxury Hotels

NEW YORK) September 23, 2014 – The New York-based Luxury Institute has released findings of its 2014 Luxury Hotels Brand Status Index (LBSI) survey of affluent overseas travelers who shared detailed impressions and evaluations of 37 global luxury hotel brands.

LBSI scores (1-10) are based on each brand’s perceived quality, exclusivity, social status and overall guest experience. In addition, affluent consumers weigh in on whether a hotel deserves premium pricing, if they would recommend it to people close to them and how likely they are to stay at a brand’s property on their next trip.

Here are the top five brands as rated by wealthy consumers from each region, with Europe including the U.K., Germany, France and Italy.

Europe:Small Luxury Hotels of the World (7.96), The Ritz-Carlton (7.95),Armani Hotels (7.88), Mandarin Oriental (7.86), Leading Hotels of the World (7.77)

China: Leading Hotels of the World (8.62), Oberoi (8.57), The Luxury Collection (8.54), Firmdale Hotels (8.53), Raffles Hotels and Resorts (8.50)

Japan:Aman Resorts (8.19), Oberoi (7.83), Waldorf Astoria Hotels and Resorts (7.80), The Ritz-Carlton (7.73), Orient-Express Hotels (7.68)

“The luxury hotel industry is growing in potential, but also in the dramatic number of brands that have top tier offerings,” says Luxury Institute CEO Milton Pedraza. “The winners are those who can consistently provide remarkable guest experiences, as rated by the clients.”

Respondents reviewed the following hotel brands: Aman Resorts, Armani Hotels, Banyan Tree, Club Med, Como Hotels and Resorts, Conrad Hotels and Resorts, Fairmont Hotels and Resorts, Firmdale Hotels, Four Seasons, Grand Hyatt, InterContinental, Jumeirah, JW Marriott, Kempinski Hotels, Le Meridien, Langham, Leading Hotels of the World, Loews Hotels, The Luxury Collection, Mandarin Oriental, Oberoi, Orient-Express Hotels, Pan Pacific, Park Hyatt, The Peninsula Hotels, Raffles Hotels and Resorts, Regent, The Ritz-Carlton, The Rocco Forte Collection, Rosewood, Shangri-La Hotels & Resorts, Small Luxury Hotels of the World, Sofitel, St. Regis, Taj Hotels Resorts and Palaces, W Hotels and Resorts, and Waldorf Astoria Hotels and Resorts.

Contact the Luxury Institute for more details and complete rankings.

Visit us at www.LuxuryInstitute.com and contact us with any questions or for more information.

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September 17, 2014

Can Apple Watch Win Over Swiss Luxury Giants?

By Sarah Mahoney
Marketing Daily
September 17, 2014

Talk about the clash of the titaniums: For centuries, nothing has said “Master of the Universe” as elegantly as a five- (or maybe even six-) figure watch. Yet for status-seekers who pride themselves on being early adopters, sporting the neighborhood’s first Apple Watch will be a big deal. (Especially since the tech insiders over at CNET are speculating that while Apple’s entry-level watch will be priced at $349, gold ones might sell for as much as $5,000.)

While Tag Heuer has said it’s working on its own smartwatch (and has already developed a smartphone), most luxury watch brands seem confident that the old-world chic of the Swiss will outlast any Silicon Valley buzz. And why shouldn’t they be? Sales of luxury timepieces are strong, and online interest for luxury watches is up 7% in the second quarter of this year, compared to the same period a year ago, according to the World Watch Report. In the U.S., that growth is relatively faint. But in the developing world, curiosity is rising fast: Online interest in these watches soared 23% in China, 22% in India, and 20% in Saudi Arabia. (Rolex is by far the most search-for brand, it says, followed by Omega, Cartier, Tag Heuer and Patek Phillippe.)

“The Apple Watch is a product that is not useful if you don’t own an iPhone,” says David Sadigh, CEO of the Geneva-based Digital Luxury Group, which publishes the report. “It’s a product that has been launched to bolster iPhones sales and put a first foot in the door into the smartwatch market. It won’t have a dramatic impact on the Swiss watch market at this stage, as the majority of the market is composed of brands at a luxury level,” he tells Marketing Daily in an email.

For now, watch brands seem to agree, and are ignoring the onslaught that so many techies are predicting. Piaget, for example, is unveiling a new “Perfection in Life” global advertising campaign, which positions its sexy timepieces in some of the planet’s prettiest places, including Geneva, Paris, “La Côte d’Azur,” and Los Angeles, and could have been taken straight out of a1960s jet-set travelogue. Shot by photographer Maud Rémy-Lonvis, they make each piece a hero: The world thinnest automatic watch, the Piaget Altiplano, for example, towers above the Manhattan skyline, while the Piaget Limelight Gala, with white gold set with diamonds, sparkles over the Hollywood Hills.

And just to prove it’s not completely unaware of the digital age, the company describes the effort as a “360° brand concept,” supported by social media. Consumers can post pictures of their own favorite cities to Instagram, hashtagged #Piaget and #PerfectionInLife, the submitted photos will be entered into a contest. A special Piaget jury will select 5 winning photos from the 50 that receive the most likes, and says they will be displayed in Piaget boutiques worldwide.

What the designers of smartwatches and wearables are missing, says Milton Pedraza, CEO of the Luxury Institute, “is that smartwatches like the Apple Watch are accessories. They’re functional, but they’re not emotional. Luxury watch buyers see their timepieces as art, an adornment, made with true artisanship. So they’re missing half the equation. Smartwatches don’t have the personality that luxury watches do.”

And while there will doubtless be luxury consumers who already own classic timepieces and who buy smartwatches too, “there’s only so much real estate on the wrist.” That means there a tremendous opportunity for tech companies to partner with luxury watch marketers, “to move beyond the generic, dramatically improve the aesthetic, and increase the appeal.”

For now, though, says Sadigh, “folks at Vacheron Constantin, Rolex and Patek Philippe can still sleep well at night.”

http://www.mediapost.com/publications/article/234357/can-apple-watch-win-over-swiss-luxury-giants.html

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September 16, 2014

Luxury In Motion: The Precarious State of the Super Car

By: Tamara Warren
Bloomsbury Publishing
Vol. 1 Issue 1
September 2014

Click the link to read the entire article which includes quotes from Milton Pedraza, CEO of Luxury Institute (subscription required): http://www.bloomsbury.com/us/journal/luxury/

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Luxury Executives Offer E-Commerce, Sales Force Management Insights In New Luxury Institute Survey

(NEW YORK) September 16, 2014 – The New York-based Luxury Institute released findings from its most recent surveys of luxury executives that focus on luxury sales force management and e-commerce strategies and practices, respectively. More than 120 respondents shared their views, each of them holding titles of chief executive officer, chief operating officer, chief marketing officer, chief financial officer, president, vice president or director. Some executives are entrepreneurs or directors of their own companies.

Underscoring the importance of online commerce, nearly half of all luxury executives say that their companies spend at least 30% of the overall marketing budget developing digital initiatives, ranging from websites to mobile apps. Furthermore, two-thirds of executives say that they are spending more on e-commerce than they did last year, and 59% say that it is still not enough.

The digital marketing goals of highest importance to luxury executives are acquiring new customers (51%), growing brand awareness (38%), and increasing sales (28%).  In terms of directing visitors to their brands, social media sites are the most productive leads, with one in three executives saying that direct links through social media are the most important drivers of traffic outside of customers searching for a specific brand on a search engine.

When it comes to hiring sales representatives, the top qualities executives seek are a good fit with the organizational culture (21%), prior industry experience in a specific luxury category (16%) and proven ability selling luxury goods and services (11%). Nearly 80% say that the most crucial personal attribute of a successful salesperson is the ability to build long-term relationships. Online job boards, word of mouth and employee referrals are the top three ways in which managers find qualified job candidates.

 “In the luxury world, your sales professionals and your digital presence are the two most visible presentations of your brand to consumers,” says Luxury Institute CEO Milton Pedraza. “Investing heavily in these areas and operating by a set of humanistic best practices make tremendous economic sense in terms of higher sales and more repeat business.”

Contact the Luxury Institute for more details and a complete set of survey data.

Visit us at www.LuxuryInstitute.com and contact us with any questions or for more information.

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August 27, 2014

In the Loop, At the Half With Betty Liu

Betty Liu
Bloomberg Radio
August 27, 2014

http://www.bloomberg.com/news/2014-08-27/in-the-loop-at-the-half-with-betty-liu-aug-27-2014-audio-.html

Milton Pedraza’s segment is featured at: 9:35-15:11

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August 20, 2014

Macy’s settles up in profiling case

By: Dan Gorenstein
Marketplace
August 20, 2014

After the shooting of unarmed teenager Michael Brown and the recent clashes in Ferguson, Missouri, racial profiling has returned to the national spotlight.

Department store chain Macy’s reached a $650,000 settlement Wednesday with the New York Attorney General’s office over racial profiling practices, which shows how deep the issue runs. This is the second settlement since 2005 for Macy’s, and the deal comes about a week after a similar agreement was reached with the Madison Avenue luxury store Barney’s.

The most recent investigation has found that African-American and Hispanic shoppers were detained at  “significantly higher rates” for alleged shoplifting than white shoppers.

Retail researcher Paula Rosenblum says racial profiling is frequently an afterthought in the industry.

“They mostly advise their store associates to watch out for people who look suspicious,” she says.

Milton Pedraza, founder and CEO of the Luxury Institute, says retailers have every incentive to train front-line and security staff so every customer feels welcome.

“Even if you didn’t have moral clarity on the issue, at least you should have economic clarity on the issue,” he says.

Pedraza says stealing a shirt is insignificant compared to the additional sales that come from building a reputation as a kind and generous merchant.

For its part, Macy’s has agreed to make several changes, including an effort to improve its anti-shoplifting practices and plans to distribute an anti-racial-profiling memo to workers.

Simma Lieberman, who works with retailers on diversity and what she calls “cultural intelligence” says employers should know profiling is often unconscious. Lieberman trains her clients to monitor their own personal biases. Often, she says, shop clerks are quick to make assumptions, and “they don’t get to behavior, they just look at what somebody looks like.”

The danger, says Lieberman, is in our rush to judgment, when we “assume someone is going to have a certain behavior, which they may not have.”

http://www.marketplace.org/topics/business/macys-settles-profiling-case

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Corruption and cognac: China’s crackdown hits luxury

By: Jacqueline Nelson
The Globe and Mail
August 20, 2014

Cognac has become the latest casualty in China’s war on corruption, a nationwide crackdown that has squeezed the country’s once-plump luxury goods market.

Shipments of the French brandy to Asia, in particular China, have fallen sharply in the past year. Both the volume sold and the total value of shipments dropped around 20 per cent, according to French-based trade group National Interprofessional Bureau of Cognac (BNIC). The Chinese slowdown played a major part in an overall decline in global sales of cognac, with shipments down nearly 7 per cent in the past year and total value falling 10 per cent, the BNIC said. And that came after three years of record sales.

President Xi Jinping began clamping down last year on the spendthrift ways of the country’s government workers, from military officers to politicians and civil servants. The crusade has put the kibosh on giving flashy gifts such as high-priced cognac or leather goods from Louis Vuitton, which had commonly been offered by officials to sweeten deals.

The fallout has slashed the sales growth of many luxury goods to low-single digits, and China is expected to keep this “lacklustre” pace of growth for the rest of the year, according to a recent report from Claudia D’Arpizio, a partner at consulting firm Bain & Co.

Ms. D’Arpizio projects the luxury goods market in China will grow by 2 per cent to 4 per cent in 2014, which is in line with Europe and a slower rate than North and South America. It’s a major change from China’s 20-per-cent increase in market size between 2011 and 2012.

“The corruption crackdown is still reducing sales,” the report said, noting that the stricter regulations were especially impacting gifting.

It’s a tightening spigot that one of the world’s largest luxury companies has seen first-hand. In its most recent quarterly results, Paris-based LVMH Moet Hennessy Louis Vuitton SA, maker of Hennessy-branded cognac, cited heavy destocking of French brandy in China. The company attributed this to “anti-extravaganza measures” – a term used to describe the Chinese government’s limitations on extravagant spending. The company’s Louis Vuitton fashion line also saw softer sales in China in the quarter.

The financial results of other cognac-selling companies, such as Rémy Cointreau SA and Pernod Ricard SA, have also shown the Chinese market is a challenge. Fashion house Prada Group, and luxury giant Compagnie Financière Richemont SA, owner of Montblanc, Cartier and Van Cleef & Arpels SA brands, have also been showing similar signs of strain in China.

“This famous gifting issue has impacted our business in China especially for most of our brands, because most of our brands were the most regarded and offered as a gift,” Richard Lepeu, co-CEO of Richemont, said on a recent earnings call.

It wasn’t long ago that China was seen as the future for luxury goods, as incomes there rose while Western shoppers pulled back because of the recession.

But now the region has cooled off and the world’s luxury market is entering a more mature phase. Retailers are reshaping their strategies in China from lengthening store hours to offering discounts in order to entice more customers to spend as growth slows down.

Some luxury producers are navigating the headwinds better than others. Burberry Group PLC’s past quarterly results showed double-digit sales growth in mainland China and Hong Kong. The company’s chief financial officer, Carol Fairweather, attributed this in part to targeting younger consumers and connecting with them digitally. The retailer is still betting on Asia to help drive growth and opened its first flagship store in Shanghai earlier this year.

Even more important than these strategic changes will be maintaining a reputation for quality. “Consumers are so much more discerning now in China,” said Milton Pedraza, chief executive officer of research and consulting firm Luxury Institute LLC. Brands such as Hermès, Bottega Veneta, Chanel and top-tier liquors are standing out with the Chinese consumers because they are truly unique and exclusive.

Tariffs and other charges often make luxury goods more expensive in China than abroad, leading many Chinese to buy their leather goods and other luxe products on trips. This is one area Canada benefits, as wealthy tourists flock to Toronto and Vancouver to shop, Bain’s report notes.

Unless a housing bubble or debt crisis threaten the Chinese economy, luxury brands may have seen the worst of the slowdown.

“I think by the end of the year we’ll be in a different mode. I think the government will have flexed its muscles, it will have made its point,” Mr. Pedraza said. “There’s a lot of pent-up demand out there.”

The government could risk encouraging a larger black market for goods if its purchasing limitations go on too long or become too stringent, he added.

And industry heavyweights such as LVMH are also betting the government sanctions will ease up in the future. The company is building out its cognac-production capacity in anticipation of future growth. “This will help the brands be in a good position when the destocking in China subsides, although this is expected to continue through the second half of the year,” said Chris Hollis, director of financial communication, on a conference call.

http://m.theglobeandmail.com/report-on-business/international-business/corruption-and-cognac-chinas-crackdown-hits-luxury/article20146104/?service=mobile

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August 19, 2014

Nordstrom bets on a slow, cautious entry into Canada

By: Marina Strauss
The Globe and Mail
August 18, 2014

For Karen McKibbin, getting it right is more important than doing it fast in her latest assignment at upscale U.S. chain Nordstrom Inc.

The president of Nordstrom’s Canadian division has been gearing up for two years for the launch of its first store here on Sept. 19 in Calgary’s Chinook Centre. She watched another U.S. retail giant – discounter Target Corp. – stumble in rapidly introducing its first 124 outlets in this country in 2013 amid customer complaints of empty shelves and overhigh prices.

Nordstrom is taking a decidedly different approach from Target, opening its first six stores gradually over 2 1/2 years, she said.

“We are going to stub our toe – we are not going to get everything perfect,” she said in a telephone interview from Calgary, where she has been spending three or four days a week commuting from Nordstrom’s Seattle headquarters. “You can expect us to make changes and respond in real time. We are certainly not resting on our laurels.”

A lot is riding on Ms. McKibbin making a positive first impression with Nordstrom in affluent Calgary. As Target works to make up lost ground, Nordstrom is investing in a slow, deliberate rollout, betting that its first foray outside its home country will pay off in giving customers reasons to return amid rising competition in the luxury field.

Nordstrom posted $14-million (U.S.) of operating losses last year in Canada and expects $35-million in 2014, chief financial officer Mike Koppel has said. The red ink will flow for “several years” before the division contributes to the retailer’s bottom line, he has warned. Eventually, the company anticipates it can generate $1-billion of annual sales in up to 10 department stores and as many as 20 of its Rack discount outlets.

(Target, for its part, had expected to be in the black in the final quarter of its first year in Canada, but instead it reported an operating loss of almost $1-billion last year and analysts anticipate more red ink in 2014.)

But Nordstrom, which is a relatively strong performer south of the border, will face an increasingly crowded luxury market in Canada. Dominant player Holt Renfrew & Co. and men’s wear specialist Harry Rosen Inc. are expanding their stores, while U.S. rival Saks Inc., which was bought by Toronto-based Hudson’s Bay Co. in 2013, is preparing to launch its first stores in this country next year. HBC is making progress in polishing its existing operations here.

“Nordstrom is going to have to be adaptable because things will evolve in Canada,” said Milton Pedraza, chief executive officer of researcher the Luxury Institute in New York, which has worked with each of Nordstrom, Holts and Saks. “But I think Nordstrom will be a solid competitor.”

In the Institute’s annual survey of luxury retailers’ customer service and store experience, Nordstrom ranked No. 1 this year after coming in second in 2013 and first the previous year.

In Canada, Nordstrom has already shown its cautious approach by delaying the launch of its Rack stores here from a planned 2015 roll out because of the unexpected complexity of building its new systems. Nordstrom also will hold back for now on introducing a separate domestic e-commerce site, said Ms. McKibbin, a veteran of Nordstrom.

“We definitely feel there’s an opportunity for us to serve the customer online and that’s definitely still part of our strategy,” she said. “Although when we’ll be able to offer that to the customer is left to be determined.” Nordstrom allows consumers here to cross-border shop from its U.S. site although steep duty, tax and shipping fees raise the tab about 10 to 20 per cent, a spokeswoman said.

Its next store opens in Ottawa in March, 2015 and, in Vancouver, six months later. “I’m feeling cautiously optimistic about opening our first store,” Ms. McKibbin said. “The cadence is going to allow us the opportunity to open the doors to our first store and really get to work about making the adjustments, things that customers are telling us they want, and then applying that to our next store.”

Click the link to read the entire article, which includes a quote from Milton Pedraza, CEO of Luxury Institute:http://www.theglobeandmail.com/report-on-business/nordstrom-bets-on-a-slow-entry-into-canada/article20100322/

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