Luxury Institute News

January 13, 2010

Cold weather mocks death of fur

‘Fur right now… doesn’t make the top-10 list of anybody’s fashion needs,’ says Milton Pedraza, head of New York consultancy The Luxury Institute.

Reuters-Jan 12, 2010

HELSINKI – IN A warehouse outside of Helsinki hundreds of buyers gathered to bid in a three-day auction of mink, fox and other furs just before Christmas.Any worries about the ailing global economy, the threat of global warming, or the fading popularity of fur as fashion were firmly left outside to chill in the snow.

Bidding was brisk, and by the end of the auction all pelts were sold. Organisers said sales roughly tripled to 39.5 million euros (S$79.6 million), with prices sharply up – by a third on average – since an auction in September.

‘Demand and supply are in a good balance, and there is maybe slight overdemand, which supports price levels,’ said Chief Executive Pertti Fallenius of Turkistuottajat, which says it is the world’s only publicly listed fur auctioneer.

While the fur market looks to be challenging in the coming years, weighed by a variety of factors including increasing social pressure against its use, the auction clearly showed that any talk of fur’s death is greatly exaggerated.

And the industry has certainly got a boost from the recent cold snap that has dumped snow on many countries across the Northern hemisphere. –

CHINA BOOST, BUT STEADY DECLINE

FALLENIUS said one reason behind the recent uptick in the market has been a cut in output from China, which since early 2000 had sharply hiked fur production, pressing prices.

He said China in the past two years has halved its annual mink production, while fox is down by three quarters. The country is the world’s second-largest fur producer after Europe.

‘Cheap labour costs won’t get you far in this business. The international textile trade has… been less and less willing to accept fur skins produced in China,’ Fallenius said.

Denmark is the world’s top supplier of mink pelts, while Finland has some 1,300 fur farms, and last year Europe produced some 32 million mink and fox pelts.

But while recent demand has been strong, helped by markets like China where fur is less taboo and more of a novelty, global output peaked in 2007 and has fallen the last two years.

The European Fur Breeders’ Association said 2009 fox and mink production globally was some 50 million pelts, down from the high of 65 million in 2007.

After Austria banned fur farming more than a decade ago, the much-debated trade has been entirely or partly phased out in countries like Britain, Holland and Denmark as stricter regulations come into force in the European Union.

‘Fur right now… doesn’t make the top-10 list of anybody’s fashion needs,’ says Milton Pedraza, head of New York consultancy The Luxury Institute.

‘It’s not that consumers, particularly women, don’t like fur – they do. But they see the social pressure that continues to exist against consuming fur. It’s high-end, so they love it, but on the other hand they can do without it. The pain outweighs the pleasure right now of wearing fur,’ Pedraza said.

Pedraza said the global economic slowdown would also hurt the industry.

‘I don’t think fur will ever go away for sleeves and colours and some decoration, but a full mink coat?,’ he said, noting young people were not likely to ‘flock’ to fur – not even vintage – anytime soon.

Harald Ullmann, spokesman of the German branch of animal rights group PETA, said that in the next 10-15 years fur would likely disappear from the streets.

‘Even if people say fur is back – and that’s what the industry wants us to believe – I don’t think this is really the case,’ Ullmann said.

‘Fur has nothing to do with luxury products. It is a product from the stone age and it belongs in the history books and not on somebody’s back,’ he said. — REUTERS

Botox to vacations: Where bankers spend their bonuses

By Blake Ellis, contributing writer
January 12, 2010: 12:54 PM ET

NEW YORK (CNNMoney.com) — Wall Street bankers are putting together their wish lists for 2010 — and they’re not holding back. After last year’s dry spell, bonuses for top-level executives are expected to be sky high. Maybe even records.

Bankers at Goldman Sachs and Chase are anticipating bonuses of more than $500,000 a piece, on average, so they’ll have plenty to spend.

Here’s where they’ll be putting the money.

Real Estate: $3 million to $5 million

Buying apartments, second homes and vacation houses tops the list of ways bankers will most likely spend their money.

“Because these are big Wall Street bonuses, people are buying million-dollar-plus properties in the Hamptons, South Florida, skiing communities like Vail and Aspen, and Europe,” said Milton Pedraza, CEO of the New York-based research firm the Luxury Institute.

Wall Street’s big bonus culture

Of course, the first status residence is in Manhattan, and bankers are already starting to check out the goods in advance of their windfall. They’re putting up huge down payments, which has helped the $3 million to $5 million sector of the city’s housing market to rebound, said Pamela Liebman, CEO of New York-based brokerage firm Corcoran.

At the low end, they can score a three-bedroom, two bath condo right on Central Park or a tony address on Fifth Avenue. The more adventurous poet-at-heart bankers can tap out buying a five-story Queen Anne on the Upper West Side or head to the once-bohemian East Village for two joined buildings that boast an owner’s triplex with a stunning terrace — and income-generating apartments and businesses below.

Of course, many Wall Streeters already own their Manhattan dream homes, so they’ll spend their extra money revamping their primary residences, Pedraza said.

A makeover by a well-respected interior decorator can run at least $150,000 — but usually is more like 30% to 40% of the bonus. Think: Charlie Sheen hiring Daryl Hannah to give his new condo — and life — a high-rent makeover in the 1987 flick “Wall Street.”

Or, there is always the extravagance of buying a condo on the new Utopia oceanliner. It’s the high life on the high seas for just $24 million.

Private school: $35,000 per child

Of course, the kids must have all the advantages that come with such prestigious addresses. So… off to private school they go. And not just any private school — “Gossip Girl”-worthy institutions of learning.

“If they have kids, that’s usually where the money goes,” said Diahann Lassus, co-founder of wealth management firm Lassus Wherley.

And these places don’t come cheap: The famed Horace Mann School costs more than $34,000 a year per kid — for kindergarten or senior year. That’s more than it costs for a year as a Longhorn at the University of Texas. (Of course, a year at Yale is $47,500 — just for tuition.)

Plus, there’s the not-mandatory-but-still-expected “donation” of an extra 10% to keep you in the school’s good graces.

Vacation: $40,000+

On top of essentials such as education, many bankers will use the fresh cash to get away. One banker, who wanted to remain anonymous, said he’ll be escaping his crushing work schedule as an associate by spending three weeks in Argentina.

He’s not at the level of the uber bonus – yet – but he may someday join the ranks of those jetting off to the newest hot spots. African safaris are becoming de rigueur, and Ashley Isaacs Ganz, founder of Artisans of Leisure Travel, said the Middle East, Spain and Morocco are very popular.

“Our luxury travelers are fascinated by the history in Israel and nearby Turkey and really want to have in-depth cultural experiences,” Ganz explained.

A trip like that can cost $40,000 for the whole family — on a budget. Plus, these travelers have to consider whether to bring the nanny. That costs an extra plane ticket, sure – but you just lodge them in the kids’ room. So the overall expense — considering a half-million-dollar bonus — isn’t exactly crippling.

For something more intimate, Ganz said, people are asking her to arrange on-site babysitters or be booked in hotels that offer kids clubs.

“With more money, they can bring more of the family along and go to more exclusive and smaller, boutique resorts,” said Pedraza.

The real high-rollers, however, can’t just go to Aspen for a much-needed vacation. They look for the unexploited experience — like renting a rehabbed ghost town in the Colorado wilderness. And for that they’ll pay $17,500 a night for the Dunton Hot Springs.

Or maybe they could charter Richard Branson’s yacht for a week.

Toys: $50,000+

Of course, generous bonuses also mean splurging on the fun stuff. “There has never been a better time to negotiate jewelry and watches, and I mean the finest of luxury watches,” said Pedraza. “This is the opportunity to go in and negotiate what you want.”

But when it comes to picking out these luxury goods, “no one’s in the mood to experiment,” he said. So, while still spending more than $50,000 on jewelry and watches, the monied are playing it safe by sticking to traditional brands such as Tiffany & Co. and Cartier.

That goes for cars as well, and Pedraza said he predicts many employees will use part of their bonuses to buy autos that hold up in value, such as Ferraris.

Upkeep: $20,000+

But the high-profile package isn’t complete without the appearance to match the expensive cars and watches.

That’s why up to $20,000 of bonus money will likely fund personal upkeep, said Pedraza. And on Wall Street, this includes Botox — even for men.

“Botox for men, getting your eyebrows plucked, all these things have become normal,” he said. “Many older bankers will rejuvenate themselves with Botox and plastic surgery. They’re not Hollywood but they still need to have that fresh, young appearance.” 

http://money.cnn.com/2010/01/11/news/economy/bank_bonuses/index.htm

January 6, 2010

WWD List: Man Power

by Suzanne Blecher
THURSDAY DECEMBER 31, 2009

The Luxury Institute ranked the leading men’s brands in China for its 2009 Luxury Brand Status Index survey. In April, 300 male consumers with minimum household incomes of $147,000 were asked to rate luxury brands on a scale of one to 10 in four areas: consistently superior quality, uniqueness and exclusivity, making the customer feel special and whether the brand is consumed by peers and people admired by the respondents. “China is the highest growth market and greatest opportunity that luxury has in the next 10 to 20 years,” said Milton Pedraza, chief executive officer of The Luxury Institute.

Chinese consumers are individualistic and willing to pay a premium for quality, craftsmanship, design and service. “Luxury is uniqueness and exclusivity,” he said. Gucci, Ralph Lauren, Marc Jacobs and Dunhill just missed the top 10 cut.

1 GIORGIO ARMANI
Luxury Brand Status Index score: 8.74

According to the LBSI survey, Giorgio Armani is the brand most likely to be chosen by men in China for their next luxury fashion purchase. “Armani is well-established, and it’s all about who gets to China earliest,” the Luxury Institute’s Pedraza said. “It’s also about the personality of the founder. There is a halo effect on the brand.” Earlier this year, actor Takeshi Kaneshiro became the first Asian male to appear in an Emporio Armani advertising campaign in China. An Emporio Armani flagship opened in Beijing in 2008, adding to a portfolio that includes six A|X Armani Exchanges, two Giorgio Armanis, two Armani Casas and one Armani Collezioni in the region.

2 LOUIS VUITTON
Luxury Brand Status Index score: 8.68

“Louis Vuitton is considered a pioneer in China,” Pedraza said. This month, Vuitton opened a Maison in Macau, the brand’s seventh Maison and fourth store in the former Portuguese colony, WWD reported. A dark, lounge-y area on the ground floor is dubbed Men’s Universe, and is made up of areas for shoes, ready-to-wear, accessories and the first men’s Bag Bar. The three-story unit is connected to One Central Mall, a new retail development with Gucci, Hermès, Tod’s, Kenzo and Ralph Lauren, among others. There were more than 30 million visitors to Macau in 2008, with more than half from Mainland China. 

3 DIOR HOMME
Luxury Brand Status Index score: 8.54

Dior Homme has boutiques in eight Chinese provinces. “Dior as a female brand entrenched itself first,” Pedraza said. “It’s a worldrenowned female brand that gained share of mind with men later.” Dior owes much of its success to the deep pockets of parent LVMH Moët Hennessy Louis Vuitton. “They invested heavily in the brand. LVMH understood the market quickly,” Pedraza said. “They have used their firepower.” The label has 35 freestanding men’s stores and accounts for 12 percent of group sales. Christian Dior president and chief executive officer Sidney Toledano said Dior Homme is “growing” and has “great potential,” especially in Asia, WWD reported.

4 PAUL SMITH
Luxury Brand Status Index score: 8.54

“Paul Smith had early entry into China and good marketing,” Pedraza said. “The British brands also have a great Savile Row reputation.” The label ranked second to Louis Vuitton in the survey for making the customer feel special. The brand opened its first Hong Kong franchise shop in 1990 and is sold at wholesale in 35 countries worldwide, including Singapore, Taiwan, Korea and Japan, which has more than 200 Paul Smith shops. But Smith has closed his stores in Mainland China, which were underperforming and uneconomic.

 5 VERSACE
Luxury Brand Status Index score: 8.52

“Younger men look at Italy as the cornerstone of fashion,” Pedraza said, accounting for the brand’s popularity with the under-30 crowd. “They are willing to dress more trendy and wear boutique brands that give them the opportunity to shine.” More than 23 percent of the 300 men surveyed had purchased Versace in the previous 12 months, making it third in popularity behind Louis Vuitton and Dunhill. In November 2008, Versace presented its first runway show in Beijing, re-creating the fashion house’s Milan event, and used only Chinese models. Actor Jet Li was host of a live auction at the show, which raised $100,000 for earthquake relief work.

6 YVES SAINT LAURENT
Luxury Brand Status Index score: 8.46

“Gucci Group invested heavily in China despite the [economic] meltdown in the Western world,” said Pedraza, linking YSL’s success to the strategy of its parent company. More than 60 percent of the Group’s total expansion investments are to the Asia-Pacific market, and China, in particular, WWD reported. Gucci Group operates 38 stores in Mainland China. In the first nine months of this year, overall sales of Yves Saint Laurent declined 14.3 percent on a comparable basis, hampered by the slowdown of its traditional markets, which account for 75 percent of sales. In Asia-Pacific, where 14 percent of total volume is generated, sales grew almost 22 percent. Sales of leather goods and shoes remained solid. 

7 PRADA
Luxury Brand Status Index score: 8.45

Asia was Prada’s largest business in the first half of 2009, representing 25 percent of global sales. In October, the brand unveiled a 13,000-square-foot unit in Singapore’s Ion Orchard mall, its largest flagship in the Asia-Pacific region. The label has seen strong comps across the region, with men’s wear, which accounts for 30 percent of global Prada sales and more than 30 percent in Asia, leading the way, Prada Group chief operating officer Sebastian Suhl told WWD last month. Prada also is looking at new territories, such as Mongolia. 

8 ALEXANDER MCQUEEN
Luxury Brand Status Index score: 8.43

Respondents gave McQueen high marks for uniqueness. “In the case of the Chinese, they are willing to recommend Western brands that are individualistic,” said Pedraza, adding that Chinese men are not purists about luxury. “In the past, luxury goods were a way to fit in, but now it’s a way to differentiate,” said Patricia Pao, founder of New York-based fashion consultancy Pao Principle. “Mainland China was the dumping ground for merchandise, and Hong Kong got the stars. Now it’s about limited edition merchandise. The Chinese also love a deal and a discount.” 

9 ERMENEGILDO ZEGNA
Luxury Brand Status Index score: 8.43

Ermenegildo Zegna opened a 7,300-square-foot global concept store designed by Peter Marino in October in Tsim Sha Tsui, Hong Kong, an urban area in Southern Kowloon popular with Mainland tourists. The brand, which operates 75 stores in 35 Chinese cities, plans to open its second global flagship in China on Shanghai’s Huaihai Road in the spring, along with flagships in four or five key cities. In the LSBI study overall, Pedraza was surprised more Italian brands did not make the cut. “To be candid, they should have been first,” he said. “They have a global reputation as being the best brands, but they came to the party late and underestimated the huge significance of China.” 

10 BROOKS BROTHERS
Luxury Brand Status Index score: 8.42

“They established themselves in Asia through Japan selling classic, American, conservative suits,” Pedraza said. “They have built a solid foundation.” American brands “are seen as more hip and as value for the money,” Pedraza said. “They are fundamental and attainable.” Brooks Brothers opened its first Hong Kong store in 1998 at Windsor House Seibu. Brooks Bros. merchandise can be found in 24 Mainland China locations and 11 locations in Hong Kong.

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