Luxury Institute News

December 25, 2013

Post-Twitter IPO: “Suddenly everyone thinks you’re Santa Claus”

By Mark Garrisson
Marketplace
December 24, 2013

Twitter may be the most famous company to go public this year, but 2013 was a monster year for IPOs in general.

And initial public offerings can bring big money to employees, on paper at least. Things can get a little awkward this time of year for the newly-rich, as certain friends and family members raise their holiday gift expectations. Strike it rich with an IPO, and suddenly everyone thinks you’re Santa Claus.

“You find you have relatives and friends you never knew you had,” says Doug Wolford, president and COO of Convergent Wealth Advisors. “I’ve known people whose friends have, you know, asked them to pay off their cars, take them on trips to the Super Bowl, you name it.”

Pressure to spend big is intense and not all external.

“The individuals themselves begin to feel guilty, feel like they do have to step in and solve a lot of the problems for the people they love. So it’s kind of a two-sided issue” says Luxury Institute CEO Milton Pedraza.

Click the link to read the entire article which includes a quote from Milton Pedraza, CEO of Luxury Institute: http://www.marketplace.org/topics/tech/post-twitter-ipo-suddenly-everyone-thinks-you%E2%80%99re-santa-claus

December 5, 2013

Strong sales may result in weak profits for retailers this holiday season

Posted in E-Commerce,Fashion
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By Jonathan Berr
CBS News
December 4, 2013

So far this holiday season, it seems like economic pundits have been too pessimistic about the holiday shopping season. They worried that stagnant wages and high unemployment would dampen sales. They struggled over how consumers could pack in the same amount of shopping when there are six fewer shopping days between Thanksgiving and Christmas this year.

Yet consumers, whose confidence unexpectedly fell by one measure to seven-month low in November, showed a familiar propensity to buy as the holiday shopping season kicked off in earnest over what’s newly known as”Black Weekend” — the bonanza of discounting during and after Thanksgiving.

For example, in the hot game console category, they snapped up more than 2 million Sony PlayStation 4s in the three weeks since it debuted. Rival Microsoft sold more  than 1 million of its Xbox One units, which retail for about $100 more than the PlayStation 4.

Click the link to read the entire article which includes a quote from Milton Pedraza, CEO of Luxury Institute: http://www.cbsnews.com/news/a-holiday-season-of-consumer-unease/

November 20, 2013

Are flash-sale sites a flash in the pan?

By AnnaMaria Andriotis
Wall Street Journal
November 19, 2013

When shares of Zulily (NASDAQ:ZU)  soared 71% Friday following its initial public offering, investors seemed to be betting that flash-sale sites are here to stay. Consumers, however, are having trouble sorting out whether the limited-time offers they peddle are really a good deal. Zulily, the first such startup to go public, is part of a growing industry of high-end flash-sale sites geared toward more affluent consumers. The business model is fairly simple: offer consumers a limited period of time—typically from as little as one hour to two days—to buy high-end inventory at a discount. But the process hasn’t worked out so smoothly for shoppers.

In a sign that consumers are growing wary of the industry, one study found shoppers’ complaints to be widespread: Forty-four percent of comments on flash-sale Facebook pages were negative earlier this year, according to findings released in May by Dotcom Distribution, which provides fulfillment services, including serving as a warehouse, for companies that sell products via e-commerce. Just 29% were positive. Meanwhile, a look at the unique desktop visitors of 10 popular flash sale sites (data supplied by comScore, an analytics firm that tracks consumer behavior) reveals that they declined for all but three of them in October compared with a year prior.

Part of the problem is that these sites grew popular as a response to the downturn—and those conditions are no longer in play. As store sales tanked, high-end manufacturers were stuck with excess inventory and looking for ways to unload it. That’s when many flash-sale sites popped up offering high-end luxury brands, along the lines of Gucci and Chanel, at discounts that consumers could not previously find elsewhere. Those market conditions created a new category of discount sites that have been marketing to relatively affluent consumers who are looking for a steal on what (even with a discount) is still a relatively pricey product.

But that high caliber of retail is harder to come by on these sites now, says Maria Haggerty, president of Dotcom Distribution. Manufacturers have since scaled back production so there are fewer grade-A products on these sites. While most items are still relatively high-end, they don’t inspire the same excitement and flurry of demand. “There isn’t enough inventory of the type of products these sites want to sell because it’s doing well in stores,” says Milton Pedraza, CEO of the Luxury Institute, a New York-based research and consulting firm for the luxury industry.

 Click the link to read the entire article including a quote from Luxury Institute’s CEO Milton Pedraza: http://www.marketwatch.com/story/are-flash-sale-sites-a-flash-in-the-pan-2013-11-19/print?guid=5A07C5D6-5086-11E3-AD6E-00212803FAD6

October 23, 2013

Neiman Marcus Outshines the Competition For Online And In-Store Experiences Among the Wealthy

(NEW YORK) October 23, 2013 – As part of its first installment of the Luxury Multichannel Engagement Index (LMEI) survey, the New York-based Luxury Institute asked consumers from households with minimum annual income of $150,000 to share opinions and rankings of online and in-store experiences at leading luxury retailers. Neiman Marcus earns the highest overall score and stands out for garnering top honors in nine out of ten customer criteria used to evaluate both the Web and brick-and-mortar shopping experience.

Wealthy shoppers say that Neiman Marcus stores rank first for attractive displays of exclusive products, easy navigation, accessibility of customer service, personalized shopping experiences, fair prices, and for carrying ample stock and styles. Customers also laud Neiman’s salespersons for making them feel special while serving as trusted fashion advisors.

The Neiman Marcus online experience draws equally extensive praise with the top overall ranking and the highest scores on the same measures of satisfaction.

“Smart retailers realize the value of leveraging data to deliver superior experiences that build lasting customer relationships, regardless of the channel,” says Luxury Institute CEO Milton Pedraza.

Neiman plans to invest $100 million over the next three to five years on technology that will closely align inventory management, logistics and human resources across multiple retail channels.

“Every aspect of our business is being transformed by technological advancements,” said Jim Gold, president of Neiman Marcus Group, at a retailing summit in Dallas. “The lines have completely blurred between brick-and-mortar and e-commerce. The great challenge is to make the experience seamless.”

About the Luxury Institute (www.luxuryinstitute.com)
The Luxury Institute is the objective and independent global voice of the high net-worth consumer. The Institute conducts extensive and actionable research with wealthy consumers globally about their behaviors and attitudes on customer experience best practices. In addition, we work closely with top-tier luxury brands to successfully transform their organizational cultures into more profitable customer-centric enterprises. Our Customer Culture consulting process leverages our fact-based research and enables luxury brands to dramatically Outbehave as well as Outperform their competition. The Luxury Institute also operates LuxuryBoard.com, a membership-based online research portal, and the Luxury CRM Association, a membership organization dedicated to building customer-centric luxury enterprises.

October 21, 2013

Luxury Institute’s Wealth and Luxury Trends 2014 and Beyond: A New Model to Increase Profitability

(NEW YORK) October 21, 2013 – The luxury industry is closing out the final quarter of 2013 and preparing for another year of uncertainty ahead in 2014. Hyper-growth in the emerging markets since 2009 is showing signs of softening, while the year-over-year increases in U.S. sales are picking up steam. Europe, too, is on the upswing.

Looking ahead, brands are concentrating on existing stores, price increases, cost reductions, and emphasizing higher-profit products. Another area of focus enabling many of these initiatives is improving customer conversion and retention efforts.

Providing luxury goods and services to wealthy customers will remain a growth industry. Market share is the name of the game and competition is getting fierce in a slower-growth environment.

We work with dozens of top-tier global luxury brands each year. Based on recent experiences in New York, Milan, Paris, and London, here are seven trends that smart luxury brands need to address in 2014:

1.   U.S. Brands Ditch CRM Vendors Who Fail To Deliver Measurable Results

The honeymoon is over. After investing heavily in CRM systems and consultants, leading brands are now beginning to divorce their initial CRM vendors. Many top-tier luxury brands, particularly those based in the U.S., are terminating their current CRM contracts or confidentially seeking alternatives. They feel shortchanged by empty CRM promises at the database and analytics levels. They are also disappointed with CRM consultants unable to execute simple reporting requirements to support marketing and front line teams on a timely, error-free basis. As CRM vendors continuously fail to deliver, look for the Europeans to stage their own revolts from underperforming analysts and systems.

2.   Mystery Shopping Is No Way To Boost The Bottom Line

Luxury executives, mostly out of habit, have opted for mystery shopping as the preferred method for measuring sales team behaviors. It’s dawning on many brand leaders today that they are often getting reports that are clearly massaged by the vendors and/or the mystery shoppers, very much like fake online ratings and reviews. These are not real shoppers, nor are they even economically qualified to be luxury shoppers. Combine this with the fact that the number of data points does not equal a statistical sample, and you get a sense of the spurious conclusions that can be drawn from mystery shopping. The concept adds up to wasted resources and falls far short of the goal. Look for the leading edge brands to abandon mystery shopping as a relic of the last century that took years to wear thin. Customer experience surveys and customer metrics can take the mystery out of mystery shopping and be a better use of resources.

3.   Attribution Model Retribution

Brands are eager to pinpoint which marketing and sales channels are most effective so they can invest accordingly. It’s not an easy task, so data scientists have come up with a concept called attribution modeling.

Attribution modeling attempts to determine which communication channels get credit when a prospect uses several of them before converting into a buyer. Data scientists analyze data and try to trace the customer purchase journey across touch points. They then weight the channel results using their own judgment to come up with an answer.

There are several challenges involved, including how to account for unknown offline influences, multiple device usage, and various digital touch points that may be a combination of social, display, video, referral, email and search. The inaccuracies are almost insurmountable. The process is biased from the start due to the fact that the most readily available data comes from online sources.

Predictably, the brand channel owner fighting hardest to get the credit also influences results. Today, data scientists build expensive attribution models that are very precise but highly flawed. Look for senior brand executives to demand full accountability from their teams and stop wasting money on inaccurate models that drive ineffective spending in 2014.

4.   Not Big Data, Relevant Data

The Big Data hype became huge in 2013. Since most senior executives are new to data and analytics, they must act duly impressed by the promise of Big Data, or they will be accused of being out of touch.

The reality is that most collected customer data is simply exhaust and not relevant in making predictions about future spending behavior. The 20% of the data that gives us 80% of the predictability models gives us what we term “lift”, or a higher probability.  This higher probability that a customer will buy an item is simply that, increased probability, not certainty. Timing is everything and even a good predictive model of what a customer might buy next may send the offer at the wrong time. Demand that your analysts prove to you which massive data they collect and analyze is relevant and why. Ensure that the data scientists verify the conversion “lift” of their models. Make sure that Big Data has a big return on investment. Sometimes just skip the propensity models and build strong customer relationships by simply contacting clients and asking how you can best serve them.

5.    Online Personal Shoppers

Finally there is innovation in delivering a customer-worthy online buying experience, and it looks a lot like the offline experience. The human being is en vogue again. Online-only and multi-channel retailers are developing personal shopper teams aimed at supporting their most valuable customers (top 20%) who may require a guided or curated experience with a trusted expert. Masses of affluent tourists are a preferred segment since many can be retained online after the initial store purchase.

Brands are incentivizing their specially selected and trained personal shoppers to use digital channels to develop deep customer relationships based on expertise, trustworthiness and generosity. It is not cheap, but the low conversion and high attrition rates among key customers and wealthy tourists require innovation that yields high returns, even if it is boring, low-tech humanity.

6.     Luxury Outlet Saturation

Recessions have a way of inspiring luxury brands to explore new opportunities for development. Luxury outlets are a growth engine right now. Many luxury retailers are reaching the point where discount outlets may soon outnumber their full-price stores. Right now, this strategy has delivered results and outlets are a source of good profits for brands, but don’t dismiss the negative impact this can all have on a luxury brand. A great deal of the merchandise in luxury outlets allegedly has never seen a full-price store. It is made of a lower level of design, quality and craftsmanship, created specifically for the outlet, and carries faux full price tags that are then reduced.

Luxury has rules that can’t be violated for long without serious consequences. True luxury consumers are highly educated and connected, and allegations have spread across fashion blogs. When you take the high quality, craftsmanship, and design out of your products, and also eliminate personalized service, you slowly erode the brand’s heritage and loyal clients will begin to doubt your legitimacy. Many executives in headquarters are quietly beginning to worry. Outlets fever will have a corrosive brand effect. The problem is that short-term growth feels so good and the negatives creep in slowly. Wall Street will cheer you on. You won’t notice your luxury brand has been damaged until full price loyalists begin to flee in droves.

7.   Customer Culture is the New Profit Mode

Like CRM, Customer Culture is a holy grail everyone discusses with passion, and can even cite the great culture-driven brands such as Zappos, Nordstrom and The Ritz-Carlton. Although most brands know their stores and websites are more like vending machines than relationship building centers, embracing Customer Culture is scary for many. Some will simply pretend they are customer-centric, while others do piecemeal work in an effort to create a client-focused environment.

Results from a 2013 Deloitte survey on culture and values show that companies with a purpose beyond selling widgets have much higher rates of profitability as well as customer and employee satisfaction. Luxury Institute’s own case studies reveal that data collection rates can triple and retention can double, especially for the top 20% of customers who drive 70% of sales. One automotive client recently won an award for CRM activities such as a 400%+ increase in lead follow-up.

Brand leaders finally understand that technology, big data, and analytics are rendered useless without empowered and inspired human beings that engage the customer daily. We predict an increased focus on Customer Culture in 2014 as brand executives are forced by fierce competition and slower growth to innovate.

Dramatic progress can be seen when brands think beyond products and channels and focus on customer relationship building. Even Apple has recognized the potential of further engaging the customer, bringing Burberry CEO, Angela Ahrendts, on board in a new role to oversee both retail and online stores. Customer Culture is the new profit driver in a commoditized and fiercely competitive luxury world. Only the enlightened will thrive.

To hear Luxury Institute CEO, Milton Pedraza, speak more about the importance of relationship building with top clients, watch excerpts from “Bold Customer Culture: The New Profit Model” presented at the 2013 Luxury Interactive conference.

About the Luxury Institute (www.luxuryinstitute.com)
The Luxury Institute is the objective and independent global voice of the high net-worth consumer. The Institute conducts extensive and actionable research with wealthy consumers globally about their behaviors and attitudes on customer experience best practices. In addition, we work closely with top-tier luxury brands to successfully transform their organizational cultures into more profitable customer-centric enterprises. Our Customer Culture consulting process leverages our fact-based research and enables luxury brands to dramatically Outbehave as well as Outperform their competition. The Luxury Institute also operates LuxuryBoard.com, a membership-based online research portal, and the Luxury CRM Association, a membership organization dedicated to building customer-centric luxury enterprises.

 

October 18, 2013

Burberry’s internal harmony paves path for Chris Bailey CEO transition

By Joe McCarthy
Luxury Daily
October 17, 2013

British apparel and accessories brand Burberry’s soon-to-be CEO Christopher Bailey has triggered doubts owing to his creative background, but his collegial relationship with departing company boss Angela Ahrendts and extensive credentials should nullify the skepticism.

Mr. Bailey has spent 12 years absorbing the brand’s ideology and helped to spearhead its transformation throughout the past decade. Furthermore, passing the executive baton to a close collaborator of Ms. Ahrendts allows Burberry to continue its trajectory as a design-driven and digitally pioneering brand without interruption.

“In Bailey you have someone who can handle the job,” said Milton Pedraza, CEO of The Luxury Institute, New York. “He’s worked with Ms. Ahrendts and has learned execution from her.

“They worked in a very good partnership that shared decisions and execution,” he said.
“Change always happens because of the marketplace, but Burberry will continue on its track of being customer-centric and having a customer culture driven by digital.”

Not that disruptive
Burberry announced Oct. 15 that Ms. Ahrendts would be leaving the brand by mid-2014. Mr. Bailey will take over her position while maintaining his current role as the chief creative officer. Ms. Ahrendts will join Apple next spring as chief of the electronics giant’s retail and online stores.

Prior to Burberry, Mr. Bailey worked as a designer for U.S. label Donna Karan and Italian fashion house Gucci, where he was recruited by fashion designer Tom Ford.

Mr. Bailey arrived at Burberry in 2001 and has played an instrumental in restructuring the brand’s image, while advocating for an embrace of technology. In the past year, Burberry has demonstrated its digital prowess several times.

For instance, the brand partnered with Apple to showcase its upcoming spring/summer 2014 collections through images and video captured on the new iPhone 5S. Leading up to Burberry’s spring/summer show Sept. 16, the brand posted images and videos from the iSight camera on the iPhone 5S.

Also, Burberry engaged consumers in branded peer-to-peer communications through a partnership with Google where users sent loves notes around the world. The label created a microsite for the Burberry Kisses campaign that let consumers send and view notes that have been sent.

In a video outlining the fashion house’s executive transition, Ms. Arendts describes the strong management team and global infrastructure that Burberry has developed over the past eight years that will prevent the brand from falling from its expansionary climb.

Also, Ms. Ahrendts explains that her initial dream for Burberry to become a company bigger than any one person has been fulfilled.

“I don’t think Ms. Ahrendts just built a company,” Mr. Pedraza said. “She built a culture that will outlive her and Bailey was a big part of that.”

Mr. Bailey echoes the assessment of the brand’s unified departmental and regional teams in the video. In addition to its digital gains, the brand has transformed itself into a formidable retailer over the past several years.

Revenues climbed 16.8 percent to $1.59 billion, reflecting double-digit gains in all regions, and high-single-digit comparable growth in China, per WWD.

According to the Telegraph, Mr. Bailey is the person most responsible for Burberry’s elevation from a moribund and musty provincial backwater of a British brand into one of the world’s most lucrative and best-known.

“Bailey is already responsible for Burberry’s image,”  said Chris Ramey, president of Affluent Insights, Miami, FL. ”I don’t expect much change.

“Moving a creative officer into the CEO position is a welcome change,” he said. ”Most companies experience a power struggle between marketing and accounting.”

Doubts abound
Some experts are concerned that Mr. Bailey’s background as a designer has failed to adequately prepare him for the role of CEO, with no prior boardroom-level experience.

Skeptics should look around.

Ralph Lauren and Giorgio Armani are two prominent examples of a figure handling both the creative and executive responsibilities. However, these designers share entrepreneurial roots that set them apart from Mr. Bailey, who only has experience as a designer.

Following the Oct. 15 announcement, Burberry’s stock dropped 8.8 percent, according to WWD. This initial dip was countered by Burberry’s release of strong year-to-date sales numbers.

Burberry’s decision to look internally for a replacement indicates that it does not want to shift course.

“Lots of creatives rise to the management roles,” said Marie Driscoll, CEO and chief consultant at Driscoll Advisors, New York. ”It’s Angela’s career arc as well as Mickey Drexler at Gap and Jenna Lyons at J. Crew.

“Bailey has been integral to Burberry for years, so I wouldn’t expect drastic changes as the business is humming,” she said.

http://www.luxurydaily.com/burberrys-unified-internal-structure-ensures-smooth-ceo-transition/

October 16, 2013

Have to Ask What the App Costs? It’s Not for You

By Claire Cain Miller
New York Times
October 15, 2013

The superrich have always had magazines, hotels and retailers catering to the special needs of their stratosphere. So it’s no surprise that the digital world has caught up.

Though luxury brands and services were initially reluctant to go online, a new corner of the Web and mobile app marketplaces has emerged, dedicated to making life easier for wealthy consumers. “They’re playing off the affluent desire to be treated differently, expect a very high level of service and have something edited and vetted and pay for that,” said Andrew M. Sacks, president of the Affluence Collaborative, a research firm studying affluent consumer behavior, and AgencySacks, a branding agency.

Luxury advertisers then follow closely behind. “If you’re successful in bringing several thousand affluent customers to a site, you’re then prime to offer brands and advertising to that audience,” Sacks added.

Click the link to read the entire article: http://www.nytimes.com/2013/10/16/your-money/have-to-ask-what-the-app-costs-its-not-for-you.html?_r=0

October 5, 2013

Jimmy Choo Co-Founder Tamara Mellon Puts On Her Revenge Boots

By Susan Berfield
Bloomberg Businessweek
October 4, 2013

For fifteen years, Tamara Mellon was the muse, face, and legs of Jimmy Choo, the luxury shoe company she co-founded in London with her parents’ money in 1996. The stilettos regularly appeared on Sex and the City and quickly became an object of desire; wearing them suggested a life of carefree glamour. Eventually, she says, Jimmy Choo became a $900 million business. Mellon had an extravagant clothing allowance, and a make-up artist and hair stylist on call, too. She was photographed at store openings and celebrity-filled parties, on the red carpet, on vacation in St. Bart’s, in her closet, in the nude. Her 2000 wedding to Matthew Mellon, an heir to the banking fortune, was photographed for British Vogue

It turns out, though, that for much of this time, Mellon felt aggrieved. She says she was unappreciated by executives at the company and exploited by the private equity investors who funded its expansion. She was betrayed by those close to her. She had night sweats and panic attacks and was always exhausted. She left Jimmy Choo in 2011 with a reported $135 million and enough resentment to fill a book. It’s called In My Shoes and went on sale Tuesday. “To me the truth is always the best way,” she says.

Click the link to read the entire article which includes a quote from Milton Pedraza, CEO of Luxury Institute: http://www.businessweek.com/printer/articles/157300-jimmy-choo-co-founder-tamara-mellon-puts-on-her-revenge-boots

October 2, 2013

By Noon, These Two Will Have Brought In Another Half a Million More Dollars

By Paul Wachter
New York Magazine
October 1, 2013

One Kings Lane
Founded: 2009
Age of co-founders: 38 and 58
Most recent estimated valuation: $440 million
Lesson: Better than a deal on flatware is the perfect set delivered to your in-box.

The name emblazoned on the outer wall of 1355 Market Street, an Art Deco building ­in San Francisco completed in 1937, is a tribute to the past, not the ­present: Western Furniture Exchange and ­Merchandise Mart. As late as 2005, the premises housed 300 furniture wholesalers. By 2008, the number was down to 30, and the developer, brandishing city tax credits, made the sensible decision to re­invent the space for techies. Twitter moved in, followed by Microsoft-owned Yammer. Also came a company that can lay claim to the building’s former identity: One Kings Lane, an online purveyor of furniture and home accessories that is now projecting $300 ­million in annual revenue.

When I met the company’s co-founder, ­Alison Pincus, in One Kings Lane’s offices in late August, this historical symmetry went unmentioned. It wasn’t, I’m certain, because she was unaware, but rather because from the outset, she said, “we thought of One Kings Lane as always trying to be more than furniture.”

Click the link to read the entire article which includes multiple quotes from Milton Pedraza, CEO of Luxury Institute: http://nymag.com/news/business/boom-brands/one-kings-lane-2013-10/?imw=Y&f=most-emailed-24h5

September 30, 2013

Coach and Michael Kors and the Japanese Fashion Market

By Sarah Deschamps and Hiroshi Saito
Modern Tokyo Times
September 29, 2013

Michel Kors ventured into the competitive fashion market of Japan in 2009 and since this period this brand continues to consolidate. The handbag market is just one angle to the products sold by Michael Kors but this area alone is worth a staggering amount each year throughout Japan. Now it is becoming clear that inroads are being made in this area and other important segments of the fashion sector in the land of the rising sun.

Coach may be on the horizons of Michael Kors in Japan because this company is firmly established and highly desired. Indeed, the reputation of Coach is known internationally for being extremely creative and where vibrancy is maintained year after year. Therefore, with Coach being firmly established in Japan and with this nation ranking highly within the profits of this company, the impact of Michael Kors in the handbag market is extremely intriguing.

In the United States it was stated about Coach that their customer service is second to none. This angle is certainly important throughout Japan and noticeably in major cities like Tokyo and Osaka where the fashion market is enormous. According to the data of the Luxury Institute in America 25% of wealthy women had purchased a Coach bag. Equally powerful is that the same statistic was given for buying a new handbag in the next twelve months. No other company came close to Coach in America in other types of surveys.

Click the link to read the entire article which includes a quote from Milton Pedraza, CEO of Luxury Institute:
http://moderntokyotimes.com/2013/09/29/coach-and-michael-kors-and-the-japanese-fashion-market/

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