Luxury Institute News

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: http://seekingalpha.com/article/2926306-can-kate-spade-recover-from-closing-its-2-spin-off-brands

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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.”

Source: http://www.washingtonpost.com/news/digger/wp/2015/02/02/kate-spade-saturday-is-closing-after-3-months-in-georgetown-is-this-the-end-of-lower-priced-spinoffs/

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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.

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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.”

Source: http://www.luxurydaily.com/luxury-brands-must-understand-consumer-levels-from-aspirational-to-true-luxe/

 

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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

Marketwired
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.

Source: http://www.marketwired.com/press-release/luxury-institute-analysis-shows-strong-potential-firms-serving-wealthy-consumers-as-1985040.htm

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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.

Source: http://www.retailgazette.co.uk/articles/20344-the-customer-comes-first

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December 30, 2014

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

Loyalty360
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.”

Source: http://loyalty360.org/resources/article/lose-insight-into-the-customer#sthash.c4kwQ3gJ.dpuf

 

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Hey, big spender: Luxe buyer not who you may think

CNBC
December 29, 2014
By: Krystina Gustafson

Take a minute to picture the stereotypical luxury shopper.

What do you see?

If the vision of a 45-year-old, fur-clad woman immediately comes to mind, you’re making the same mistake as many of the brands targeting high-end buyers.

According to a new study by Epsilon and the Luxury Institute, 57.5 percent of luxury spenders are actually male, and many are of Asian and Middle Eastern descent. But categorizing shoppers by their age, sex and net worth still isn’t enough to get a real gauge on consumers who crave nice things.

The report, which examined 30,000 high-end shoppers, found that luxury brands lose 50 percent of their top customers each year by not correctly identifying them, and thereby failing to create a personalized shopping experience.

According to the study, there are four distinct groups of luxury shoppers for brands to identify, which account not only for net worth, but purchase behavior. They are:

  • “Aspirational” shoppers, who covet luxe brands, but don’t necessarily have the means to purchase them on a regular basis;
  • “Moments of wealth” shoppers, who save up for a certain item, but don’t buy the brand frequently;
  • “Dressed for the part” shoppers, who spend on high-end items to appear as if they live a luxury lifestyle, but may not have the wealth to be a true luxury spender, and
  • “True luxe” shoppers, who can purchase luxury items whenever they want, without financial concern.

“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 of retail business development at Epsilon. “This is critical in creating a personalized experience for the customer that drives engagement, retention and satisfaction.”

It’s not just existing customers who are at stake. Pam Danziger, president of Unity Marketing, said luxury brands’ failure to identify potential customers could also discourage consumers who have the money to spend from visiting certain stores, because they feel as if they don’t belong.

She said the reason many luxury brands aren’t well-tuned into their customers is because the industry prides itself on dictating trends, instead of listening to what people want. But communicating with consumers could have some serious benefits.

A recent study by Unity Marketing—which surveyed more than 300 consumers with a minimum net worth of $800,000—found that many wealthy shoppers consider certain luxury brands “overrated.” Luxe mainstays Louis VuittonGucciHermèsPrada and Rolex were at the top of the list.

While some of that could be attributed to each label’s designs, Danziger said the more consumers knew about a brand, the less likely they were to view it as “overrated.”

“The takeaway very simply is that marketing communication aimed at educating the affluent about the luxury brand is very likely to create a positive feeling or halo around the brand, which may well lead to … buying,” according to Unity Marketing.

Source: http://www.cnbc.com/id/102299035#

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Pinterest Focusing On Ads, Education In New Year

MediaPost Communications
December 29, 2014
By: Laurie Sullivan

Pinterest on New Year’s Day plans to begin selling ads on the site to brands at a cost per thousand (CPM) in an effort to better compete for ad dollars with Twitter and Facebook, as well as search engines Google, Bing and Yahoo. Promoted Pins, launched eight months ago to its brand advertisers in beta, will be available to all advertisers beginning in January.

Major upgrades to Promoted Pins that are in the works will give brands new ad formats and advanced targeting features. Pinterest says that early results look promising. Brand advertisers achieved about a 30% increase in earned media from their campaigns in terms of site users who saw a Promoted Pin and thought it was good enough to save to one of their own boards. The average Pin gets repinned 11 times. Brands also see those results, and sometimes higher, from Promoted Pins.

The company said brands using the auction-based cost per click (CPC) model also see success. Many of the self-serve beta partners see gains in traffic and impressions, explains Joanne Bradford, head of partnerships at Pinterest. “We’re still making tweaks to the product and want to make sure we get it just right before we roll it out to all businesses,” she wrote in a blog post.

While brands see success with Pinterest, the company needs to rethink how it competes with other platforms — especially Facebook. The platform attracts consumers who gravitate toward luxury brands like Prada, Manolo Blahnik, and Jimmy Choo. Seven in 10 consumers who prefer luxury items used social media in the past year, but more than half use Facebook, per research from Epsilon and The Luxury Institute. The analysis compares 30,000 luxury shoppers to reveal insights, myths and stereotypes of the luxury shopper. Of those, more than 25% engage with brands or retailers on Facebook. When consumers under the age of 50 are considered, the number rises to 34%.

To compete, Pinterest will teach brands how to best use its platform. Pinstitute was built as a way of teaching marketers how to connect with users, as well as building native ads and measuring the performance. It will give them insight into the types of Pins that perform well, and insight into what Pinterest users care about.

The company also expects feedback on the types of services and features that will help marketers get better results from the platform, so it is inviting a select group of brands and agencies to attend quarterly Pinstitute workshops where they can learn, exchange ideas and meet with the Pinterest product team. The first one is scheduled for March.

Source: http://www.mediapost.com/publications/article/240837/pinterest-focusing-on-ads-education-in-new-year.html

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December 29, 2014

Luxury Brands Often Misidentify Their Target Consumers

MediaPost Communications
December 26, 2014
By: Steve McClellan

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, according to new research from global marketing and crm agency Epsilon and research and consulting firm The Luxury Institute.

Epsilon analyzed and compared 30,000 luxury shoppers to uncover insights, myths and stereotypes of the luxury shopper, the firm said.

According to the findings, luxury brands mistakenly believe their customers are typically female and on average 45-years old with a net worth over $1 million. However, 57.5% 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. In addition, nearly 13.8% of shoppers with a net worth over $1 million invest mostly in modern, contemporary decor 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 report categorizes luxury shoppers into four groups including the so-called “True Luxe” shopper who has the means to purchase luxury items at will without financial concern. But there is also the “Aspirational Shopper,” described as shoppers who “desire to own pieces from a brand, but may not have the means to do so on a regular basis.”

Another group is labeled “Moments of Wealth,” comprised of shoppers that may save for specific piece but do not purchase from the brand frequently. And the “Dressed for the Part” group buys luxury items to give the appearance of someone who lives a luxury lifestyle but often does not have the financial resources to be a true luxury buyer.

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% of luxury shoppers use the Internet regularly, more than 50% 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.

Recommendations include using insights to tailor marketing communication to the optimal targets for more personalized and relevant communication. Luxury brands also need to do a better job of leveraging external shopper behavior for true one-on-one interaction both in-store and online, the report surmises. They also need to get a complete picture of their consumer target set. Third-party data will help. More on the report can be found here.

Source: http://www.mediapost.com/publications/article/240785/luxury-brands-often-misidentify-their-target-consu.html

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