Luxury Institute News

March 9, 2015

68pc of millennials follow luxury brands on social media: report

Luxury Daily
By: Nancy Buckley
March 9, 2015

Consumers are split on their willingness to download luxury brand applications, but when dispersed into generations, 72 percent of millennials are inclined to download a branded app, according to a report from The Luxury Institute.

Digitization of the luxury world is slowly evolving as younger generations grow into being affluent consumers. Luxury clients differ across more than just generations, but understanding the prime and upcoming consumer can prepare marketing teams for the future.

“There is no one size all client experience and we have to understand the consumer not as a segment but as one individual, as a human being, in order to build a long term relationship,” said Milton Pedraza, CEO of Luxury Institute, New York.

“There are clear generational differences where the boomers are less digital and millennials are extremely digital,” he said. “If you want to look to the people with the most money, you want to cater to the older individual, who are not digital, but as you cater to the digital and the millennials.”

The Luxury Institute has conducted research on consumer attitudes and behaviors by surveying wealthy consumers in the United States with a minimum household income of $150,000 per year.

Technology changes all
Adapting to changes in technology can be difficult, but when looking at statistics, over half of affluents prefer to buy luxury products in-store. However, this number is about 40 percent when it comes to millennials and generation X.

Millennials also change the numbers when it comes to following brands on social media. Sixty-eight percent say they follow one or more brands on social media, while 64 percent of wealthy consumers follow zero brands.

Generation X also follows brands, with 58 percent reporting to follow at least one.

When it comes to brand apps, luxury consumers are about even among those who download and those who do not. Fifty-three percent do not download apps, but 47 percent do. The majority of these consumers are in the younger generations, but 38 percent of baby boomers claim to download branded luxury apps.

“As boomers are behind in digitalization, they are by no means not digital,” Mr. Pedraza said. “Especially the highly educated global traveler.”

When it comes to fashion bloggers, baby boomers are even more separated from the younger population. Fifteen percent of boomers follow a fashion blogger whereas 62 percent of millennials say the same.

These bloggers are having influence upon the luxury consumer with the average of 4.2 purchases made from blogger suggestions among those followers.

Overall, technology is influencing decisions. Sixty-one percent of all affluent consumers believe that technology allows them to make more purchases, and 65 percent report technology changing the way they shop with luxury brands.

Blogging influencers
Since fashion bloggers arrived on the scene about a decade ago, they have gained influence and grown to be leaders in the industry, says a report by Fashionbi.

As these bloggers gained an audience, brands began to partner with them for advertising campaigns, events and other marketing efforts. While it may seem that fashion bloggers are losing their luster, they still have large followings that can rival magazines, creating an opportunity for luxury brands to reach a large, fashion-focused audience (see story).

Department store chains increasingly partner with fashion bloggers to promote new initiatives and publicize their stores.

Fashion bloggers often have a large degree of influence and many followers, making them the ideal spokespeople for high profile marketing campaigns and events. Retailers such as Bergdorf Goodman, Harrods and Bloomingdale’s have recently partnered with a variety of bloggers to promote their products (see story).

Digital is slowly immersing into luxury, and eventually it will alter the consumer’s experience entirely.

“[In the future,] there will be digital aspects that help the sales associate be a far more effective relationship builder,” Mr. Pedraza said.


Spread the wealth, share!

March 4, 2015

Vancouver ramps up the luxury shopping experience: Expect doormen, personal shoppers and attentive staff to be standard service

The Vancouver Sun
By: Joanne Lee-Young
March 3, 2015

VANCOUVER — In downtown Vancouver, steps from a Taco Del Mar and the Subway next door, Michael Alaska is opening glass doors and greeting customers as if he was on New York’s Fifth Avenue or in London’s posh Mayfair district.

“I call it doorman ballet,” he says, theatrically rolling one bent arm and shuffling aside.

Alaska wears a top hat and long grey coat with a mandarin collar. He looks like a quintessential doorman, exactly what his employer, luxury retailer Holt Renfrew, wanted when it created his position last fall.

“Granville Street is our front door,” says general manager Jeanie Owen. “We wanted it to have a feeling of old-world elegance.”

The company has long employed doormen in Toronto, but Alaska is the first ever in Vancouver.

His appointment is part of Holt’s “service strategy,” a plan that started four years ago, Owen says.

It also comes as the local retail market gets ready to shop at and also work for legendary names like Seattle-based Nordstrom and, later, Saks Fifth Avenue.

Last week, Nordstrom named company veteran Chris Wanlass as manager of its Vancouver store at Pacific Centre, which will open in September. Tuesday, it begins the posting of 44 manager positions.

“They’ll learn about our culture, hear from company leaders and work side by side with a mentor manager,” says Wanlass in an email.

In total, the company expects to hire more than 1,000 sales and support positions in June.

“I think there will be a lot of coaching and extensive in-house work to replicate the (Nordstrom) culture” in Vancouver, says Milton Pedraza, chief executive officer of the Luxury Institute, a New York-based research and consulting firm. “It’s not just operations, and ‘how to do a transaction’ or ‘process a return,’ but the ‘how-to-behave’ part.”

Farla Efros, chief operating officer of Hilco Retail Consulting, says with such intense competition “across the board, online, the many established names and also the fast-fashion scene, the only way to differentiate yourself is around the customer experience.”

There are the usual ways to get an edge: customized events, personal shoppers, and even people to help organize your closets.

And then there are the “intangibles,” says Efros, recalling in 2011 when Holt Renfrew let go of Tom Hargitai, a doorman who had worked at its Yorkville location for 21 years.

“He was very well known,” says Efros. “People were very upset,” and jumped online to share poignant anecdotes, deeming the doorman, whom some affectionately called “the mayor of Bloor Street,” an institution.

When Alaska first started opening doors for Holt Renfrew in Vancouver last November, a few longtime customers did a double take, he says. “People run across the street. They think I am him,” he says.

As much as Alaska revels in evoking the charm of another era, Granville Street can be a gritty portal into the polished floors of Holt Renfrew.

On a recent weekday, a reporter watched as a young man angrily confronted Alaska, finally spitting on the glass of one of the doors, yelling “that’s what I think of your store” before continuing with a string of expletives.

Alaska defused the encounter with a gentle response before retreating inside. “What happened is very rare,” he says, before admitting that “it’s a very interesting location. It’s not a hotel driveway and it’s not West Georgia.”

On the flip side, in a town perhaps not yet used to department store grandeur, Alaska says he has also has had some folks awkwardly “try to grab the door themselves,” apologizing to him that “they are just going through the store to get to their office.”

Alaska, who has worked in hospitality for airlines and cruises and was also previously a stuntman, says when he answered the Holt’s ad, it said “preferred background in entertainment and theatre. They didn’t want a security guard.

“I come from a place of wanting to do something like this, welcoming everyone. In my mind, I am thinking MGM 1950s movies kind of service,” he says. “I bring that all to the role.”


Spread the wealth, share!

Why C. Wonder, Kate Spade Saturday spiraled down

Crain’s New York Business
By: Adrienne Pasquarelli
March 2, 2015

New York’s mass-market retailers are paying the price for the country’s stagnant middle-class wages.

Selling to the middle-class shopper has rarely been so tough.
Last week, Macy’s lowered its 2015 earnings forecast, amid sales-growth slowdowns resulting from shopper malaise. The department store giant’s troubles follow the January shuttering of Kate Spade Saturday, C. Wonder and Gap Inc.’s Piperlime—three businesses aimed at young, fashion-conscious professionals who can’t yet afford true luxury—and a spate of middle-market retail closures in 2014. And the hatchet is expected to continue falling.

“Being average in the middle is death,” said Kevin Mullaney, president of retail consultancy the Grayson Co. “The high end and the low end—those two businesses are thriving. If you’re in the middle, you’d better have a darn good reason for being there based on product and freshness.”
Hundreds of store closings

Unfortunately, many stores ­didn’t get the memo. Though fast-­fashion players such as H&M and Forever 21 are in expansion mode, and luxury brands from Ralph Lauren to Tory Burch continue to roll out new products, midtier retailers are struggling.

Bankrupt chains Delia’s, Wet Seal and Caché have all closed hundreds of stores since the fall, and 1,700 RadioShacks will follow. Though retailers are dealing with the oversaturation and decline of shopping malls, there’s a more widespread problem at play. Worried about an uncertain global economy and rising prices, middle-class spenders are seeking deals, such as a $6 T-shirt, or splurging on truly special, must-have merchandise, like a $1,200 Canada Goose jacket. Stores such as J.Crew, Gap and Aéropostale are getting squeezed as a result.
For the quarter ended Nov. 1, J.Crew reported that same-store sales declined 2%. In January, long-ailing San Francisco-based Gap announced it was letting go of its creative director, who had been with the company since 2012, and axing the position altogether.

Meanwhile, brands such as Aéropostale and Sears, which occupy the lower end of the midtier, are closing underperforming stores left and right. And Macy’s is investing an additional $100 million in capital spending this year for new store concepts and international growth, in order to ramp up sales amid sluggish traffic.
“We had another good year in 2014,” said a spokesman, noting that Wall Street always wishes for higher projections. Many of these brands are offering steep discounts to reverse the downward slide.
“You either have to be lighting people on fire and getting them excited about product, or you find yourself like J.Crew and Gap, running 30% to 40% off your entire store,” said Mr. Mullaney.

In addition, middle-market apparel sellers are also faced with increased competition from specialized online players such as Bonobos and Asos—buzzy brands that often don’t have the same overhead associated with large brick-and-mortar chains.

“There is such a wealth of options, particularly with the Internet,” said Kelly Tackett, research director at Planet Retail. “It’s really hard to stand out among that crowded field.”
The consumer buying these brands is part of a shrinking middle class whose wages nationally have stagnated. Median household income in the U.S. was $51,939 in 2013—adjusted for inflation, that’s 8% lower than in 2007 and 9% less than the 1999 peak, according to the most recent available U.S. Census Bureau data. For many retailers, this means marketing to customers who now care more about price than brand.

Though gas prices are down and the dollar is strong, many shoppers are dealing with inflation on everyday essentials like groceries, housing and education. The New York-area consumer price index for food rose 3.5% during 2014, for example.

Any extra income accumulated from gas pumps is being used to pay off bills or stored in savings, or spent on luxury items that are now must-haves, experts said.

“There’s not as much consumption as you might expect,” said Milton Pedraza, chief executive of research group the Luxury Institute. He noted, however, that technology is still thriving because consumers now consider such purchases essential. “They will stretch for iPhones, but may not stretch $70 for a J.Crew pair of pants when you can get them at Uniqlo for two-thirds of the price.”

Some of the recent closures can be attributed to timing. C. Wonder and Saturday were barely out of their infancy—C. Wonder was founded in 2011, Saturday two years later—and expanded too quickly out of the gate when consumers began tightening their purse strings.
Overextended brands

These brands tried to be everything to everyone at once, rather than focusing on doing a single product right and expanding into other categories over time.

Ralph Lauren started with ties when he founded his namesake brand nearly four decades ago, and eventually grew it into a $7.4 billion lifestyle label. C. Wonder has closed its 32 stores, which included three local shops. Saturday, a lower-priced label that lacked an identity distinct from its parent, will shutter its Spring Street store by July, along with 18 other locations.

“There were a lot of new entries at a time when retail wasn’t really flourishing,” said Rebecca Duval, a retail analyst at BlueFin Research Partners. “It wasn’t the best time to come into the market or try to develop a growth story.”

To attract spending, retailers need to introduce more eye-­catching products, experts say, though there are few trends right now to bet on. Athletic looks have already become ubiquitous; consumers can find the same me-too jogger pants at H&M that they can find at J.Crew.

“We have a plethora of retailers with that same weak message in terms of the trends they’re getting behind, and eventually they’ll continue to lose market share,” said Ms. Duval.

A version of this article appears in the March 2, 2015, print issue of Crain’s New York Business.


Spread the wealth, share!

February 20, 2015

Can Kate Spade Recover From Closing Its 2 Spin-Off Brands?

Seeking Alpha
By: Eryn Johnson
February 18, 2015

Kate Spade & Company (NYSE:KATE) designs and markets branded women’s and men’s apparel, accessories, and fragrance products. The company’s portfolio of brands includes most apparel and non-apparel categories, and their products are available at retail locations throughout the world, including its own retail and outlet stores, and on its e-commerce sites. The company operates the Kate Spade New York brand as well as the Jack Spade brand, since closing Kate Spade Saturday. The company has a very competent management team, including CEO and board member Craig Leavitt, who has been CEO since 2010; COO George Carrara, former CFO of Tommy Hilfiger and Liz Claiborne; and CFO Thomas Linko, who has been with the company since October 2014 after being CFO/COO of Juicy Couture Inc.

According to the Kate Spade investor relations site, the brand “inspires women to live colorfully, delivering on our promise to help her lead a more interesting life. In every time zone and on every continent, kate spade new york is a global lifestyle brand offering aspirational luxury with a clever wit and playful charm that is distinctly our own.” The site also explains that Jack Spade “grew out of the simple idea that useful products could also be stylish. Jack Spade understands that taste and style say more about someone than fashion or trends. As a brand it stands for smart designs and ideas to help men live a layered life, and speaks to an expanding collection of discerning customers in the U.S., with a small but burgeoning business abroad.”

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

Spread the wealth, share!

February 3, 2015

Kate Spade Saturday is closing after 3 months in Georgetown. Is this the end of lower-priced spinoffs?

The Washington Post
By: Abha Bhattarai
February 2, 2015

Kate Spade Saturday lasted just 15 Saturdays in Georgetown before executives announced plans to shutter the store for good.

Parent company Kate Spade & Co., the brand known for its candy-colored handbags, announced last week that it is closing all retail locations of its lower-priced offshoots, Kate Spade Saturday and Jack Spade, in an effort to shore up sales at the New York-based fashion house.

The decision comes just two years after Kate Spade introduced its Saturday stores, following in the footsteps of a number of high-end designers, including Dolce & Gabbana, Marc Jacobs and Missoni, that have created secondary lines in a race to woo younger shoppers.

But those lower-priced spin-offs, which often come with thinner profit margins, can dilute a brand’s cache and analysts say that’s bad news for higher-end brands looking to capitalize on their exclusivity. This could be the year, experts say, that retailers pull back on their lower-priced efforts and outlet stores and instead shift their attention back to their primary brands.

“A lot of brands in luxury are realizing that playing at the bottom doesn’t pay,” said Milton Pedraza, chief executive of the Luxury Institute, a New York-based research firm that focuses on wealthy consumers.

While lower-priced offshoots are nothing new — Donna Karen started DKNY in 1988 — the recent recession, coupled with an influx of millennial shoppers, have given way to a number of new secondary brands. Vera Wang created the line Simply Vera for Kohl’s months before the start of the Great Recession in 2007. Zac Posen and Alexander Wang followed two years later with Z Spoke and T by Alexander Wang, respectively.

“It’s something that became very en vogue” after the recession, Pedraza said. “A lot of Wall Street analysts, private equity firms and hedge funds were pushing these companies and egging them on. But now I think you’re seeing the consequences in lower margins and discounting.”

Pedraza points to Coach, the maker of handbags, as a cautionary tale.

“Look at Coach — they opened a bunch of outlet stores and they paid the price,” he said. “They are trying to go back up market now, but it’s not very easy.”

At Kate Spade, executives had hoped the Saturday line would reach a younger, less affluent demographic.

Leather wallets at Kate Spade Saturday, for example, range from about $95 to $120, whereas a similar wallet by Kate Spade New York retails for $228.

“I think they had some good successes with the brand but overall the business didn’t meet expectations as quickly as they wanted,” said Mary Ross Gilbert, a retail analyst at Imperial Capital, a Los Angeles-based investment bank.

During the third quarter of 2014, overall sales at Kate Spade rose 30 percent to $250.4 million even as the company posted a loss of $9.13 million.

All 19 Kate Spade Saturday stores are to close by the end of June, but executives said some items from that line will be sold at the company’s higher-end Kate Spade New York stores.

Jack Spade, the company’s 22-year-old men’s line, will also shutter all 12 locations but will continue to be sold online.

“This is a year where you eliminate the hobbies and you eliminate the non-essentials, and that’s exactly what Kate Spade is doing,” Pedraza said. “You’ll see a lot of brands backing away from that this year. You’ll see a lot fewer outlets, a lot of deemphasis on outlets on the part of luxury brands.”


Spread the wealth, share!

January 23, 2015

Study says luxury brands fundamentally misunderstand their audience

Retail Customer Experience
December 29, 2014
By: Retail Customer Experience

Luxury brands lose 50 percent of their top customers annually because they routinely misidentify their demographic and economic profile while also failing to create a personalized sales experience for them, according to new research from Epsilon and The Luxury Institute.

The survey analyzed and compared 30,000 luxury shoppers to uncover insights, myths and stereotypes of the luxury shopper, according to the companies.

Luxury brands mistakenly believe their customers are typically female and on average 45-years old with a net worth over $1 million, the study found. However, 57.5 percent of luxury spenders are in fact, male. They are likely to be of Asian and Middle-Eastern descent with a net worth over $500,000. Additionally, nearly 13.8 percent of shoppers with a net worth over $1 million invest mostly in modern, contemporary décor and gifts as opposed to high-ticket apparel items.

“Luxury brands need to truly understand who their customers are and what they are looking for in a luxe shopping experience,” said Jean-Yves Sabot, vice president, retail business development at Epsilon. “This is critical in creating a personalized experience for the customer that drives engagement, retention and satisfaction.”

The study also found that online shopping accounts for less than a quarter of sales for multichannel luxury retail brands, because these consumers typically want to see and touch the product. While 98 percent of luxury shoppers use the Internet regularly, more than 50 percent of the time they are researching products and comparing prices on their mobile devices. Luxury shoppers crave the experience of the brand and look for a VIP interaction, according to the report.

Spread the wealth, share!

Luxury brands must understand consumer spending levels

Luxury Daily
December 31, 2014
By: Nancy Buckley

When it comes to luxury products, 73 percent of luxury consumers consider quality to be the most important attribute, according to a study by the Luxury Institute and Epsilon.

The report focuses on defining the different tiers of luxury consumers, focusing on those who are true luxe customers and those who are aspiring to that level. By understanding their consumers, luxury brands will be able to adjust their marketing tactics based on the individual’s level of consumption.

“The only way you can have a good understanding of a human being is to have honest dialogue with them,” said Milton Pedraza, CEO of Luxury Institute, New York.

“You have to treat people as an individual and you have to have an honest and open dialogue with them,” he said.

Deeper understanding
Interacting with consumers in a relevant and personal manner is key for brands looking to make a connection, especially since 50 percent of luxury brands lose their top clients every year. Also, since 47 percent of consumers say it is the customer service that defines a luxury brand, understanding and catering to the top customers is vital.

The study breaks down the luxury consumers into four categories: aspirational shopper, moments of wealth, dressed for the part and true luxe.

An aspirational shopper is that individual who wants to own luxury items, but cannot afford to on a regular basis. They typically shop at outlet stores or on discount Web sites and purchase low-ticket designer brand items.

Those categorized in the moments of wealth section of luxury shoppers may save for a specific piece from a specific luxury brand, but they are not a regular consumer of the brand.

Understanding luxe consumer

Dressed for the part shoppers purchase luxury items to present themselves as someone living a luxurious lifestyle, but do not have the finances to be true luxe shoppers.

True luxe shoppers do not have any financial concerns when purchasing and buy from luxury brands on a frequent basis.

Understanding where individuals lay in the scheme of luxury shopping and where they may jump to is important for brands. With a degree or a job change, consumers can move up a level of luxury shopping.

True luxe shoppers are statistically male and between the ages of 25 and 44. Fifty-two percent of them are single and 42 percent are college graduates. They are worth more than $500,000 and have annual incomes between $125,000 and $250,000.

Online shopping is less than 25 percent of sales for luxury brands, since consumers are still shopping in-person, leaving an opportunity for brands to offer more traditional white glove experiences.

However, this does not mean that luxe consumers are not actively online. Ninety-eight percent regularly use the Internet and more than 50 percent research products before purchasing. Also, 75 percent compare prices on their mobile devices.

Seventy percent of these consumers are on social media, but less than 25 percent engage with brands on Facebook. The digital nature of these consumers allows brands to have an online presence and attract consumers online, but offer customer service in-person.

The report suggests that brands organize and analyze housefile information to best understand their consumer’s habits and purchasing history.

Big data for personal results
Luxury brands are delving into more bespoke options and marketing, according to Wealth-X’s president at Luxury Retail Summit: Holiday Focus 2014.

Mr. Friedman spoke about the necessity among brands to understand their consumer, who they are, what they do and who their friends and family are in order to gain a full understanding of these individuals in order to effectively market. Luxury brands can learn from Wealth-X’s research on the ultra-high-net-worth individuals to create specific marketing strategy for the ultra-affluent (see story).

Some brands are adopting data trackers to attempt to understand in-store sales and trends.

For instance, Italian lingerie maker La Perla has teamed with a software platform to create a platform that will be implemented for all La Perla boutiques and fashion stores where its products are sold.

La Perla worked with MicroStrategy Mobile to analyze sales and other company data points through key performance indicators. This new technology will allow La Perla to be aware of information in all its stores and make necessary alterations to tactics without too much delay (see story).

Taking these opportunities to learn about and understand clients is vital for brands looking to engage and maintain a relationship with individuals.

“I think from the targeted marketing perspective if they understand who their clients are deeply they can really target those individuals and make it personal,” Mr. Pedraza said.

“People will be excited about the human approach,” he said. “It gives you a wonderful opportunity to connect with [them] in a truly unique and personal way.”



Spread the wealth, share!

January 22, 2015

Luxury Institute Analysis Shows Strong Potential for Firms Serving Wealthy Consumers as Ranks of High-Income Americans Swell to All-Time High

January 21, 2015
By: Luxury Institute

A surge in the number of high-income households signals a source of potential strength for firms selling high-end goods and services, according to a metadata analysis of the Federal Reserve’s 2013 Survey of Consumer Finances by the New York-based Luxury Institute. The number of U.S. families earning at least $150,000 has grown 25% from 10.6 million households in 2010 to 12.8 million 2013, but even as more Americans achieve “high-income” status, luxury merchants still face challenges in turning these high-earners into loyal customers.

Favorable trends in household finances, since 2010, have thus far failed to produce a broad-based rebound in luxury on par with the boom before the Great Recession. Despite rising levels of income, wealth, and recoveries in stocks and real estate to pre-recession levels, many providers of high-end goods and services continue to struggle with sales growth more than six years after the financial crisis that devastated asset values and consumer confidence.

Long memories of the crisis are partly to blame for restrained spending: 30% of consumers from households with at least $150,000 in annual income say that they spend more when their assets appreciate in value, but the wealth effect cuts both ways, and even more deeply when asset values decline. Two-thirds of high-income Americans say that when the value of what they own goes down so does their spending.

In addition, luxury marketers are also facing fundamental shifts in consumer shopping habits brought on by the ubiquity of tablets and smart phones, and the influence of social media.

“Compelling products and extraordinary experiences lead to long-term client relationships in luxury,” says Luxury Institute CEO Milton Pedraza. “Firms thriving today are those with systems and personnel in place to leverage new technologies into smarter ways of communicating and doing business with customers that reflect the new reality.”

Conducted every three years since 1983, the Survey of Consumer Finances provides detailed demographic profiles and insights into household wealth, income, saving, and spending. Since 2004, the Luxury Institute has mined the survey data to identify emerging trends that can impact companies serving a wealthy clientele.


Spread the wealth, share!

January 6, 2015

The customer comes first

Retail Gazette
January 2, 2015
By: Veebs Sabharwal

A new report by the Luxury Institute and marketing company Epsilon, emphasises the need for luxury brands to know their customers’ profiles. While merchandise and the overall experience are unarguably important elements to a luxury brand’s success, research has shown that luxury brands could be missing major opportunities by skipping the fundamental influence on their profits: the customer.

While luxury brands tend to have a higher price point and average order value by definition, many luxury brands lose 80-90% of the customers in any given year. Those same brands struggle to retain the top 50% of their customers. In addition, only 10-15% of luxury customers cite a first-name relationship with a sales professional.

Milton Pedraza, CEO of Luxury Institute confirms:

“Luxury brands lose half of their top customers every year. The biggest reason why a consumer won’t come back isn’t the product – it’s a rude or inattentive salesperson.”

It’s therefore crucial for a luxury brand to understand their customer from a high macro level, which could be part of a brand’s marketing and advertising, down to a granular level, which could be leveraged by individual sales associates in the course of customer relationship management.

Luxury is more often than not, associated with having the financial means to afford higher price points, and to some extent this is true but how exactly can the concept be defined? Says the report:

“Luxury” is a very broad category – it can encompass retail, travel, auto and finance but there is a wide range in these groups. For instance the pricing different between a Coach handbag and a Hermès Birkin bag is substantial. The same is true for BMW 3 Series and Bentley Continental GT. So is the luxury market that vast? Is it tied only to affluence?”

Wealthy consumers believe that luxury is defined by exceptional quality (the most significant attribute) followed by a brand’s design and finally customer service.

According to American Express and The Harrison Group, luxury customers prefer elegant stores and wish to feel an in-store experience that is in line with owning an indulgent item. Luxury is a state of mind, and for these customers, close relationships with select sales associates are valued.

The report suggests that typically, there are four shoppers who buy into the luxury market:

Aspirational Shopper: This consumer desires the pieces of high end brands, but does not have the finances to do so on a regular basis. Instead, aspirations are met through outlets, boutiques or low-ticket designer brand items eg. cosmetics.

Moments of Wealth: This type of shopper will save for a specific item from a lux label, investing in one-off purchases over long periods of time.

Dressed for the Part: These are the customers who purchase luxury items to maintain the appearance of someone who lives a luxury lifestyle, but doesn’t have the means to be a true luxury buyer. This fashion-conscious shopper devotes his/her time on curating a handsome collection of items across fashion and accessories, or a car, rather than on an expensive home.

True Luxe: The True Luxe can afford to purchase luxury items without any concern for the price. This is the consumer who frequents luxury retailers throughout the year.

It’s imperative that luxury brands understand which customers to place into which category, as there are opportunities for acceleration eg. Aspirational shoppers may complete their degree and obtain a well paid job, after which they may upgrade to the Moments of Wealth or Dressed for the Partcategory.


Spread the wealth, share!

December 30, 2014

Lose Insight Into the Customer, Lose the Customer: Here’s Proof

December 30, 2014
By: Bill Brohaugh

We all understand the importance of knowing your customer, but every so often a needed reminder hits us hard. A recent hit comes from a joint study conducted by Epsilon and The Luxury Institute. The study—The New Face of Luxury: Breaking Down the Myths and Stereotypes of the Luxury Shopper—comes out swinging in a press release announcing its publication: “Luxury brands lose 50% of their top customers annually because they routinely misidentify their demographic and economic profile while also failing to create a personalized sales experience for them.”

Half of your top customers out the door is a big hit indeed.

The study reports findings about the demographic characteristics of luxury customers in particular, but the overall lessons are clearly adaptable to brands and customers of all sorts.

Don’t be fooled by stereotypes. It’s well-known that most luxury shoppers are women, right? Except that the study knows that 57.5% of those shoppers are male.

Don’t be fooled by assumptions. In this prolonged age of conspicuous consumption, the best way to show off is in person, with expensive clothes, correct? But 13.8% of luxury shoppers indicate that their top merchandise categories are décor and gifts, more than those who indicated apparel. (But apparel is certainly in the running.) Hunting and fishing—no surprise—are pretty low on the list, so maybe that assumption was OK.

Fight internet pillage of your brand with instore experience appropriate to the customer. Reports the study: “Luxury shoppers crave the experience of the brand and look for a VIP interaction,” according to the report.

The white paper recommends: “Combine housefile information with third-party data including purchase behavior, to get the real picture of your shoppers. Use this information to segment your housefile into shopper personas.”



Spread the wealth, share!
« Newer PostsOlder Posts »