In The Loop
November 14, 2014
Luxury Institute’s Founder and CEO Milton Pedraza discusses luxury retail on “In The Loop.”
In The Loop
November 14, 2014
Luxury Institute’s Founder and CEO Milton Pedraza discusses luxury retail on “In The Loop.”
NEW YORK, NY–(Marketwired – Nov 11, 2014) – The following is a White paper by Milton Pedraza, CEO of Luxury Institute, LLC:
All around the globe, the luxury industry has navigated against strong headwinds in 2014. Growth in China has slowed due to government crackdowns and macroeconomic forces, Russian clients are buying far less for obvious reasons, and key European countries dependent on streams of wealthy tourists and aspirational buyers have also stalled. The situation is comparatively better in the United States and in Japan but both nations are growing far below their long-term economic potential. To these cyclical challenges, add in the secular change of online buying cannibalizing store and it has been a tough year for most luxury goods and services providers.
There are exceptions to the rule of sluggish sales. Despite the challenges, pure-play luxury brands like Saint Laurent, Bottega Veneta, and Hermès continue to innovate and make necessary investments to retain their status as luxury brands. No one is immune to market forces. Luxury will always be cyclical, but the real danger for brands that we see comes from self-inflicted wounds caused by the inability to accept new realities and failure to execute. Doing either of these far too slowly is also dangerous.
Looking ahead, the future has the potential to be very bright for luxury. Providing high-end goods and services to wealthy customers will remain a growth industry in volume, and value, for decades to come. What’s crucial now is rapid adaptation to evolving market realities. Powerful forces are affecting the luxury industry right now and remind us that we have to get comfortable being uncomfortable. The time to implement change is now.
We work with dozens of top-tier global luxury brands each year and live in the headquarters and stores of our clients. Based on recent experiences and dialogues, here are seven trends and issues that enlightened luxury brands need to address in 2015:
1. There Are Too Many Luxury Brands For A Slow-Growth Environment
There are too many luxury and premium brands in the world. Our industry has too many hotel chains, too many handbags and apparel producers, too many automotive providers, too many wealth managers, too many watch and jewelry makers and too many private jet charter companies. Name an industry and you’ll likely find a staggering number of brands purporting to be premium. Many have global ambitions.
There are too many “luxury” brands, but not enough great ones. Most are pure copycats. This does not even take into account all the fearless start-ups trying to disrupt the industry.
In 2015, look for many more large, medium and start-up brands to stall, or fail, at a faster rate than over the last few years. Affluent consumers, chased to exhaustion, are swamped by too many me-too options in every category. It will be time for true luxury brands to stop benchmarking the mundane players, understand their own brand identity, values, and standards, and get back to delivering differentiated, fully-priced value in 2015.
2. Comparable Store And E-commerce Sales Are The Critical Metrics
One recurring theme we hear in luxury boardrooms is that any run-of-the mill luxury brand can open stores, including outlets, globally to increase sales. In the current environment, it takes true leadership competence to drive significant comparable store sales. Foot traffic into stores is down 20% to 30% year-over-year for many luxury brands. E-commerce has scarcely made up the difference.
Look for luxury brands in 2015 to stop opening stores completely, even close some, and focus surgically on pinpointing true opportunities to open profitable new stores. The three mantras of luxury economics in 2015 will be: driving new valuable clients to online and offline channels, dramatic increases in conversion, and profitable retention of all high potential clients, not just the VIPs.
3. Not Only Best Practices, Best Execution
Dr. Atul Gawande, a Harvard surgeon and author who has studied how the highest performers in many fields achieve results, has written that the biggest differentiator in medicine and business today is not learning new best practices but executing on a core set of known best practices. For example, hospital infections proliferate today in most hospitals even though medical personnel are fully aware how they can be prevented. Failure to execute best practices consistently is the single biggest impediment of increasing sales and profits in the luxury industry.
Luxury today is full of highly experienced marketing, sales, e-commerce, operations and human resources executives who know exactly how to execute best practices. Unfortunately, many of these leaders show up at the office daily and fail to inspire, empower, measure and reinforce these best practices. In 2015, look for boards of directors to require measurable results from their teams as the hyper-competitive environment requires going from experienced to expert, from delusion to execution.
4. Transforming Store Managers Into Entrepreneurs
Everyone who understands luxury retail agrees unequivocally that the store manager is the backbone of any operation. Despite this wide recognition, many store managers are disempowered into becoming little more than glorified administrators and bureaucrats. They stay in small offices all day counting inventory and pounding out reports that can be automated in a flash.
There is a crisis of management in luxury, but it is not primarily in the executive suite. It is among the store manager ranks. Luxury brands need to attract, retain, educate and empower store managers to become a new breed of entrepreneur within the luxury brand. In 2015, look for top-tier luxury brands to focus resources to dramatically increase the formal education, empowerment and incentives of store managers to generate business by using public relations, digital assets, events, social media, and other tools to drive traffic and sales to stores daily. These local entrepreneurs will unleash a new era of “freedom with boundaries” in the luxury world.
5. Brands Are Finally Getting Serious About Human Relationships
We believe that the concept of a luxury brand having a relationship with its customers without continuous human to human engagement is highly overrated, if not an outright mirage. Last year we told you the online personal shopper was a critical and urgent evolving concept in the luxury world. One of the few brands that executed this concept was mainstream retailer Zappos. Others like Net-A-Porter reserve this concept for VIP clients.
In the coming year, look for more brands to finally begin building deeper relationships with large percentages of online and multi-channel customers. Although resources are scarce, brands should build intimate relationships with, at a minimum, their top 20% to 40% of clients.
Also, and very importantly, look for luxury brands to empower store sales associates who have multi-channel clients to reach out and build human relationships after the client purchases in any channel. For this to happen, digital assets and insights must empower sales associates in real time, and compensation structures will need to reflect the nature of a multi-channel relationship. In 2015 we are extremely optimistic that the economic conditions will force brands to get moving on building better client relationships rooted in personal interaction rather than impersonal algorithms.
6. CEO Change Will Accelerate Again In The Luxury Industry
During the recessionary years of 2008 and 2009 CEO changes were widespread as desperate times called for desperate measures. This time the change lacks desperation, but it will be just as profound. Demographics will drive change in the executive suite as baby boomer CEOs gracefully step down at a rapid clip. We experienced several CEO changes toward the end of 2014, and we expect to see many more in 2015.
In times of change, luxury brands look for more skilled and effective leaders. Enlightened boards of directors at major conglomerates and private equity firms are looking for a new breed of highly collaborative and effective team builders. Inspiration is needed more than perspiration to lead associates to execute brilliantly across segments and channels. Companies expect measurable execution in 2015, and they will get it, one way or another. Given the demographics of luxury, expect more women and diversity candidate CEOs to thrive in 2015, all to the benefit of our industry.
7. Think Less Facebook, More Pinterest
Let’s face it, in its current format, Facebook is of marginal value for luxury brands. Gathering millions of likes and online fans has not been a formula for rapid sales growth in luxury. Success stories have been few and far between despite the lemming-like response from unenlightened digital executives and their agency partners. True luxury buyers are far more discerning. Engagement in luxury requires a one-to-one conversation, not a megaphone.
Social media can certainly serve a useful purpose. Sites and apps like Pinterest and Instagram that engage visually have a far better chance of success for the eye-candy offerings of many luxury brands. Look for localized and personalized efforts to thrive within these highly engaging media and look for the leading edge brands to empower all front-line associates to post their favorites in a brand-sanctioned way. In this way, a brand can engage clients and prospects in rich, honest dialogue that builds relationships and boosts sales.
The luxury industry is healthy, but those who anticipate change will have a decided advantage. Many luxury goods and services brands enter 2015 with false confidence and may only realize too late that the world has changed. Enlightened brands are jumping off of the cresting wave, and onto an emerging wave to drive sales and profits in 2015.
We welcome your opinions and comments. Please see below for our contact information.
By: Deirdre Kelly
November 5, 2014
When Christal Agostino was pursuing her MBA a few years ago, she had a deluxe classroom – a Hermès boutique in Paris.
In the rarefied edifice devoted to luxury shopping, the Montreal native had to learn the intricacies of the high-end marketplace. But the focus was not on the legendary brand’s crocodile handbags, some costing as much as a car, nor on its famous silk scarves, produced since 1937 and coveted worldwide.
It was on the sales staff, paragons of discretion, and how they interacted with customers of Hermès’ pricey goods.
“The way they handled the merchandise – the way they wrapped it and presented it to the customer, walking from behind the counter to hand it to them – was incredibly fascinating to me,” Ms. Agostino says. “They were creating a curated experience within the luxury experience. Nothing was done haphazardly.”
Ms. Agostino had completed her one-year, full-time MBA at Queen’s School of Business in Kingston and was in France at the time to expand her degree to include a specialization in international luxury brand management at École supérieure des sciences économiques et commerciales, better known as ESSEC.
The French business school, in collaboration with LVMH and L’Oréal Luxe, launched the specialization in 1995 to provide the high-end companies with a talent pool from which they could recruit, particularly in developing markets. Queen’s became an exchange partner with ESSEC in 2006. So far, about 180 students have gone back and forth between the schools.
“The ESSEC MBA in international luxury brand management was the first MBA program of its kind to exist worldwide,” ESSEC spokeswoman Anthea Davis says.
The program is 11 months long and is offered at two campuses in France and one in Singapore.
“It is today the reference worldwide in international luxury brand management education. We now work with all major luxury groups and independent houses worldwide,” Ms. Davis adds.
Milton Pedraza is the chief executive officer of the Luxury Institute, launched 11 years ago in New York, and he says there’s a growing need for specialized training in the luxury sector.
“Luxury is different from mainstream retail – the level of design, the level of quality, the level of relationship-building are all much higher than any other business segments,” Mr. Pedraza says.
“You are dealing with the affluent and the wealthy who have special needs and requirements and who are paying a very high premium for their goods and services. So the level of expertise required to deliver that value proposition must be taught and learned.”
Since ESSEC’s program launched 20 years ago, specialized MBAs in luxury brand management have grown in popularity. They are also now offered at the Bologna Business School, in the Italian city that’s home to brands such as Lamborghini and Maserati; the International University of Monaco; the NYU Stern Business School in New York; and the SDA Bocconi School of Management in Milan, Italy, to name some.
Most concentrate on a single facet of luxury, such as design and marketing. Others boost technological skills. Fashion in the digital age has become instant and a luxury goods education today includes video and social media training.
“Historically, luxury has seemingly been quite old fashioned and formulaic to its approach to business. However, with swift changes in technology, social media, e-commerce and expansion to emerging markets, we are seeing that luxury is now evolving and adapting rapidly,” says Nicole McBride, office manager at Lambert and Associates, a retail network company with offices in Paris, London, New York, Milan and Florence, Italy.
“With change comes a demand for a new talent pool that can provide a fresh approach.”
Canadian fashion entrepreneur Diane Robinson is the co-founder of the Huntress jewellery and luxury handbag, which made its debut recently at the Spring 2015 edition of World MasterCard Fashion Week in Toronto. In advance of launching her own business with partner Ron LeBlanc, she took the year-long luxury brand management MBA at the University of Monaco, graduating in 2011.
“You need both the language of business and luxury to compete in this field,” Ms. Robinson says. “Our aim was to have a fully vertically integrated business and I needed to know every part of the business, from the rough to the runway.”
The ESSEC MBA offers several specializations within its luxury brand program: fashion and accessories; fragrances and cosmetics; watches and technology; hotels and property.
Being broadly focused is what attracted Jessica Wang, another Canadian at ESSEC, currently enrolled.
“I have always had a passion for the luxury industry in general and when I found out about this program … , I was very intrigued,” Ms. Wang writes in an e-mail from Cergy-Pontoise, France, where she has lived since September.
“I did a lot of research on similar programs offered by many other schools and found the one offered by ESSEC to be the most comprehensive. It does not concentrate on just one area of the luxury industry such as fashion and accessories; instead it also explores in detail other areas: wine and spirits, watches and jewellery, and cosmetics,” she says.
Prior to becoming a student again, Ms. Wang worked for L’Oréal Group in Canada. When she graduates from ESSEC in 2015, she hopes to work in the fashion and accessories sector. She has a good chance of meeting her goal.
Since ESSEC’s founding in 1995, its 560 graduates have gone on to work for every major luxury group and independent luxury companies worldwide, including LVMH, Kering, Richemont, Estée Lauder, Tod’s Group, Zegna, Chanel and Hermès.
“We have a 95-per-cent success rate of students finding employment in the luxury goods industry upon graduation,” Ms. Davis at ESSEC says.
Ms. Agostino took courses in all aspects of a luxury brand, including retail design, licensing, wholesaling, and the psychology behind an expensive purchase.
Her teachers included the former managing director of Giorgio Armani France: “He brought a wealth of information, a lot of real-time stories,” says Ms. Agostino.
After she graduated from ESSEC in 2011, Ms. Agostino, 30, returned to Canada and landed a job in Toronto at the global office of Fairmont Hotels and Resorts, where she worked on creating luxury partnerships.
In the spring of this year, she moved to Spafax, an international media and marketing agency that works with major airlines such as Air Canada and British Airways as well as Mercedes-Benz and other luxury brands. She produces their videos and glossy magazines.
“The story-telling behind the brand is what I love,” says Ms. Agostino, crediting her specialized MBA program for giving her a heightened awareness of luxury as a layered category of consumer goods.
“A Hermès purse is very beautiful, a piece of art. But there’s also a story behind it, what it represents as a luxury good, and what it means to the person buying it. It’s a piece of their ego, a part of their personal brand.”
By: Kelsey Drain
November 5, 2014
(Photo : Instagram/Yoox)
Italian e-tailer Yoox.com will launch its holiday project today, centered on the theme of one of the country’s most romantic cities.
A Dinner Party in Venice is “an eclectic gift guide menu to suit everyone’s tastes,” and will consist of a series of videos showing personalities gathered in Venice to attend a fictitious Christmas dinner. The collection will also offer a special range of Venice-inspired products.
The videos, released weekly, will feature Arrigo Cipriani, actress Alessandra Mastronardi, artist Ivan Olita, fashion curator Lynn Yaeger, photographer Charlotte Colbert, jewelry designers Osanna and Madina Visconti di Modrone, artist Barnaba Fornasetti and stylist Tina Leung.
The new collection is shoppable on Yoox.com and on its new app, which allows users to access what products shoppers around them are buying and make purchases quickly by just scanning a credit card.
A customized selection of aprons decorated by various fashion and design labels are featured in the selection of Venice-themed products. Designed by Emilio Pucci, Fornasetti, Missoni, Toilet Paper and Vivienne Westwood, the proceeds will be donated to nonprofit organization Slow Food Foundation for Biodiversity.
The holiday shopping section also features two Venini Murano glass vases, a selection of Venice’s traditional Friulana slippers and striped T-shirts resembling those worn by gondola boatmen.
Additionally, MSGM, the Italian contemporary fashion label, designed a special-edition capsule collection for the site.
Back in August, there was speculation of Yoox being acquired by Amazon. The luxury retailer and the e-commerce conglomerate have made no advancements on the speculation.
“This might be the right time for companies to look to acquire a company like Yoox,” Milton Pedraza, CEO of the Luxury Institute, a New York-based research and consulting firm, said in August.
“The mass brands understand that luxury is far more profitable and more resilient. For a company to trade up to the luxury or the premium providers in categories, that would be wise right now.”
By: Kathryn Vasel
October 30, 2014
Click the link to read the entire article, which includes quotes from Milton Pedraza, CEO of Luxury Institute: http://www.channel3000.com/money/men-are-buying-up-these-1200-sneakers/29428624
October 28, 2014
NEW YORK, NY–(Marketwired – Oct 28, 2014) – Today, the New York-based Luxury Institute released findings from its 2015 Luxury Multichannel Engagement Index (LMEI) survey of large multi-brand retailers. Responders had a minimum annual income of $150,000, an average annual income of $318,000 and an average net worth of $3.1 million.
Wealthy consumers aged 21 and older rated and ranked both their online and in-store shopping experiences along 31 criteria. Compared to the 2014 survey, the selection of retailers was refined to thoroughly define the preferences of the multi-channel luxury consumer. Responders evaluated six luxury retailers — Barneys New York, Bergdorf Goodman, Bloomingdale’s, Neiman Marcus, Nordstrom and Saks Fifth Avenue — as well as online-only luxury specialist Net-A-Porter.
Nordstrom is the most popular luxury retailer with the highest incidence of customers spending in both online (26%) and offline (45%) channels. It also leads in the share of total fashion spend (17%). In aggregate, for the six multi-channel luxury retailers, wealthy consumers spend 61% offline and 39% online.
Bergdorf Goodman is the top-rated luxury retailer for in-store engagement with an in-store LMEI score of 8.17 out of 10. Ranking second for in-store engagement is Barneys New York (7.90), and Neiman Marcus (7.85) ranks third.
Saks.com ranks the highest for website engagement with an online LMEI score of 8.10. Saks.com achieved the top scores on 3 of the 16 website engagement criteria: the matching consumer perceptions of a luxury retailer, offering guided and personalized shopping experiences online, and featuring attractive and inspiring product displays.
Ranking narrowly behind Saks.com is Net-A-Porter (8.07), noted for its prices and personalized recommendations. Neimanmarcus.com (8.04) finishes third but is ranked highest on 5 of the 16 criteria of online customer experience.
“Wealthy consumers have come to expect a lot from luxury retailers both online and in stores,” says Luxury Institute CEO Milton Pedraza. “Not only do the goods that these retailers sell need to be of the finest quality, but they must also have top people, both online and offline, in place to deliver superior service and experiences.”
NEW YORK, NY–(Marketwired – Oct 21, 2014) – Today, the New York-based Luxury Institute announced the launch of Luxcelerate, an enhanced version of its innovative successful 7-Step Customer Culture process. Luxcelerate is designed to accelerate sales performance via a proprietary methodology that focuses on empowering the customer-facing online and offline associates, helping brands to improve both client relationships and sales exponentially.
Presently, top brands are struggling to both expand and retain their client base. Top brands have a conversion rate of 10-15%, a data collection rate of 30-40% (approximately 25% of this data is unusable) and a first time buyer retention rate of 10%.
Luxcelerate encourages the individual sales associate to learn and execute the best practices in client relationship building. The process is designed to improve sales performance via an exclusive methodology that focuses on relationship building, while improving a brand’s conversion, data collection and retention rates.
Luxcelerate’s proprietary methodology is based on shared relationship values and standards that are designed by a brand’s front-line teams, and is therefore customized to fit the unique DNA and culture of each brand. Custom education programs use empirically proven learning principles to drive retention of critical knowledge. Measurement and reinforcement methodologies are then deployed individually to guarantee consistent daily execution. The outcome is humanistic, effective client relationship building that leads to sharp increases in sales.
Luxury Institute’s CEO Milton Pedraza developed Luxcelerate’s 7-step methodology. Mr. Pedraza established this innovative methodology after being inspired by best practices from education, medicine and aviation. Using this process, a number of top-tier luxury brands have doubled, or tripled, the accurate collection of critical client data, and have significantly increased client conversion and retention rates. Luxury Institute has worked with the top brands of major luxury groups, well-known brands owned by private equity firms, and small boutique brands, to drive sales at rates of 15-30% per annum.
“The Luxury Institute was invaluable in helping Malia Mills define and implement our clienteling process. The first quarter that we implemented our program we increased sales by a significant amount.” — Carol Mills, Co-Founder, Malia Mills
“Since embarking on this project, we have seen double digit increases in data collection, conversion and a significant acceleration in retail momentum.” — Claudia Poccia, President and CEO of Gurwitch, Owner of the Laura Mercier brand
Hold the myrrh
Gold and frankincense are so two millennia ago
October 18, 2014
NOT everyone finds Christmas easy. Some people have so much money that they cannot think what to spend it on. Every year Neiman Marcus, a posh department store, takes pity on these unfortunate souls by offering them its Christmas catalogue, stuffed with ideas to empty even the fattest wallet.
For example, sporty couples can buy “His and Hers” Quadskis for $50,000 each. These are jet skis that convert into quad bikes in about five seconds (pictured). And they come in a turtle print. Shoppers who wish to relax can buy an elaborate cocktail shaker for $35,000. It comes with a year’s supply of gin and a class for 20 guests with a “mixology” expert.
Many luxury brands are now ubiquitous, which robs them of their snob value. What the truly rich want is “unique experiences”, says Milton Pedraza of the Luxury Institute, a consultancy. Neiman Marcus offers plenty of those. For $125,000 you can ride a Mardi Gras float in New Orleans. For $425,000 you can attend the Vanity Fair Oscar party, having first been glammed up by a style expert so that the other revellers won’t think you are a gatecrasher.
The costliest item in this year’s book is the “House of Creed Bespoke Fragrance Journey”. For $475,000 you can fly to Paris and have a master perfumier create a scent that perfectly suits you. You also get “white-glove car service, private tours and other experiences befitting the royally amazing you”. Your correspondent tried to expense such a trip, for research purposes, but her Scrooge-like editor said no.
Ginger Reeder, who handpicks all the “fantasy items” for the catalogue, does not expect to sell everything. Selling is not the point. “They are chosen for their uniqueness and their publicity value,” she says. In 1997, for instance, Neiman Marcus was unable to offload first editions of 90 of America’s greatest novels, from “The Great Gatsby” to “Catch-22”, but Ms Reeder found some comfort when she received 600 requests for the book-list.
The shop’s most expensive gift ever was a Boeing jet for $35m in 1999. The most memorable have included a submarine ($20m), a mean-spirited camel who spat a lot (Neiman Marcus no longer includes animals in the catalogue) and “His and Hers” mummy cases for $6,000 in 1971 ($35,000 in modern money). A mummy was unexpectedly discovered in one sarcophagus, which caused a spot of bother. A death certificate had to be issued before it could be delivered. Gift wrapping was optional.
NEW YORK, NY — (Marketwired) — 10/14/14 — More than two-thirds (70%) of wealthy U.S. consumers, under the age of 50, drink wine at least once a month, and they’re willing to pay premium prices for preferred vintages — an average of $48 per bottle at retail and $64 at a restaurant. These are among findings of the New York-based Luxury Institute’s just released Luxury Brand Status Index (LBSI) premium wines survey.
Consumers 21 and older from households with income of at least $150,000 a year evaluated 20 premium domestic wine brands on the degree to which each embodies the four “pillars” of brand value: superior quality, exclusivity, enhanced social status and an overall superior consumption experience. Respondents also reveal which wines are worth paying premium prices, which they would recommend to people close to them, and which brand they will buy next.
Based on overall 1-10 LBSI scores, Ghost Pines (7.65) earns top honors, and it ranks the highest on all four pillars of value. Known for California winemaker Michael Eddy’s multi-appellation blends of grapes from Napa, Sonoma, Monterey and San Joaquin counties, Ghost Pines is also the brand consumers deem most worthy of a price premium, even though many of its bottles sell for less than $20.
Other highly ranked premium domestic brands include Mount Veeder (7.39), Meiomi (7.30), Bridlewood (7.16) and Edna Valley (6.90).
“Winemaking is the quintessential luxury business in many ways,” says Luxury Institute CEO Milton Pedraza. “Brand value begins with the best-quality raw materials and grows with fine craftsmanship and a relentless focus on execution and consistently delighting customers.”
Contact the Luxury Institute for more details and complete survey data.
The Luxury Institute, LLC
San Diego Source
Daily Transcript Staff Report
October 6, 2014
San Diego is among the top 10 cities with the highest number of luxury home sales, according to a report by Coldwell Banker, with La Jolla high on the list.
San Diego saw the sale of 927 homes valued at $1 million-plus from July 1, 2013, to June 30, 2014. The Luxury Market Report was prepared by the Coldwell Banker Previews International marketing program.
Topping the list was San Francisco with 2,485 luxury homes sold — up nearly 57 percent from the previous year — followed by Los Angeles with 2,170 and New York with 2,145.
The report included three price points: $1 million, $5 million and $10 million.
Two of San Diego’s ZIP codes saw high sales of luxury homes.
La Jolla’s 92037 ZIP code had closings on 348 homes valued at $1 million or more, the third highest of all ZIP codes in the country at that price tier; 269 homes sold in Carmel Valley and Torrey Pines in the 92130 ZIP code.
Four homes valued over $10 million closed in La Jolla, which ranked 16th, the report said. The most $10 million homes, 58, sold in New York.
The U.S. high-end residential real estate market remains strong, with 48 percent of all wealthy consumers indicating they plan to buy a luxury home within the next 12 months, according to the companion survey of wealthy U.S. consumers with a net worth of at least $5 million, conducted by the Coldwell Banker Previews International program and the Luxury Institute.
Younger buyers are the most motivated to buy; an overwhelming 81 percent of affluent people younger than 35 plan to buy a luxury home in the next year.