Luxury Institute News

July 25, 2017

Is Tiffany & Co. Amazon-proof?

CBS MoneyWatch
By: Jillian Harding
July 24, 2017

Though many major American retailers have had their foundations shaken by Amazon (AMZN) and the wider explosion in e-commerce, Tiffany & Co. (TIF) appears to be a rare diamond in the rough of brick-and-mortar retail.

Exhibit A: The company’s stock price has jumped nearly 30 percent over the last year, even as department stores like Macy’s (M), J.C. Penney (JCP) and Sears struggle with shrinking growth.

Analysts point to several reasons why Tiffany’s, despite a recent dip in sales, remains in favor among investors. Those include the touch-and-feel experience of shopping for fine jewelry, the company’s potent brand, and a global, and well-heeled, customer base.

Another advantage is Tiffany’s small physical footprint of 125 stores in the U.S. and roughly 300 total worldwide. Its stores also are in upscale malls, which have been less affected by the mass department store closings that have affected other malls.

That helps keep Tiffany’s operating costs low and its stores churning out profits, with sales of around $2,600 per square foot in 2016 and a sparkling 62 percent gross profit margin.

Like other retailers, of course, Tiffany must cope with the impact of e-commerce and, as ever, the changing tastes of consumers. To that end, it recently named Alessandro Bogliolo, a veteran of luxury retail who is known for his ability to revamp brands like Bulgari, as its new CEO.

As with many luxury retailers, Tiffany also is looking to add millennial buyers that may be more interested in experiences and paying down student loans than spending on big-ticket jewelry. The trick is to attract younger shoppers while maintaining its core high-end client.

One way to appeal to younger buyers is by offering lower-priced fashion jewelry, which does not include gemstones and carries a lower price tag than fine gemstone jewelry. The fashion jewelry category was responsible for 33 percent of Tiffany’s sales in 2016.

Edward Jones analyst Brian Yarbrough said the company must be cautious about not devaluing its brand. While having different price points opens the door to a different mix of consumers, “You have to be careful — they had this problem in the early 90s… People who are buying $20,000 or $30,000 pieces don’t want teens running around,” he said.

Retail consultant Howard Davidowitz, CEO of Davidowitz & Associates, said that for Tiffany to retain the luxury customer, the company might consider looking to do an offshoot for fashion jewelry or acquire a brand like Pandora to appeal to a different kind of consumer.

“If you have a store and you load the store up with a lot of middle-level merchandise because you are trying to sell to tourists and everyone else, they are going to want to buy a small item and get the Tiffany bag. If you do that, you are a going to lose luxury customers.  I don’t think there’s any way to do it unless you can come up with a store within a store strategy — there is clarity in that.” he told CBS MoneyWatch.

In reporting its first-quarter earnings, the company laid out a new strategy for driving growth, including finding ways to more effectively engage with customers, adding new products, and revamping or even closing some stores.

Yarbrough said Tiffany needs to refresh its product line and improve its marketing, while adding that a greater focus on supply-chain efficiency could boost the retailer’s profit margin. But he also thinks that the company’s core strengths — its allure in overseas markets and high-end jewelry niche, in which customers want to make purchases in person — help buffer it from the competitive ravages of e-commerce.

“We think it’s a brand, as well as a retailer, that is more Amazon-proof,” he said.

Echoing this theme, Cowen senior retail analyst Oliver Chen wrote in a recent note, “In our view, Un-Amazon-Able qualities include… store and vertical integration focus at Super-Premium luxury stocks (Tiffany, LVMH, Sotheby’s),” he said in a recent note.

But Tiffany can’t rest on its diamond-studded laurels, Davidowitz said, noting that high-end clothing retailers with strong brands have been hurt by e-commerce and that Amazon could eventually decide to encroach on the jeweler’s turf.

“They have to have a plan to address the gigantic change taking place… Now is the time to do it. There is no way to say people are not going to buy jewelry online.”

Milton Pedraza, CEO of retail research group the Luxury Institute, said the key for Tiffany is to foster strong relationships with customers built on its compelling products and prestigious brand. 

“I think the world will become a barbell — at the one end it will be Amazon, commoditized products — and then there will be real luxury,” he said. “There are a lot of ‘luxury’ pretenders….Tiffany is no pretender. I think they will continue to survive and thrive.” 

Source: http://www.cbsnews.com/news/is-tiffany-co-amazon-proof/ 

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May 12, 2017

‘The unfortunate thing about Macy’s’: Just about everything

The Washington Post
By: Abha Bhattarai
May 11, 2017

Macy’s, it seems, can’t catch a break.

The beleaguered retail chain, which has been aggressively closing stores in recent months, announced more bad news Thursday: Sales were down in the first quarter of the year, leading to a 39 percent drop in profits.

As a result, the company’s stock price plunged more than 16 percent Thursday, to its lowest level since 2011.

Macy’s steady decline, analysts say, is the result of a number of factors, including the demise of shopping malls, as well as competition from online stores and off-price retailers such as TJ Maxx. Another issue: The company tends to sell run-of-the-mill products that shoppers can find more easily — and often more cheaply — elsewhere.

“Here’s the unfortunate thing about Macy’s: There’s nothing that sets it apart,” said Milton Pedraza, chief executive of the Luxury Institute, a New York-based research firm. “It’s crowded, it’s messy, the service is poor. The business model of Macy’s is no longer justifiable in a world dominated by Amazon and Walmart.”

The company’s woes come as other longtime retailers like Sears and JCPenney face similar headwinds. Americans are increasingly skipping the shopping mall in favor of buying online, which means department stores are left with hordes of inventory and pricey real estate. Macy’s last year announced plans to close 100 of its stores, and analysts said more closures may be in the works if the company’s fortunes don’t change soon.

“There are so many structural issues here that it’s going to take years for all of these challenges to play out,” said Sucharita Mulpuru, a retail analyst for Forrester Research. “This is a company that is fundamentally tied to shopping malls, and I don’t know that there’s any hope of rejuvenation there.”

After a dismal holiday season, 2017 hasn’t turned out to be much better. Same-store sales — a closely-watched industry metric — fell 4.6 percent, marking the ninth consecutive quarter of declines. Profit, meanwhile, plunged nearly 40 percent to $70 million from $115 million a year earlier.

“These are unusual and challenging times for retail, especially for mall-based department stores,” Jeff Gennette, who took over as Macy’s chief executive in March, said in a Thursday morning call with Wall Street investors. “We don’t have our head in the sand as to the significant challenges we face in getting the business growing again. We certainly don’t have all the answers yet, but we are working on them with a sense of urgency.”

To that end, he said, the company is revamping its fine jewelry and women’s shoe departments, adding furniture and mattresses to 60 locations, and forging exclusive partnerships with brands like DKNY. It is also planning to expand its buy-online, pick-up-in-store options in an effort to win over shoppers who have grown accustomed to shopping from their homes.

“The consumer has fundamentally changed,” Oliver Chen, a retail analyst for Cowen Group, told CNBC earlier this year. “Customers really expect speed, and the way in which customers shop now, they want their goods immediately.”

The retailer is facing considerable competition online. Amazon.com, which has a private-label clothing brand and is experimenting with custom-fit items, is widely expected to usurp Macy’s as the country’s largest clothing retailer this year. (Jeffrey P. Bezos, Amazon’s founder and chief executive, owns The Washington Post.)

Macy’s, founded nearly 160 years ago in New York, has been a household name for decades. Through the years, it has bought up a number of regional chains, including Hecht’s, Foley’s, Rich’s and Bullock’s, and consolidated them into the country’s largest department store brand. Today, Macy’s parent company also owns the department store Bloomingdale’s and beauty chain Bluemercury.

In recent months, it has also begun experimenting with its own off-price store, Backstage, which it has been quietly opening inside existing locations. The goal, executives said, is to target shoppers who might otherwise go to Nordstrom Rack or TJ Maxx. Two-thirds of Macy’s most loyal customers and 70 percent of millennials shop at off-price retailers each month, Gennette said.

“Macy’s needed to solve for that,” Gennette said, adding that the company is also lowering prices in certain departments, such as housewares. “We’re obviously dropping our prices to be competitive. We don’t want to have like-products that are more expensive online or in our stores than our competitors. That is why we have really pushed to make sure we’re giving customers value.”

But Pedraza, of the Luxury Institute, says that may not be a viable strategy.

“All they’re going to do is dig a deeper hole,” he said. “They may get a little bit of a dead cat bounce that way, but other than that it’s not a long-term strategy.”

In recent years, analysts say, retailers have been engaged in a race to the bottom, offering never-ending promotions and sweeping discounts as a quick fix for long-term problems, and Macy’s has been no exception. But the plan has also backfired: Customers have become trained to expect large-scale discounts on everything they buy, which means retailers are increasingly settling for slimmer profit margins.

“If you missed last week’s sales numbers, you can literally make that up with a promotion this week,” Mulpuru said. “That’s the only short-term lever retailers have. Anything else — new real estate, new inventory, new vendors — is going to take six months to three years, which is why retail has degenerated into a promotional business.”

As Macy’s executives scramble to shore up sales, they are also finding creative ways to bring in extra income. The company has sold off the top floors of certain properties, including stores in Brooklyn and Seattle, to be converted into office space. Its flagship in New York’s Herald Square, which takes up an entire city block, is also being floated by analyst as a potential source of cash.

“The value of that real estate alone is billions of dollars,” Mulpuru said. “This is a company that’s in trouble, but they’ve still got a few aces in their back pocket. It takes a long time to kill a retailer, and I don’t think Macy’s is there, yet.”

Source: https://www.washingtonpost.com/news/business/wp/2017/05/11/the-unfortunate-thing-about-macys-just-about-everything/?utm_term=.fec3244ec83b

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May 9, 2017

Millennials think Coach is ‘boring.’ Will acquiring Kate Spade help?

The Washington Post
By: Abha Bhattarai
May 8, 2017

Luxury handbag maker Coach is buying rival Kate Spade, a brand known for its whimsical designs and colorful patterns, for $2.4 billion in cash, the companies announced Monday.

The deal would bring together two New York-based brands that have competed in recent years to win over younger customers and build a global presence.

“This deal gives Coach a real toehold into the millennial market,” said Ed Yruma, a retail analyst at KeyBanc Capital Markets.

“Kate Spade can substantially expand in China and Japan — there are so many new opportunities for revenue — and Coach is in a great position to take that on,” said Oliver Chen, an analyst at Cowen Group. “The fact that Coach has transformed itself before gives it credibility to do it again.”

Coach executives have spent three years trying to persuade customers to think beyond its ubiquitous logo bags and outlet stores. To that end, Coach introduced its 1941 luxury label, acquired shoemaker Stuart Weitzman, added more stores abroad and stopped offering as many discounts. The changes seem to be working: After years of stalled growth, profits and sales are up.

Now executives say they would like to make similar changes at Kate Spade — where 60 percent of sales come from millennials — to turn it into a larger, more global brand.

“The lessons we have learned during our own transformation provide a blueprint for guiding our strategy with Kate Spade,” Victor Luis, chief executive of Coach, said in a Monday call with investors. “We believe our extensive experience in opening and operating specialty retail stores can unlock Kate Spade’s largely untapped global growth potential, notably in Asia and Europe.”

Among his first moves, Luis said, would be to cut back on online flash sales and deep discounts on Kate Spade goods.

“These channels are profitable and can drive growth,” he said but warned that “they can lead to brand deterioration over time.”

On Monday, for example, Kate Spade’s website was touting half-priced cross-body satchels for $149 (“today only!”). Another bag, the Cobble Hill Adrien, was discounted 60 percent, from $428 to $171.

“There’s been a vicious cycle of overproducing, then discounting prices and hurting your own brand,” said Milton Pedraza, founder of the Luxury Institute, a New York-based research firm. “It will be painful to dial this back — surgical, even — but it needs to be done if Kate Spade is going to become a lean, efficient brand.”

Coach is paying $18.50 for each share of Kate Spade, a 9 percent premium on Friday’s closing price. The deal is expected to be finalized in the third quarter of this year, and executives say they hope to save $50 million by consolidating parts of the business over the next three years.

But while Wall Street seemed pleased by news of the takeover — shares of Kate Spade rose 8 percent Monday, while shares of Coach were up 5 percent — some customers were wary. Kate Spade shoppers took to social media to voice their misgivings.

“WHY WHY WHY UGH,” a user named HellOnHeelsGirl tweeted in response to the news.

“I find Coach to be boring with their brown, unoriginal bags,” tweeted another. “Kate Spade had color and uniqueness! Bye bye pretty bags.”

Coach executives said Kate Spade will remain an independent brand with its own design, merchandising, marketing and sales teams. In addition to handbags and wallets, the company has expanded into jewelry, children’s clothing and homeware.

Kate Spade founded the eponymous brand with her husband in 1993. (She recently legally changed her name to Kate Valentine to coincide with the launch of her new brand, Frances Valentine). The couple sold a majority stake of Kate Spade to Neiman Marcus in 1999. Liz Claiborne bought the brand for $124 million in 2006. (Liz Claiborne was later renamed Fifth & Pacific and is now called Kate Spade & Co.)

In December, the Wall Street Journal reported that Kate Spade began looking for a potential buyer after shareholders said a larger company could help the brand grow faster. Analysts quickly began speculating that Coach would be the buyer.

“This has long been expected,” said Dana Telsey, chief executive of Telsey Advisory Group, a research and consulting firm in New York. “Being part of a larger organization will obviously get [Kate Spade] going where it wants to, faster.”

And, she added, this is part of Coach’s long-term plan to assemble a collection of brands into what it is calling a “New York-based house of modern luxury.”

“This won’t be the last acquisition for Coach,” Telsey said. “This is part of something much bigger.”

Two years ago, Coach paid $574 million for Stuart Weitzman and hired a former Valentino executive to become the brand’s chief executive. In the quarters since, the luxury shoe brand has turned a steady profit and helped boost its parent company’s earnings.

“With Stuart Weitzman, Coach has demonstrated that it can bring in another brand and nurture it,” said Pedraza of the Luxury Institute. “Now the challenge will be, can they do the same for Kate Spade without watering it down?”

Source: https://www.washingtonpost.com/business/economy/millennials-think-coach-is-boring-will-acquiring-kate-spade-help/2017/05/08/50bd9e9c-33f9-11e7-b4ee-434b6d506b37_story.html?utm_term=.ce0be13f8676

 

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High-end bag maker Coach splurges and buys rival Kate Spade

Marketplace
By: Jed Kim
May 8, 2017

Luxury goods maker Coach announced today it’s splurging. It has agreed to buy rival company Kate Spade for $2.4 billion. Coach has already acquired high-end shoe designer Stuart Weitzman, and with the Kate Spade purchase, it seems it’s on a mission to create a stable of luxury brands.

To hear the fully story, including insights from Milton Pedraza, click the link below to access the Marketplace website for the audio story: https://www.marketplace.org/2017/05/08/business/high-end-bag-maker-coach-splurges-and-buys-rival-kate-spade 

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April 21, 2017

Ducati Stretches Its Sex Appeal

Departures
By: Brett Berk
April 20, 2017

Can the exclusive Italian superbike manufacturer change its game without sacrificing its reputation? Necessity suggests the brand has no other choice—if it wants to survive.

It came as a surprise to supercar purists when, in 2012, Lamborghini first hinted that it would release an SUV—a vehicle seemingly antithetical to the brand’s aggressively impractical essence. But what may be experienced by some as a sign of brand suicide is actually an act of survival: The performance-oriented Urus is expected to double Lamborghini’s sales once it hits stores by the end of this year. In the eternal quest for increased market share, the automaker known for its fiendish six- and seven-figure supercars has had no choice but to diversify. And in this competitive market, they’re not the only ones.

The 90 year-old Ducati brand is the Lamborghini of motorcycles: exclusive, expensive, performance oriented, and effusively Italian. The brands’ spirits have only become more kindred since 2012, when the motorcycle marque became a wholly owned subsidiary of Lamborghini (itself owned by German carmaker Audi, and part of the Volkswagen Group). And just like its hyper-potent owner, Ducati has begun to dip its toe into the market beyond the high-speed, high-price racing bikes for which its known.

 

Working on a Ducati Multistrada. Courtesy Ducati

 

This year alone, Ducati plans to release eight new bikes across a number of new, more accessible segments the brand has shied away from in the past. New models include the Multistrada 950, a touring “multibike” (January 2017, $13,995); a suite of Scramblers, as part of the two-year-old sub-brand, including the off-roading Desert Sled (March 2017, $11,395) and a 1960s-inspired Café Racer (April 2017, $11,395); and a versatile, entry-level sport/comfort SuperSport (April 2017, $12,995). The XDiavel, a cruiser intended for an aging buyer (someone over 40 in motorcycle-speak), launched in December 2016 ($23,495).

These additions are a far cry from the developments of previous years, which saw R&D dollars generally go to making their superbikes ever faster and more technically advanced. But those investments have had an unforeseen side effect: As progress has allowed high-end motor vehicles to become incredibly fast, safe, and easy to drive, access to the full experience they offer has become almost impossible to achieve on public roads.

 

The Ducati Scrambler Café Racer. Courtesy Ducati

 

“The risk,” says Jason Chinnock, CEO of Ducati North America, “is that the motorcycles, like supercars, get so far advanced that it limits their actual use.” The brand had to adapt or perish—or at least, start collecting cobwebs in the garage. Already the move seems to be paying off. Global sales are up nearly 25 percent, reaching a record 55,450 bikes purchased in 2016. Part of this can be attributed directly to the new offerings, especially the Scramblers, which immediately became Ducati’s bestseller when the line was introduced in 2015. “It was very important for us to able to expand,” Chinnock says. “Now I can say that we cover about 60 percent of all motorcycle segments, versus in the past where we were around 23 percent [with just superbikes].”

“There are always going to be purists out there,” says Milton Pedraza, CEO of luxury research and consulting firm the Luxury Institute. “But I think most of us are willing to accept a more sedate, or different versions of a brand that is still in the same category. The Ducati brand has a sex appeal, besides the performance appeal.”

 

The Ducati XDiavel. Courtesy Ducati

 

Ducati won’t completely leave its past behind: In May, the brand will debut the 1299 Superleggera ($80,000), the fastest twin-cylinder in history (at 215 horsepower) and first-ever street-legal full-carbon fiber structure superbike. But the marque will continue its expansion into existing and incipient categories moving forward. Chinnock hasn’t ruled out a fully electric motorcycle, which, with its instant power, stealthy silence, and eco-friendly approach, may soon garner significant demand. “It’s something that we’ve continuously looked at, but the technology isn’t at the point yet where we can insure the proper experience for our brand,” he says, citing Ducati’s rousing heritage, founded in part on its aggressive and mechanical sound.

One style Ducati fans likely won’t find any time soon, however, is a self-driving motorcycle. “I think that autonomy has an excellent place in the world of transportation, but why people get on a motorcycle is not necessarily to move from point A to point B,” Chinnock says. “We ride to escape, we ride for sport, we ride to clear our head. That’s the difference between entertainment and transportation.”

Source: https://www.departures.com/lifestyle/automobiles/ducati-dips-into-new-motorcycle-segments

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February 27, 2017

The 4 hottest trends for the upper crust

The New York Post
By: Zachary Kussin
February 24, 2017

 

Wealthy New Yorkers are usually on the vanguard of the latest high-end gadgets and lifestyle crazes. So we asked Milton Pedraza, CEO of The Luxury Institute, to reveal this year’s toniest trends. Below, he offers his predictions on what will be making waves in the worlds of luxury automobiles, travel, style and living. 

Real Estate

Ritzy residential developments aren’t just for major metropolises anymore. “[People] everywhere want lots of amenities,” Pedraza says. Indeed, posh residential towers that cater to both young professionals and empty nesters are popping up across America — from the glassy One Light in Kansas City to the elegant Residences at Mandarin Oriental, Boca Raton (above), that Florida town’s first five-star hotel-and-real-estate combo.

Travel

“Hotels are understanding the paradox that you need to feel the literal comforts of home [on your] adventure,” Pedraza says. So they’re adding ultra-personal touches and stocking up on guests’ favorite snacks, bedding and products. Aloft hotels rolled out voice-activated rooms (above) that set temperature, lights and music just as you’d have them en casa, while 1 Hotel South Beach just debuted “Personal Gurus,” who will stock suites with requested groceries and newspapers before check-in.

Transport

Sleek design and an elite engine don’t make a luxury car stand out these days. Advanced tech features — including self-driving mechanisms, onboard Wi-Fi and virtual assistants, like the “Eleanor” system aboard Rolls-Royce’s “Vision Next 100” concept car (above) — will be in the driver’s seat. “You’re going to see technology become more pervasive,” predicts Pedraza, noting that safety features will matter most: 360-degree visibility and stay-in-the-lane technology among them.

Jewelry

Instead of browsing baubles dug from mines, the fashionable set will embrace lab-grown diamonds and other customizable gems. “The quality is extremely high,” Pedraza says. Man-made dazzlers (like the above o.75-carat Brilliant Earth sparkler in an 18-k white-gold setting, from $3,080) are indistinguishable from real rocks to the naked eye and offer a bright alternative to environmentally destructive mining — at a lower price point. (Shhh — no one has to know about that part.)

Source: http://nypost.com/2017/02/24/the-4-hottest-trends-for-the-upper-crust/

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Ralph Lauren CEO To Depart Over ‘Different Views’ With Founder, Shares Tumble

Forbes
By: Lauren Gensler
February 2, 2017

Stefan Larsson (left) and Ralph Lauren. (AP Photo/Jason DeCrow)

Stefan Larsson (left) and Ralph Lauren. (AP Photo/Jason DeCrow)

That didn’t last long: Less than two years after taking the top job, Ralph Lauren’s CEO will leave the company over differences of opinion with its billionaire namesake founder and chairman.

According to a release from the company on Thursday, chief executive Stefan Larsson and Ralph Lauren didn’t see eye to eye on the direction of the company. Larsson, a veteran of Old Navy and H&M who took the top job from Lauren himself in October 2015, has agreed to leave the American retail empire on May 1. He will receive $10 million in severance over the next two years.

“Stefan and I share a love and respect for the DNA of this great brand, and we both recognize the need to evolve,” said Ralph Lauren, 77, who Forbes estimates is worth $5.6 billion. “However, we have found that we have different views on how to evolve the creative and consumer-facing parts of the business. After many conversations with one another, and our Board of Directors, we have agreed to part ways.”

 Shares, which have slid 22% over the past 12 months, fell another 11% to $77.69 in morning trading.

Ralph Lauren also reported third quarter earnings on Thursday. Net income slid to $82 million, or 98 cents per share, from $131 million, or $1.54 per share, a year earlier. Excluding certain items, earnings came in at $1.86 per share, which beat the $1.64 that Wall Street analysts were looking for.

Revenue fell 12% to $1.71 billion during its holiday quarter, which was in line with analyst estimates.

Ralph Lauren, perhaps best known for its polo shirts, has been closing stores and cutting jobs as part of a multi-year growth planto put the company back on track. It has also shed organizational layers to help speed up decision-making and worked to get its products in stores at a quicker pace, taking a page out of the fast-fashion playbook.

In fiscal 2017, the company expects restructuring charges of about $400 million. It also projects savings of $180 million to $220 million related to cost-cutting efforts.

The retailer said it will begin conducting a search for a new chief executive and chief financial officer Jane Nielson will help out in the interim. Ralph Lauren will continue in his role as executive chairman and chief creative officer.

Source: http://www.forbes.com/sites/laurengensler/2017/02/02/ralph-lauren-stefan-larsson-ceo-departure/#57781e5518c4

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January 22, 2017

Luxury Executives Talk About How To Get More Of Your Money

Forbes
Doug Gollan
January 18, 2017

Global luxury from autos to jets to watches, jewelry, home, arts, beauty, and travel is a trillion dollar industry. What will it take for luxury brands to successfully sell and serve you? Top executives gathered in New York today at Luxury Daily’s annual Luxury FirstLook 2017 to discuss best practices in getting you to open your wallet. Below are some highlights.

1. It takes impeccable service. Luxury providers need to give front-line staff more decision-making authority. Mehdi Eftekari, the general manager of Four Seasons Hotel New York, says the group allows its employees to resolve complaints. As an example, he says a customer checking out complains his room service coffee was cold. The typical hotel rulebook would have the clerk get a manager. Instead, Four Seasons’ employees can take the charge off the bill on their own. He says removed charges actually decreased. Hotels and airlines are often concerned about travelers who try to game the system. Eftekari told the audience, “That’s 1/10th of 1 percent. I tell my team to focus on the 99.9%.”

2. Look to Jeff. Amazon is already a powerhouse in luxury sales, according to Bob Shullman, CEO of The Shullman Research Center. He said 74% of the top 1% bought luxury from Amazon in the past year. Moreover, as luxury brands try to figure out how to better sell their wares in an omnichannel world, he says Amazon customers rate the retailer better than other retailers by an 110-to-1 margin. He says top luxury brands typically score a 2- or 3-to-1 margin. “(Amazon CEO and Founder) Jeff Bezos doesn’t see any limitations,” Shullman told the group, noting it has launched its own private label fashion line after many top luxury brands eschewed the sales platform. What’s more, Amazon has a power database of both customer emails and home addresses. Moderator Milton Pedraza, CEO of The Luxury Institute, noted the online retailer needs to fix its reputation that it doesn’t treat its employees well. “It matters,” he says.

3. Shopping needs to be memorable. Retail stores have to move “from nicely furnished stock rooms with well-dressed stock people” to centers of experience, says Ken Nisch, chairman of JGA.. He notes with retail leases running 10 years or more, retailers are under pressure to figure out how you will shop not next month but five years from now. He says malls have increased “experiential” retail space that includes things like restaurants, exhibits and hair styling to 25% from 8%. He quoted Walt Disney, telling the executives, “A picture is worth a thousand words but an experience is worth a million.”

4. Sustainability needs to be relatable. Luxury companies haven’t done a good job communicating what they are doing let alone making it inspirational to you the consumer. Charles Stanley, US CEO for De Beers’ Forevermark said there are a multitude of statistics about how the diamond industry supports sustainability, however, to make an impact his company created short films to show consumers real examples. One vignette shows a single mother who was able to launch a successful business creating more jobs based on funding from Forevermark. Kane Sarhan, marketing boss for 1 Hotels, a new group based on the core value of sustainability (They know where everything from carpets to bathroom fixtures were made and how.) wants guests to go away understanding how they can bring sustainability back into their regular lives. He says a survey of over 50,000 guests found “49% said staying at our hotel made them change life at home.” The hotel has meters in its showers so you can moderate your water use. He says in the future the hotel may reward guests who consume less water or electricity.

5. Brands need to rethink their approach to events you get invited to. David Friedman, co-founder of research firm Wealth-X says most event marketing is based on trying to one-up other events and the guest list isn’t well targeted. He coined the phrase “Hope Marketing.” In other words, hold and party and hope the right people show up and then buy. Friedman says when targeting Super Rich/UHNW consumers, marketers need to turn it around and focus on what the customer is interested in, be it fishing, football, collecting stamps or the opera. Shamin Abas, who owns a PR company that works with jet and yacht companies told the audience to think small. For a client that makes $3.5 million submarines, an event meant bringing an Ultra High Net Worth prospect and his family to the Bahamas for a test dive. For another client that manages private jets, but was worried about what will happen as fathers grew older and turned over operations of their empires to their children, she helped orchestrate a father/son event so the jet company could get to know the next generation.

6. Traditional advertising no longer works. Pam Danziger, president of Unity Marketing, said the average consumer gets 362 ad messages a day, but few of them resonate or stand out because they are in the wrong platforms. Greg Licciardi, chief revenue officer of Elite Traveler (Disclaimer: I co-founded the magazine in 2001 before selling my interest in 2014) said niche media is the key. For companies that want to reach the Super Rich, the publication is distributed on private jets and terminals. Shullman says digital media such as e-mail is effective in driving recall with luxury buyers. Tracy Doyle, creative director for fashion and luxury at The New York Times T Studio says more and more marketers want customized “native content” messages. Licciardi noted that with over 80% of UHNWs having made their money in the past 15 years, luxury marketers can’t assume you know about their heritage or what uniquely sets them apart. “Luxury marketers need to tell the story and educate,” he says.

Doug Gollan is Founder and Editor-in-Chief of DG Amazing Experiences, an e-newsletter for private jet owners.

Source: http://www.forbes.com/sites/douggollan/2017/01/18/luxury-executives-talk-about-how-to-get-more-of-your-money/#66f92d6c4549

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January 16, 2017

To be creative or not? That’s the question for luxury handbag-makers

FashionUnited
By: Angela Gonzalez-Rodriguez
January 16, 2017

The economic slowdown in China; terror attacks in main international luxury plazas such as Paris and the fights against counterfeits have taken a toll on handbag-makers’ creativity.

According to a recent research by Edited, a fashion analysis firm, Michael Kors Holdings Ltd., Prada SpA, LVMH’s Louis Vuitton and Burberry Group PLC all reduced the number of styles introduced last quarter.

In the final three months of 2016, the number of new styles introduced by Michael Kors dropped 24 percent from the preceding quarter. Prada and Louis Vuitton rolled out 35 percent fewer new designs, while the number at Burberry dropped 8 percent, according to Edited, whose clients include Ralph Lauren Corp. and luxury e-commerce retailer Net-A-Porter.

On the other hand, a few brands such as Kate Spade & Co. and Ralph Lauren, did introduce more new designs in the fourth quarter, Edited found.

Brands needs their bags sales, which account on average for 40-60 percent of total sales.
“There’s a feeling of doom out there in the industry – everything is defensive and not offensive,” said Milton Pedraza, a luxury consultant who runs the Luxury Institute. “What you’re seeing is a tremendous amount of copying, less innovation and less creativity, at a time when exactly what you need is to be bold.”

And truth is that luxury brands need their bag sales. Bags account for 39 percent of Gucci’s products priced over $1,000. They make up 65 percent of Fendi’s and 82 percent of Prada’s 1,000 dollars or more assortment, reports Edited in their corporate blog.

“Dropping newness too low could certainly threaten sales,” said Katie Smith, a senior fashion analyst at Edited. In fact, rolling out the right number of styles is no easy task. Smith stresses that brands need to strike a careful balance between creating an excess of inventory while ensuring they remain trendy and therefore relevant.

Handbag-makers have faced other challenges as well. Younger consumers are demanding faster availability of the latest trends, and some are showing preference for shoes and jewelry over bags.

Sales growth in handbags is estimated to decelerate to 3.1 percent by 2020, from 16 percent in 2012, according to data collated by Euromonitor. The slowdown has forced companies to diversify. Michael Kors is expanding into menswear, and Kate Spade is growing in other categories such as home goods.

In this regard, Pedraza recalls that “For the first time in many years, there’s a real sense of threat,” he said. Companies are focused “on survival and dismantling the old structure.”

Photo: Louis Vuitton Official Web

Source: https://fashionunited.in/news/business/to-be-creative-or-not-that-s-the-question-for-luxury-handbag-makers2/2017011614691

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January 12, 2017

Handbag makers find it hard to carry on like before

The Strait Times
January 12, 2017

They’re cutting back on styles as demand for luxury items wanes

NEW YORK • Handbag makers are busy battling waning demand and markdowns at stores, and that may have diverted their attention from what could make them successful in the long run: creativity.

Michael Kors Holdings, Prada, LVMH’s Louis Vuitton and Burberry Group all reduced the number of styles introduced last quarter, according to Edited, which provides fashion industry analysis.

Though manufacturers and retailers are worried about being saddled with too much merchandise, the lack of innovation will make it tough to recapture the excitement of shoppers, said Mr Milton Pedraza, a luxury consultant.

“There’s a feeling of doom out there in the industry – everything is defensive and not offensive,” said Mr Pedraza, who runs consulting firm Luxury Institute. “What you’re seeing is a tremendous amount of copying, less innovation and less creativity, at a time when exactly what you need is to be bold.”

Demand for US high-end products took a hit last year from a strong dollar and global economic woes. Terrorism fears also crimped tourism, a big source of luxury spending. Shares of upscale brands suffered.

Michael Kors, Coach and most other rivals underperformed the Standard & Poor’s 500 Index in last year. Ralph Lauren was down 19 per cent last year.

TIME TO BE BOLD

There’s a feeling of doom out there in the industry – everything is defensive and not offensive. What you’re seeing is a tremendous amount of copying, less innovation and less creativity, at a time when exactly what you need is to be bold.

MR MILTON PEDRAZA, a consultant who runs the Luxury Institute.

Prada was the rare exception, rising 9 per cent in Hong Kong last year to outperform the Hang Seng Index’s 0.4 per cent gain. It rose as much as 9.6 per cent to HK$30.70 yesterday, reaching the highest intra-day level since March.

At many stores, the handbag selection from several high-end labels was significantly smaller over the holidays. In the final three months of last year, the number of new styles introduced by Michael Kors dropped 24 per cent from the preceding quarter.

Prada and Louis Vuitton rolled out 35 per cent fewer new designs, while the number at Burberry dropped 8 per cent, according to Edited, whose clients include Ralph Lauren and luxury e-commerce retailer Net-A-Porter.

Michael Kors did not have an immediate comment on the reduction, while LVMH, Prada and Burberry declined to comment.

Rolling out the right number of styles is no easy task. Brands need to strike a careful balance between creating a glut of inventory – so-called “dead stock” – while ensuring there is enough trendy, new merchandise to entice consumers, said Ms Katie Smith, a senior fashion analyst at Edited.

“Dropping newness too low could certainly threaten sales,” she added.

A few brands, including Kate Spade and Ralph Lauren, did introduce more new designs in the fourth quarter, Edited found. But many tried to ride out the holidays without breaking fresh ground.

Handbag makers have faced other challenges as well. Younger consumers are demanding faster availability of the latest trends, and some are showing preference for shoes and jewellery over bags.

Sales growth in handbags is estimated to decelerate to 3.1 per cent by 2020, from 16 per cent in 2012, according to market research firm Euromonitor.

Source: http://www.straitstimes.com/business/handbag-makers-find-it-hard-to-carry-on-like-before

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