Luxury Institute News

June 28, 2010

Brand-loyal customers returning to recession-riddled retailer Neiman Marcus

Posted in Luxury Market,Retail
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Friday, June 25, 2010  
Dallas Business Journal
Kerri Panchuk Staff Writer

Incoming Neiman Marcus CEO Karen Katz says she is committed to building a consistent pattern in sales and merchandising – two staples of the Neiman Marcus brand. For the moment, that’s about all she is saying.

Katz is quietly plotting her course and spending the summer conducting research leading up to her Oct. 7 start date.

A three-decade veteran in the retail industry, Katz spent 25 years at Neiman’s before being named CEO in late spring.

“We have this amazing culture at Neiman Marcus,” Katz, who is currently executive vice president of Neiman Marcus Group said. “We still operate the business on the founding principles of merchandise excellence and high levels of customer service … Those things will not change, but the way you do those things could very well change as we move forward.”

Milton Pedraza, CEO of The Luxury Institute in New York, believes change is needed at Neiman’s.

Neiman Marcus saw its sales rebound in the first part of the year, but Pedraza says double-digit sales gains in the first part of 2010 subsided with the company reporting only single-digit sale increases in the most recent period.

Many analysts had expressed concern about how the high-end retailer would weather a storm that sent all shoppers – including those at the luxury end of the spectrum – running. In response, retailers like Neiman’s rolled out some discounting that had not previously been part of their sales plans.

Katz admits 2009 was a rough year.

“Luxury retail in general took the hardest hit during this recession,” she said. “Our customers pulled back dramatically from spending, so I think some of the nice increases we’ve seen these last number of months are because a year ago we were in the depths of the depression.”

She added “that being said, we are very happy to see that business is coming back. The customer is definitely back in the stores.”

Katz remains confident the brand was protected as Neiman’s kept its focus on exclusive merchandise while trying to make sales in 2009.

Pedraza says some of the discounting he saw at Neiman’s did have some short-term impact on the brand’s reputation for exclusivity, but he believes the Neiman Marcus brand remains intact overall.

“I think the brand clearly survived,” he said, “but it needs to reinvent itself in terms of the customer’s experience.”

Brian Sozzi, retail analyst with Wall Street Strategies, said Neiman’s wasn’t alone in efforts to create price points needed to make up for anemic sales. He agrees Neiman’s brand remains strong.

“I don’t think they are overexpanding along the lines of other retailers,” he said. “I don’t think they have as unfavorable a debt position as Saks.”

He does, however, see room for improvement.

“I think Neiman’s probably stands above Saks,” he said, while adding that the company may be below Nordstrom in terms of the upscale industry’s standard for customer experience.

Katz recognizes that change is inevitable, noting that e-commerce and online technology have changed the face of retail. She said those factors will continue to reshape how shoppers buy and retailers sell. While she remains coy about what the future holds, she hints that online will be an integral part.

“I believe that the intersection of traditional retailing, e-commerce retailing and social networking … all of that is going to come together in a very different way than we can see it today,” she said. “We are just starting to understand how powerful that intersection can be, so we’ll see where it evolves to.”

Pedraza said Neiman’s actually hit the online platform as one of the first to meet early expectations on the e-commerce side, but said other high-end retailers, such as Nordstrom, eventually pushed the online standard a bit higher. He, too, sees online as a major component of future retail, and one Neiman’s cannot ignore.

“They have to re-establish leadership because online has changed everything,” Pedraza said.

“They have to make the online experience better than even the offline experience,” he said.

In other words, according to Pedraza, the focus needs to be on combining the in-store experience with the multi-channel experience of better communicating with customers via mobile devices.

What Pedraza is most hopeful about is Katz.

“What’s wonderful about Karen is that she does care about culture and customer relationships,” he said.

June 8, 2010

Rookwood Pottery looks to refire with new investors

Posted in Luxury Market

Business Courier of Cincinnati

Rookwood Pottery Co. is seeking new investors to recapitalize and raise $4 million in new equity to fund its continued production of high-end tiles and art pottery.

It’s in discussions with “great living Cincinnatian-type” investors and expects to complete a private placement in July that will bring significant new ownership, CEO Chris Rose said.

Rose and other local investors, including restaurateurs Martin and Marilyn Wade, own a majority of the shares. That could change, he said.

Rookwood was founded in Mount Adams in 1880 by Maria Longworth Nichols, and its art pottery and tiles are renowned for their high quality and innovative glazes. Certain pieces are highly sought after by collectors and sell for tens of thousands of dollars at auction.

Many of Cincinnati’s historic buildings, including the Carew Tower complex, are adorned with Rookwood tiles.

The Wades, also the company’s landlords, are providing bridge financing until permanent funding is in place. They could not be reached for comment.

The company brought in Cincinnati-based Chip DeMois to direct its fundraising efforts and serve as chief operating officer. Options for the new investment group could range from two investors at $2 million apiece or 16 people at $250,000.

Rose and DeMois said a private placement memorandum outlines five product lines to be more fully developed: architectural tiles, vases and other art pottery, corporate gifts and special commissions, cremation urns, and branding initiatives such as the Auctions at Rookwood (see box).

Revived in 2006 under Rose’s leadership, more than 40 years after Rookwood’s demise as an active business concern, the company is trying to re-establish the legendary name amid the steep economic downturn.

Its initial focus has been on corporate gifts and tiles, the latter marketed to a housing industry that has only recently begun to emerge from a severe slump.

The tile market peaked in 2006 just as Rookwood restarted operations.

Rose said some tile companies have gone out of business, and many have downsized. That allowed Rookwood to add key personnel to its staff this year as it prepares to increase production.

Milton Pedraza, CEO of the Luxury Institute, said consumers of luxury goods are far more discerning today.

“That favors a company like Rookwood, because they are the real thing,” Pedraza said.

http://cincinnati.bizjournals.com/cincinnati/stories/2010/06/07/story8.html?surround=etf&ana=e_article&b=1275883200%5e3452761

June 3, 2010

Men like nice clothes too, luxury execs say

(Reuters) – Men have long been treated as an afterthought by luxury designers and retailers, given that they spend far less than women on clothes and accessories.

But as men’s tastes grow more sophisticated, they are providing a new avenue for much-needed growth in the industry, executives said during the Reuters Global Luxury Summit.

That change is partly being driven by greater competition where men are being challenged to improve their appearance, and a rising professional class in countries like China.

“Men have become far more conscious of grooming, of taking care of themselves, of dressing well. And I think that is something that probably women have driven them into,” said Milton Pedraza, chief executive of New York-based Luxury Institute, a consulting firm.

“It is growing in Asia because people are now working in offices and they dress differently. It is more of a longer-term trend,” he said.

The sartorial shift has translated into sales gains for top brands.

Coach Chief Executive Officer Lew Frankfort said men’s accessories make up about 5 percent of sales now, and his company plans to open more stand alone men’s stores.

“We are thinking about urban and nearby suburbs outside major metropolitan areas where there is a more discerning male consumer,” Frankfort said.

He added that as Coach becomes a global brand, “The No. 1 opportunity for us is China. We believe the opportunities are boundless in that market.”

Oscar de la Renta, renowned for its cocktail dresses and evening gowns, is also thinking of jumping into the fray and developing a line of men’s clothing.

But Chief Executive Alex Bolen said the New York-based designer will be careful so as not to disappoint its clients.

“We are continuing to experiment with it. I want to do it, but I want to do it exactly the right way,” Bolen said, noting that the company would more likely do some high-end casual wear with a made-to-measure suit service.

Italy’s Valentino sees the men’s segment as a source of growth. Chief Executive Stefano Sassi said men’s items accounted for about 8 percent of sales, a portion that could double within three years.

GROWING, BUT STILL A NICHE

Despite the potential men’s luxury offers, it may be limited to a few cosmopolitan centers and to a certain niche group of men, some executives said.

“Putting aside gay men, still — what is it? 85 percent of the men’s underwear in America is bought by women? Wives still buy and still influence most of the purchasing habits for men in America,” said William Taubman, chief operating officer of U.S. mall operator Taubman Centers Inc (TCO.N).

Some luxury retailers opening men’s stores have done so primarily because of space shortages rather than deliberate strategy decisions, Taubman said.

“Having a separate men’s store creates an inconvenience,” he added.

At Saks, women’s apparel made up about 35 percent of total sales in 2009, more than double men’s clothing, and CEO Stephen Sadove said he did not expect that ratio to change much.

Men still lag far behind women in their shopping habits. Online luxury shopping club Gilt Groupe said that 25 percent of its members are U.S. men.

And some despair of ever converting a very large number of khaki-clad, T-shirt loving Americans to a higher sense of style.

“I believe the American male is largely uneducable. We need to focus on the segment of males that have real discerning taste,” said Coach’s Frankfort.

(Additional reporting by Antonella Ciancio in Paris, editing by Michele Gershberg, Leslie Gevirtz)

http://uk.reuters.com/article/idUSTRE6520GT20100603

June 2, 2010

News Release: Japanese High Net-Worth Consumers Rate the “Best of the Best” Luxury Brands in Five Fashion Categories

(NEW YORK) June 2, 2010 – The objective and independent New York City-based Luxury Institute reported today the results of the “Best of the Best” luxury fashion brands in Japan based on the 2010 Luxury Brand Status Index (LBSI) survey. This survey identifies the top brands that deliver true luxury based solely on the unbiased ratings of wealthy Japanese consumers. The following five luxury categories were rated: Women’s Fashion, Women’s Shoes, Women’s Handbags, Men’s Fashion, and Men’s Shoes.

The LBSI asks 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. 

The “Best of the Best” are: (LBSI score out of 10)

Women’s Fashion (Ready-to-wear)

  • o Hermes-7.28
  • o Chanel-7.27
  • o Giorgio Armani-6.80

Women’s Handbags

  • o Hermes-7.77
  • o Chanel-7.06
  • o Louis Vuitton-7.01

Women’s Shoes

  • o Christian Louboutin-7.39
  • o Hermes-7.20
  • o Ferragamo-7.18

Men’s Fashion (Ready-to-wear)

  • o Ermenegildo Zegna- 7.17
  • o Hermes-7.01
  • o Giorgio Armani-6.89 

Men’s Shoes

  • o John Lobb-7.34
  • o Testoni-7.32
  • o Ferragamo-7.11

“Japan may be a challenging market for luxury, but it is still a huge market compared to most other geographies”, said Milton Pedraza, CEO of the Luxury Institute. “We see major efforts on the part of our luxury brand clients to differentiate themselves by dramatically out-behaving their competition rather than merely outperforming on products. Extraordinary customer experiences will be the drivers of luxury success in Japan’s large, but stagnant market”

The proprietary Luxury Brand Status Index (LBSI) survey is the only unbiased measure of the prestige of leading brands among wealthy Japanese. A national sample of 600 wealthy Japanese consumers, half male/half female, with a minimum household income of 15 million Yen (approximately $165k) was surveyed online. Males rated only the men’s categories and females rated only the women’s categories.

About the Luxury Institute

The Luxury Institute is the uniquely independent and impartial ratings, research and Luxury CRM consulting institution that is the trusted and respected voice of the high net-worth consumer. The Institute provides a portfolio of proprietary publications, research and consulting services that guide and educate high net-worth individuals and the companies that cater to them on leading edge trends, high net-worth consumer rankings and ratings of luxury brands, and best practices. The Luxury Institute also operates LuxuryBoard.com, the world’s first global, membership-based online community for luxury goods and services executives, professionals and entrepreneurs.

Contact:
The Luxury Institute, LLC
Martin Swanson
Vice President Business Development
(914) 909-6350
mswanson@luxuryinstitute.com

June 1, 2010

Unemployment casts shadow on luxury recovery

(Reuters) – A rebound in U.S. luxury spending remains fragile due to high unemployment and the specter of higher taxes and stricter rules on how Wall Street operates, a top industry consultant said on Tuesday.

“The aspirants will come back when unemployment comes down to 5 percent,” Milton Pedraza, chief executive of the Luxury Institute, said at the Reuters Global Luxury Summit in New York.

He was referring to shoppers with an average household income of about $150,000 to $300,000 who helped prop up the industry, many by living beyond their means, during the economic boom of the previous decade. They were the consumers who cut back the most, suddenly and dramatically, during the more recent recession.

The U.S. unemployment rate is expected to dip to 9.8 percent when figures are released on Friday, but Pedraza cited estimates that a decline to 5 percent could take as much as five years.

While luxury spending has rebounded strongly in the first part of 2010, the European debt crisis and the potential for higher taxes in Western countries as governments there plug holes in their budgets could stop luxury’s comeback, Pedraza said.

But he added that some top luxury purveyors such as LVMH (LVMH.PA), Tiffany & Co (TIF.N) and Richemont (CFR.VX) took advantage of the turmoil in the past two years to win market share, gaining greater clout in negotiating with suppliers and luring more consumers to their classic brands.

Pedraza also said top companies would likely prune their portfolios, which often house dozens of brands, to focus on their most-established names and supplement them with a few smaller assets.

THINK GLOBAL

Some U.S. luxury retailers who are still sticking close to their home turf for exclusivity might be hurting themselves in the long run.

Pedraza, who termed the strategy as a “self-imposed limitation,” said overseas markets like China could be key growth engines for luxury players. He also sees Japan as a “cash cow” for those brands who can manage costs well.

While many upscale retailers like jeweler Tiffany and leather goods maker Coach (COH.N) have looked at fast-growing markets abroad to boost sales, many others like department store chain Saks Inc (SKS.N) are still very focused on their domestic markets.

“What is holding them back is their own perception of the world — meaning they don’t see themselves as global brands, they see themselves as regional brands,” Pedraza said.

He sees room for all luxury brands to go global.

“I would argue that all American brands that are luxury — Harley Davidson — have an opportunity to expand globally,” he said.

(Reporting by Dhanya Skariachan and Phil Wahba; Editing by Michele Gershberg and Matthew Lewis)

http://www.reuters.com/article/idUSTRE6503VN20100601

Noblesse oblige, but no service, for French luxury

June 1, 2010
Reuters.com-Shop Talk
From apparel reporter Nivedita Bhattacharjee:

LUXURY-SUMMIT/

Luxury brands in the United States might still have a lot to learn from the entrenched design houses in Europe, but their commitment to pleasing the customer serves them well as the market returns from recession.
    
Milton Pedraza, Chief Executive of the Luxury Institute, told us during the Reuters Global Luxury Summit today that the commitment to customer service could even become a real point of differentiation for American brands.
 
“The American brands and even the Burberrys of the world tend to be better at customer-centricity, at service, and could make that a competitive advantage, because the Europeans are not as service-oriented, more product-oriented,” he said.
    
“The Europeans are not as service-oriented, (they are) more product-oriented, and they will even tell you that.”
    
If one is looking for an explanation behind the attitudes, Pedraza invoked a time well before Hermes opened its doors in 1837.   
 
“A French executive told me that the word ‘service’ … is equated with servility and (goes) back to the French revolution and is why the French don’t like to serve anybody.” 
(Photo: Reuters)

http://blogs.reuters.com/shop-talk/2010/06/01/noblesse-oblige-but-no-service-for-french-luxury/