Luxury Institute News

October 30, 2009

Lululemon Sales on a Run

by Marina Strauss
The Globe and Mail

Even as rival retailers scaled back on plans to expand merchandise lines in the deepening downturn, Christine Day decided to move in the opposite direction.

About a year ago, as the financial crisis exploded, she gave the nod to her staff at high-end yoga wear retailer Lululemon Athletica Inc. to bolster its running apparel offerings and take on Nike Inc., including its top selling women’s running shorts.

The chief executive officer of Lululemon also went ahead with plans to expand its seasonal outerwear, adding fall jackets to the racks. She invested in new systems to track inventory better and ensure that the stores didn’t run out of the popular items.

Her bet on new merchandise – and better inventory tracking – has paid off. Late yesterday, Lululemon said it was raising its third-quarter profit target because of stronger-than-anticipated sales. It now projects that its earnings will range from 17 cents a share to 19 cents a share, from previous guidance of 11 cents to 13 cents.

The bullish forecast bodes well for retailers as they approach their crucial holiday season after a year when upscale merchants were hit hard by the tight economy, observers said.

“It’s a very good sign,” said Milton Pedraza, chief executive officer of the Luxury Institute in New York. “But we’re all pretty cautious. There’s not that much strength out there.”

Ms. Day added in an interview: “It gives us a little more confidence and optimism” for the holiday shopping period.

Read the full article: http://www.theglobeandmail.com/report-on-business/lululemon-sales-on-a-run/article1339607/

October 28, 2009

Oakley plans line of $4,000 sunglasses

By Bruce Horovitz, USA TODAY

For $4,000, you can land a luxurious week in Europe, an Armani 100% cashmere overcoat or a diamond ring from Tiffany’s.

Or perhaps you’d prefer a new pair of sunglasses?

We’re not yet out of the worst economic crisis since the Great Depression, but Oakley, the egocentric sunglasses maker that prides itself on outside-the-box craftsmanship and marketing chutzpah, on Monday will announce plans for a line of $4,000 sunglasses.

One luxury-market expert even predicts strong sales. “There’s pent-up demand for exclusive luxury products,” says Milton Pedraza, CEO of the Luxury Institute, a consulting firm. “They could sell out quickly.”

The move comes at a time when the $200 billion luxury-products industry, once thought recession-proof, is spiraling downward. Luxury-product sales globally are expected to fall a hefty 8% in 2009, projects a Bain & Co. study.

Pooh-poohing all that is Oakley CEO Colin Baden. “Why not go after the Holy Grail of elite sunglasses? It’s less a business objective and more Oakley flexing its R&D muscle and thumbing its nose at the other expensive eyewear makers.

“But he doesn’t expect to make money on the line. “We’re doing this because it’s brand-positive. It’s Oakley being Oakley.”

Read the full article here

http://www.usatoday.com/money/industries/retail/2009-10-25-oakley-sunglasses_N.htm

October 27, 2009

Luxe Market Faces Wealth of Challenges

Posted in Luxury Market

The current downturn has not spared the wealthy or their taste for luxury
Oct 25, 2009
Adweek.com
Mark Dolliver

Look up “luxury” in the dictionary and you’ll find a passage defining it as “something adding to pleasure or comfort but not absolutely necessary.” With economic conditions compelling even affluent consumers to pay more heed to what’s “absolutely necessary,” how is the appetite for luxurious “pleasure or comfort” holding up? Survey data on the attitudes of affluent consumers, plus the observations of people in the business of tracking their thinking, point to a market that faces a wealth of challenges.

Before the current recession, popular wisdom said wealthy people tended to be relatively untouched by the ups and downs of the economy and would keep buying high-end products and services no matter what. However true that might have been in the past, the current downturn — with its sharp decline in stock prices and real estate values — has not spared the wealthy or their taste for luxury.

AFFLUENT BUT PRACTICAL
One gets a taste of this from the Luxury Institute’s State of the Luxury Industry 2009 Survey, developed in conjunction with Evins Communications and released last month, based on August fieldwork. Seventy-seven percent of the respondents (a cohort whose yearly household income averages $415,000 and whose household net worth averages $4.9 million) agreed that luxury is less important in today’s economy. Fifty-eight percent said they are “spending more on essentials rather than on what they want”; 56 percent said they are “being more practical about spending.”

This fall’s tracking study of high-net-worth/high-income consumers by the American Affluence Research Center gives another telling sign of their current mind-set: 9 percent said they would spend “nothing” this December on holiday gifts, and those who do plan to spend anticipate laying out 5 percent less on average than they did last year.

It’s not just a matter of feeling chastened by the economy’s travails. “Even wealthy people were living beyond their means,” says Milton Pedraza, chief executive officer of the Luxury Institute, a rating and research organization that tracks the luxury field. “Now, whether they want to or not, they’re being forced to live within their means,” Pedraza says. And when they do spend, this means bringing a more critical kind of thinking to the process. “They’re more value-driven,” says Greg Furman, chairman of the Luxury Marketing Council, whose membership includes top executives of luxury brands. “They want to understand the price/value equation.”

Opinions do differ, though, about the depth of the change in wealthy consumers’ behavior. “We do not believe that there has been a paradigm shift in affluent  consumer behavior as a result of the financial downturn,” says David Thompson, managing director, affluent market at Phoenix Marketing International. “Unlike the Great Depression, this one was far too short and the markets have partially recovered too quickly to cause a seismic change in behavior. Most mainstream investors have weathered the storm quite well, overall.”

View full PDF here

View full article on Adweek here  http://www.adweek.com/aw/content_display/news/e3i18f9fdff77fbe3607ebf6e9b70ba2062

October 26, 2009

Gilt Man is bound to do well- just a slower build

Executive Tastemaker: Nate Richardson
Lauren Sherman, 10.23.09, 04:00 PM EDT
The head of Gilt Groupe’s new site for men talks suits and sample sales.

Gilt is positioned to succeed long after the recession ends,” says Milton Pedraza, chief executive of New York-based market research firm Luxury Institute. However, he cautions that attracting a significant number of male shoppers will be a challenge. Currently, about 80% of online sample-sale shoppers are women, according to Luxury Institute research. “Gilt Man is bound to do well, but it will be a slower build,” he says.

Nate Richardson’s first major clothing purchase was a Prada suit in 2003. Actually, four Prada suits: a navy, a gray, a navy pinstripe and a tuxedo. Richardson splurged on the slim-fitting ensembles after cashing in some options at Yahoo!, where he was general manager of the company’s financial site from 2000 to 2005.

Purchasing the suits, he says, “was a pretty pivotal moment in terms of realizing that fashion can change how people perceive you.” In the early days of Yahoo!, the exec was devoted to preppy basics, reflecting his upbringing in Boston. That means “heavy on the fleece” and requisite brown lace-ups. “In New England, people don’t wear black.”

Richardson, now 38, remained a fixture of financial media for some time (as chief executive of trade publication paidContent.org, he helped sell the company to the Guardian Media Group in 2008), but his sartorial preferences certainly didn’t hurt his chances at landing his current job. He’s now the vice president and general manager of Gilt Man, a guy-focused spinoff of the invitation-only online sample-sale site, Gilt Groupe. The site launched Thursday.

Read the full article here http://www.forbes.com/2009/10/22/men-sample-sales-lifestyle-style-gilt-groupe.html

 

October 19, 2009

Wealthy U.S. Shoppers Boost Spending 29%, Survey Says

Posted in Luxury Market

By Cotten Timberlake

Oct. 16 (Bloomberg) — Spending in the U.S. on luxury goods and services spurted 29 percent in the third quarter from the previous three months, as consumers with the highest incomes unleashed pent-up demand, according to Unity Marketing.

Spending among 1,067 consumers with average annual income of $228,800 rose to $18,826 each in the three months ended in September from $14,554 a quarter earlier, the Stevens, Pennsylvania-based luxury-market research firm said today. Shoppers cut spending by 3.2 percent in the second quarter and spent $13,429 in the third quarter of 2008.

The increase was driven by consumers with the highest income levels, starting at $250,000 a year, said Pam Danziger, Unity’s Marketing’s president. Spending was strongest in the home, travel and dining segments, she said. The wealthy curbed purchasing earlier this year because of Wall Street job cuts, lower home values and volatile financial markets.

“No question that this quarter’s spending increase is good news for luxury marketers,” Danziger said in a telephone interview today. “Many affluent consumers returned after sitting on the sidelines for a year. However, the richest are few in number, 2.5 million households, so competition will be fierce to win their attention.”

MasterCard Report

U.S. luxury sales rose 3.4 percent to $891 million in September from a year earlier, the first such gain since August 2008, according to figures provided today by credit-card company MasterCard in its SpendingPulse report. Last month, those sales fell 13 percent from the previous year.

The luxury category covers apparel, leather goods and department-store sales at the highest 10 percent of prices. SpendingPulse measures retail sales across all payment forms, including cash and checks.

United Marketing said purchases increased in all but three of the 22 product and service categories it tracks.

The highest-income group spent an average of $43,111 in the latest quarter and the lowest-income group tracked, with earnings of $100,000 to $149,999, spent $10,423. The three categories that didn’t gain were fashion accessories, fashion apparel and art, Danziger said.

Gains in confidence among luxury consumers, meanwhile, slowed, Unity Marketing said.

The researcher’s luxury confidence index rose 1.6 points to 75.9, after jumping 18.6 points to 74.3 in the previous quarter. That index peaked at 113.2 at the end of March 2006. Its low was 40.3 in September 2008. It started at 100 in January 2004.

The findings were based on a survey conducted among adults aged 24 to 70 with income of at least $100,000 from Oct. 2 to Oct. 7. Unity Marketing does not calculate a margin of error. It plans to publish the survey results Oct. 19.

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aHx9ytuwJJ6Y#

Luxury goods industry on track for recovery

Posted in Luxury Market

FT.com
By Scheherazade Daneshkhu in Paris
Published: October 19 2009 12:04

The luxury goods industry will return to growth next year while the decline in 2009 will be less severe than expected thanks to strong sales in Asia, especially China, according to a study published on Monday.

Bain & Co, the consultancy, expects luxury goods sales this year to fall 8 per cent – instead of the 10 per cent it forecast in April – and grow 1 per cent next year to €153bn ($228bn).

Claudia D’Arpizio, Milan-based Bain & Co partner, said the bottom had been reached: “Luxury goods markets are stabilising. We are seeing less discounting and markdowns and more signs of increasing consumer confidence. Growth will be timid in 2010 but it’s movement in the right direction.”

The decline this year in the mature markets of Europe and North America has been mitigated by growth in China and other emerging markets, notably South Korea.

The study mirrors cautious optimism on the part of some of the big luxury goods companies. Last week, Burberry, the British group best known for its red, black, white and tan check, reported better-than-expected second-quarter sales.

Read the full article here: http://www.ft.com/cms/s/0/c3708082-bc95-11de-a7ec-00144feab49a.html?nclick_check=1

October 15, 2009

‘Facebooks’ for the Rich Flounder

Posted in Social Media

WSJ.com
October 15, 2009, 2:00 PM ET

In real life, the wealthy like to stay close to their own kind.

Whether it is in Palm Beach, Fla., and Aspen, Colo., or in peer groups and charity balls, millionaires tend to like the “consoling proximity” of other millionaires, as F Scott Fitzgerald wrote in the “Great Gatsby.”

But in cyberspace, a funny thing is happening: the rich are joining the crowds. They don’t want their own velvet rope Web sites. They want to join the masses. This has proven especially true with social networking, the one area cyber-gurus and wealth watchers were sure the rich would adopt as their own.

In its discussion about Harvey Weinstein selling his majority stake in ASmallWorld.Net – the so-called elite social-networking site–to one of the Nestle heirs, Gawker says traffic on the site has been flat for years. It also says members were tired of all the ads and the constant pestering to log in. (As a member myself, I can verify.)

The reason according to Gawker:

“Rich guys don’t want to socialize only with one another, and once you let in enough attractive young women and such your VIP site loses it cachet and everyone might as well just hang out on Facebook, which Metcalfe’s law teaches us is exponentially more useful anyway.”

The point is echoed in a recent survey by the Luxury Institute, which surveyed 400 consumers with an average income of $415,000. It said the 72% of the respondents belonged to social-networking sites. And the fastest growing sites were Facebook, LinkedIn and Twitter.

Read the full article http://blogs.wsj.com/wealth/2009/10/15/facebooks-for-the-rich-flounder/

Social Media Expected To Drive Holiday Shoppers

Posted in Retail,Social Media

by Sarah Mahoney

With consumers determined to limit their holiday spending, a new study predicts they will do more of their Christmas bargain-hunting through social media, and less through search engines or shopper review sites.

The study, from Oneupweb, compared holiday traffic trends over the last two years at the top-ranking e-tailers, social sites and review sites against the latest user trends, and found that while search engines have typically been the leading driver to retail sites, “social media is influencing search behavior and affecting the purchases a consumer makes.”

Sarah Mahoney, Oct 15, 2009 01:13 PM
With consumers determined to limit their holiday spending, a new study predicts they will do more of their Christmas bargain-hunting through social media, and less through search engines or shopper review sites.  

The study, from Oneupweb, compared holiday traffic trends over the last two years at the top-ranking e-tailers, social sites and review sites against the latest user trends, and found that while search engines have typically been the leading driver to retail sites, “social media is influencing search behavior and affecting the purchases a consumer makes.”

“We found that traffic to social sites steadily gained on retail sites in 2007 and 2008,” it says. Despite a holiday bump, direct traffic to online retail sites fell 10%, behind traffic to social sites, which grew 12% from December 2007 to December of last year. “Traffic to the review sites remained stagnant throughout the year, experiencing a mild bump during the holiday season,” the report says.

What’s happening, according to the Traverse City, Mich.-based research company, is that consumers are much more engaged in talking about products and deals in the social world. Facebook — with active users now averaging about 15 hours on the site per week — contributes more than 3% of all traffic to the top retail sites online, it says, and as many as 25% of social network users post links to other companies, products or services. The report also cites a Penn State study, which found that one in five tweets mention a specific brand or services.

Last year, e-commerce drew in $25.5 billion dollars, a 3% decline, while online traffic grew 10%.

Meanwhile, a separate study from the Luxury Institute reports that wealthy consumers are also warming to shopping via social networks. The study, which looked at 400 people with an average income of $415,000 and household net worth of $4.9 million, found that nearly one in five social networkers in this group also belong to a social shopping site, with Ideeli and Rue LaLa the most popular. And while 13% have joined a group that is based around a product, service or a brand, 24% say they would be likely to do so. The Luxury Institute also found these high-net-worth individuals have an above-average participation rates: Membership in social networking sites has increased from 60% in early 2008 to 72%, with 62% of those in the 55-plus age group participating.

 

The study, from Oneupweb, compared holiday traffic trends over the last two years at the top-ranking e-tailers, social sites and review sites against the latest user trends, and found that while search engines have typically been the leading driver to retail sites, “social media is influencing search behavior and affecting the purchases a consumer makes.”

“We found that traffic to social sites steadily gained on retail sites in 2007 and 2008,” it says. Despite a holiday bump, direct traffic to online retail sites fell 10%, behind traffic to social sites, which grew 12% from December 2007 to December of last year. “Traffic to the review sites remained stagnant throughout the year, experiencing a mild bump during the holiday season,” the report says.

What’s happening, according to the Traverse City, Mich.-based research company, is that consumers are much more engaged in talking about products and deals in the social world. Facebook — with active users now averaging about 15 hours on the site per week — contributes more than 3% of all traffic to the top retail sites online, it says, and as many as 25% of social network users post links to other companies, products or services. The report also cites a Penn State study, which found that one in five tweets mention a specific brand or services.

Last year, e-commerce drew in $25.5 billion dollars, a 3% decline, while online traffic grew 10%.

Meanwhile, a separate study from the Luxury Institute reports that wealthy consumers are also warming to shopping via social networks. The study, which looked at 400 people with an average income of $415,000 and household net worth of $4.9 million, found that nearly one in five social networkers in this group also belong to a social shopping site, with Ideeli and Rue LaLa the most popular. And while 13% have joined a group that is based around a product, service or a brand, 24% say they would be likely to do so. The Luxury Institute also found these high-net-worth individuals have an above-average participation rates: Membership in social networking sites has increased from 60% in early 2008 to 72%, with 62% of those in the 55-plus age group participating.

http://www.mediapost.com/publications/?fa=Articles.showArticle&art_aid=115513

Video Interview – Milton Pedraza – Asia’s Luxury Consumer

Posted in Luxury Market

In-Depth Look – Asia’s Luxury Consumer

Bloomberg
Oct. 09, 2009. 10:46 AM EST

Interview and discussions with Milton Pedraza of the Luxury Institute. He talks about the luxury retail market. Louis Vuitton, Ferragamo and Ermenegildo Zegna to Mongolia.

Wealthy Women Like La Mer and La Prairie

Happi.com

Prestige brands are tops among wealthy shoppers.

When it comes to beauty, rich women are in la la land—La Mer and La Prairie, that is. According to the Luxury Institute, high net worth women prefer La Mer skin care products and La Prairie makeup.

The Institute’s Luxury Brand Status Index (LBSI) asked high net-worth consumers to rate luxury brands by category across four equally weighted components: Consistently Superior Quality, Uniqueness and Exclusivity, Making the Customer Feel Special Across the Entire Experience and Being Consumed by People Who Are Admired and Respected.

Top rated skin care brands were: La Mer, La Prairie and Perricone MD. The top rated premium makeup brands were: La Prairie, La Mer and Dolce & Gabana.

“In today’s new luxury landscape, wealthy consumers will pay skin care and makeup brand premiums only for what they define as genuine luxury,” said Milton Pedraza, CEO of the Luxury Institute. “Skin care and makeup brands must be able to deliver the highest quality products in order to reassure consumers that they’re purchasing value for the associated price. In the current economy, buyers are unforgiving of luxury brands that are not living up to the standard of their brand name.”

http://www.happi.com/news/2009/10/12/wealthy_women_like_la_mer_and_la_prairie

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