Luxury Institute News

July 4, 2014

America becomes absolutely fabulous

By: Laura Chesters
The Independent
July 4, 2014

Striding down Fifth Avenue clutching a monogrammed black Gucci leather satchel, François -Henri Pinault stands out among many of the trackpant-clad visitors to America’s most expensive shopping street.

Americans might still be better known for their casual fashions but Mr Pinault, the chief executive of Gucci’s owner, Kering, is betting that the millions of domestic and international tourists who descend on New York each year want to snap up European labels on their shopping sprees.

The Frenchman, who is married to the Mexican-American actress Salma Hayek  and whose family owns more than 40 per cent of the Paris-based luxury goods giant, says: “Over the last few years we have talked about the growth engine of luxury being in Asia – but it is important to remember the size and potential of America.”

According to market research from Bain/Alta­gamma on the luxury goods industry, the Americas actually passed China as the growth leader last year. The researchers estimate that the continent’s luxury goods market will grow 4 per cent, and the US alone is valued at €66bn (£52bn) this year.  Other European brands, including the UK’s Burberry and Mulberry, have also been steadily building up their presence across North America.

Mr Pinault is in the US to visit Kering’s American luxury division, which launched three years ago, and its flagship Gucci store in New York, the biggest in the world.

Kering, which owns 17 luxury brands including Saint Laurent and Christopher Kane, now plans to invest huge sums renovating some of its 180 US stores and expanding into new areas, as well as into Mexico and South America. Sales at it luxury division rose 8 per cent last year.

Mr Pinault is also betting that wealthy Americans are beginning to change their habits.  “The way of life here has been to not dress up, but the US shopper is becoming more sophisticated.”

Sarah Willlersdorf at ­Boston Consulting Group  agrees that the wealthy millionaires and billionaires in the States have traditionally spent their cash on cars and experiences rather than expensive clothes, but that now what BCG calls the “personal goods” sector is about to enter a boom period.

She says: “The aspirational masses here do want to spend on luxury – they want to spend on brands, and it is growing. There is a huge change in the desire to buy brands.”

BCG expects that by 2020 the US will have more than a third of the luxury market and  will still be bigger than China’s high-end sector. Japan will account for 7 per cent and the rest of Asia about 23 per cent of the global luxury market. Milton Pedraza, chief executive of the Luxury Institute, a consultancy, agrees: “There are big opportunities for European luxury brands in the US.”

America already makes up 18 per cent of Kering’s group sales, and Mr Pinault is keen to make sure its brands have the best stores in the best locations across the US – not just in New York, which has always had Sex and the City-style fans of European labels.

Ms Willlersdorf adds: “It is not just about East and West coast. The middle and south are very wealthy. European brands are under-represen-ted, particularly in second-tier cities.”

Click the link to view the entire article which includes a quote from Milton Pedraza, CEO of Luxury Institute: http://www.independent.co.uk/news/business/analysis-and-features/america-becomes-absolutely-fabulous-9585525.html

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June 26, 2014

Flying the Flagship

By: Simon Brooke
Sphere Magazine
June 26, 2014

Those waiting for the long-predicted explosion of luxury retailing onlines are still holding their breath. While some reports have estimated that global online retail sales have increased by as much as 17 per cent a year since 2007, growth in the effete world of luxury goods is nothing like as fast. Having viewed e-commerce with suspicion for many years, several successful brands have dipped a well-manicured toe in the digital waters-many prompted by the success of Net-a-Porter-but most have held back. Miuccia Prada summed up the sector’s attitude to web sales and e-commerce last year when she declared: “We think that, for luxury, it’s not right…Personally, I’m not interested.”

The new area for growth in luxury retailing is still not internet-based-it’s in the streets and shopping centres. Yes, bricks and mortar are back. In the luxury shopping capitals of the world-London, Paris, New York, and increasingly cities such as Shanghai and Dubai-well-established brands alongside up-and-coming names are opening new locations as well as expanding and refurbishing existing stores. Many are making significant investments: Versace, for instance, has recently sold a 20 per cent stake to private equity house Blackstone so that the brand can develop new venues.

“Luxury brands recognize the reality that only at most 10 to 15 per cent of sales are conducted online and the store, adapted for the future, will always be the main channel of customer engagement,” says Milton Pedraza, CEO of New York-based boutique research and consulting firm The Luxury Institute. “There are many cities across the world that present opportunities in growth for luxury brands and they are selectively opening stores there.”

The Italian trade body Fondazione Altagamma estimates that although online luxury shopping rose by 28 per cent last year, compared with 2012, it still only comprised 4.5 per cent of overall global luxury sales, further evidence that the luxury industry prefers “on street” to “online”. In an industry worth $300 billion, an estimated 90 per cent of luxury purchases still take place in stores.

Click the link to read the entire article which includes quotes from Milton Pedraza, CEO of Luxury Institute: http://edition.pagesuite-professional.co.uk/Launch.aspx?EID=915643ec-109b-4ba4-a154-fc2360651b30

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June 20, 2014

Real Estate In a Global Consumer Landscape

By: Ginette WrightHomes & Estates
Luxury Living Worldwide Edition 2
A Special Supplement for the Wall Street Journal
June 20, 2014

It is no secret that fine property today trades among an increasingly international circle of clients who appreciate the multi-faceted value of real estate. These world citizens have a truly global perspective and see country boundaries as less meaningful in the search for their desired home experience. After all, one can just as easily enjoy an evening sunset from a balcony in Paris or Miami.

What this means is that clients demand that the reach in the marketing of their home be international in scope. One could argue that all borders are crossed in connecting to buyers online; to an extent that is true. Yet there is an important distinction: trust. Am I more likely to click on a property associated with a company I recognize, whether I consciously acknowledge it or not? Milton Pedraza, CEO of the Luxury Institute, notes: “Luxury brands that offer both expertise and trust and are also recognized for delivering the ultimate in global reach in an extremely relevant and personal category such as real estate have a definite advantage in today’s marketplace.” With a heritage that spans over a century and locations in 48 countries and territories, the Coldwell Banker® brand and the Coldwell Banker Previews International® luxury marketing program are familiar to a vast audience that is interested and engaged in acquiring real estate. Our international marketing, whether online or off, enjoys the halo of our global reputation. In the United States alone, we close over $100 million dollars in luxury real estate each day.*

We also believe in the strength of partnerships with brands that have longevity and heritage similar to our own. To that end, the Wall Street journal is a world-class organization with sophisticated readership in all corners of the world. The Homes & estates publication you are holding will land in the hands of Wall Street journal subscribers in major cities on three continents. It’s an investment we make because we want our clients to have access to every potential buyer anywhere in the world.

There is so much more I’d like to share about the value of the Previews® program and the expertise of our fine associates, but I am limited by the space on this page. Instead, I invite you to enjoy a fine read on Robert A.M. Stern Architects (buying his firm’s new book “designs for living” is also a must) and consider the housing possibilities we’ve included in this magazine. do you see a property that fits your view of living? Since summer is upon many of us throughout the world, we chose to look at the luxury lifestyle from the view of the coastline. After all, few moments are more prized in luxury real estate than the moment when you catch that first glimpse of water from your residence and feel a sense of serenity, knowing that you own this experience—the experience of home.

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June 16, 2014

US Internet advertising revenues jump 19pc in Q1: report

By: Joe MacCarthy
Luxury Daily
June 13, 2014

Brands continue to up their digital advertising budgets, according to the Interactive Advertising Bureau.

Internet ad revenues reached $11.6 billion in the first quarter of 2014, compared to $9.6 billion from the year-ago period. While the sharp rise is not all that surprising, the increasingly effective nature of digital ads indicates that revenues will keep climbing at double digit intervals.

“Digital advertising is so much more targeted,” said Milton Pedraza, CEO of The Luxury Institute, New York. “You can now target people so much more finely than you could a few years ago.

“Relatively speaking, the cost is very competitive,” he said. “There’s a tremendous amount of online media that you can tap into.

“It’s just a revolution, a transformation, in advertising.”

Mr. Pedraza is not affiliated with the IAB, but agreed to comment as an industry expert.

The Interactive Advertising Burea was unable to comment. The IAB is comprised of more than 600 media and technology companies that account for selling 86 percent of online advertising in the United States.

Spending spree
Consumers are increasingly dependent on their smartphones, which gives marketers countless opportunities to reach them throughout their daily routines.

Also, since brands continually engage with consumers through social media and other platforms, they can expect a high level of campaign recognition when targeting ads.

Many luxury brands are finding interesting ways to increase click-throughs and post-ad engagement.

For instance, Jaguar of North America leveraged its ongoing British Villains campaign with mobile advertisements on The New York Times, The Wall Street Journal and other publications.

Click the link to read the entire article which includes a quote from Milton Pedraza, CEO of Luxury Institute: http://www.luxurydaily.com/us-internet-advertising-revenues-jump-19pc-in-q1-report/

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June 11, 2014

6 luxury marketing trends to watch

By: Marco Muellner
Luxury Daily
June 11, 2014

For luxury marketers, 2014 is predicted to be the year that tips the scales, with more than half of affluent shoppers discovering, actively browsing and shopping for luxury items via digital channels. This evolution is spurred by shoppers who are online to save time, yet remain likely to finish the purchase in-store.

According to an April 2013 Luxury Institute study on the multichannel purchasing habits of United States Internet users with incomes of at least $150,000, 48 percent of respondents sourced information about luxury fashion online via a computer. Yet only about a quarter actually completed the purchase online.

Also, eMarketer found that a whopping 74 percent of purchases researched on mobile devices are completed in-store.

Which brings me to the first trend to watch:

Mobile
We tend to think of mobile consumers as similar to desktop consumers, but on different devices. This is just not true.

Most mobile time, is, well, mobile. Digital marketers have always struggled to predictably drive offline traffic to retail, but data suggests this is changing.

With more than 70 percent of daily Facebook and Twitter users on a mobile device, digital marketers must think mobile-first.

For luxury marketers this is particularly challenging as device constraints and consumer expectations limit the richness of the experience.

But with skill and creativity, many luxury marketers are embracing the constraints without compromising brand promise.

Understanding the purchase intent journey
We have been trying to figure out what makes people buy as long as we have been selling, but it is a fragmented challenge and capturing the data at every step has been impossible.

We have made a lot of progress thanks to companies such as Datalogix and others and, as a result, luxury marketers are on the verge of the next evolution, having almost completely wired the journey.

The key, like most things in our modern world, is the smartphone.

In this next phase of digital marketing, understanding how and why consumers buy will be essential to attracting the next generation of affluent shoppers.

Click the link to read the entire article: http://www.luxurydaily.com/6-luxury-marketing-trends-to-watch/

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May 30, 2014

Affluents Don’t Want Texts from Luxury Brands

Far more affluents would opt in to luxury brand emails
E Marketer
May 30, 2014

Targeting affluents? Don’t expect to reach them through texts. In Q1 2014, Luxury Institute found that just 17% of US affluent internet users, those with an income of $150,000 or more, had signed up or were somewhat/very likely to opt in to messages from a luxury brand.

Even tech-savvy affluent millennials weren’t interested in luxury brand messages popping up on their phones: Just around one-quarter said they had or would be interested in receiving such communications, a percentage similar to Generation Xers.

Instead, emails may be the way into affluents’ digital inboxes, with 49% of respondents saying they had or were somewhat/very likely to opt in to receiving emails from a luxury brand.

While this wasn’t a majority activity among the entire group, the total percentage was skewed lower by boomers, as over half of millennials and Gen Xers were interested in receiving messages this way.

Either way, digital didn’t appear to play a major role in US affluent internet users’ research or purchase processes when buying luxury items.

Just 22% of respondents said they researched online and then purchased in-store, indicating they may not get inspiration for luxury purchases during digital browsing. Meanwhile, only 15% of respondents researched in-store and then bought online, possibly because they didn’t feel comfortable making expensive purchases digitally—or maybe they just wanted their luxury items instantly.

August 2013 research by Shullman Research Center found that online channels were where US affluent internet users—those with a household income of at least $250,000—felt least comfortable making purchases, with half saying they did not feel OK buying something via a smartphone, tablet or computer. Meanwhile, just 7% said the same about making a purchase in-store.

See article at: http://www.emarketer.com/Article/Affluents-Dont-Want-Texts-Luxury-Brands/1010867/1

 

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May 23, 2014

60pc of affluent Baby Boomers inclined to use social media: report

By: Joe McCarthy
Luxury Daily
May 23, 2014

Generational distances regarding social media use are not as wide as commonly thought, according to a report from the Luxury Institute.

Eighty-five percent of millennials surveyed for the report said they were inclined to use social media, compared to 73 percent of Generation X’ers and 60 percent of Baby Boomers. As luddites become further marginalized, brands must adopt a marketing approach that prioritizes individuals over segments and personas.

“The surprising part for me is that Boomers, Gen X’ers and millennials are all consuming all of these media at some level,” said Milton Pedraza, CEO of The Luxury Institute, New York. “It’s not as if they’re getting left behind. These are all affluent people, and tech savvy.

“Life stage matters tremendously but because of the new age of data, analytics and one to one marketing, we can look beyond the segments to the individuals and market to them,” he said.

The Luxury Institute surveyed 1,200 consumers 21 and older with an annual household income of at least $150,000.

Less boundaries
The report aims to get marketers to reconsider media consumption in general. The dynamic of how consumers “consume” is messier than the laser-drawn segments of millennials, Gen X’ers and Baby Boomers suggests.

Age provides broad indications of consumer behavior, but individual behavior is more granular, rife with the unexpected.

Baby Boomers do watch more television, with respondents averaging seven hours per week, but millennials are also flipping through channels, with these respondents averaging four hours per week. About 70 percent of all segments surveyed watch previously recorded programs on DVR.

“Marketers need to go beyond stereotypes and propensities, and start doing real one-to-one marketing now,” Mr. Pedraza said in a press release. “The data and analytical firepower are there to build relationships, and wealthy consumers, especially millennials, demand it.”

“We have to look at individual needs, lifestyles and life stages and combine something that’s optimal for each person,” Mr. Pedraza said.

See full article with quotes from Milton Pedraza, CEO of Luxury Institute: http://www.luxurydaily.com/60pc-of-affluent-baby-boomers-inclined-to-use-social-media-report/

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May 22, 2014

Choose Your Luxury

One size doesn’t fit all. Today, true luxury in incentive programs is all about customization.

By: Andrea Doyle
Incentive Magazine
May 22, 2014

“Luxury continues to grow,” says Milton Pedraza, CEO of the Luxury Institute, a New York-based independent and objective luxury research company and boutique consulting firm. “It’s growing at a rate of about 10 percent in the U.S. Plus, the luxury market will continue to grow as more people become affluent.” Pedraza references a recent prediction made by Bill Gates who surmises that, by 2035 there will be almost no poor countries left in the world.

Luxury means different things to different people. Pedraza defines it as, “the best of design, the best of quality, the best of craftsmanship, and the best of service. In other words, it’s the best of whatever is being offered in any category.”

Luxury and premium-level brands are natural motivators, he adds. “When a company wants to show its employees they are valued there is nothing that works better than a first-class travel reward or top-of-the-line products. When someone does something special, the reward ought to be special. You want that person to feel incentivized, empowered, and inspired to go on and achieve the next target, goal, or objective. You must reward the best with the best.”

Although luxury goods and travel took a hit in 2009 when the AIG fiasco erupted, that is no longer the case. “The luxury goods market has grown significantly and will continue to grow. The stigma attached to it by some in 2009 is gone,” explains Pedraza.

When a group has the opportunity to personalize a luxury product, it adds to its uniqueness and exclusivity, creating the feeling that you’re having an extraordinary experience, and eliciting the emotion of feeling special.

Customized experiences created for a certain destination or activity have added impact. Gateway Canyons Resort & Spa, edging the Colorado/Utah border and billed as the world’s first and only discovery resort, offers an option for custom cowboy boot or hat fittings during horseback rides, or dinners at Red Cliff Camp. “We have Native American artists who offer beading classes where the spouses have taken home the jewelry that they made,” explains Erik Dombroski the director of sales and marketing. “We also offer a program where a photographer will document a group’s entire event, then edit it, and present a photo montage on the last night of their stay. Companies will then send a customized memory stick or digital picture frame to their attendees with the photos to remember their trip.” Gateway Canyons, created by Discovery Channel founder John Hendricks, features 58 guest rooms and suites, 14 Palisade Casitas and more than 12,000 square feet of event space.

See the entire article: http://www.incentivemag.com/Corporate-Gifts/Apparel-Sporting-Goods/Articles/Choose-Your-Luxury/

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May 7, 2014

The $99,000 Aston Martin: End Of An Era Or New Beginning?

By: Hannah Elliott
Forbes
May 7, 2014

Change has shifted into a new gear at Aston Martin, the 101-year-old bastion of posh British motorsports. And a decade from now the manufacturer of James Bond’s most famous automobile may more closely resemble its counterparts in Munich and Stuttgart than its English forebears.

Last month at the New York Auto Show the company unveiled its 2015 Vantage GT, a 430-horsepower variation of the bestselling Vantage line. What made Aston Martin’s debut so memorable was neither the strength of its V-8 engine nor the pleasing slope of the GT’s hood. It was the sticker shock.

Aston’s latest toy is the first model in decades to cost less than $100,000–in the base version, at least–and is positioned to open up a new customer for the Gaydon-based automaker. The $99,000 Vantage GT will presumably appeal to those who might have previously thought Aston Martin was out of reach.

“We’d like to sell a few more cars, and we believe this will offer an opportunity to broaden our appeal and bring more customers to the brand,” Julian Jenkins, Aston Martin’s president of the Americas, said at the show. (Last year Aston Martin sold 4,200 cars, an increase of 11%.)

The new GT, slated only for North America, is a more athletic version of the Vantage that skips luxury ornamentation and saves buyers $20,000 in the process. It maintains the sleek sculpture, halogen headlamps and interior technological trappings of the main Vantage line (those cars start around $120,000) but offers a new 4.7-liter V-8 engine that gets 10hp more than the standard Vantage and races to 60mph in 4.6 seconds, with a top speed of 190mph. Buyers can choose between a 6-speed manual transmission (an ever increasing rarity) and a 7-speed automated manual gearbox. Sport exhaust and sport suspension come standard.

The Vantage, which was launched in 2005, has been Aston Martin’s most successful line, having sold more than 30,000 units to date–not a lot compared to BMW and Mercedes and not enough to keep Aston Martin exactly flush with cash. (It reported an operating profit of a mere $1.5 million in 2013.) But that hasn’t deterred the company from moving full-speed ahead into new markets. “Vantage was a tremendous success for us,” Jenkins said. “So we wanted to create another really sporty car which would appeal to the sportier buyer.”

The real trick, though, will be to position the new Vantage as a less expensive Aston without making it seem like a lesser Aston. The automaker certainly isn’t chasing the masses, but it is targeting a larger group in order to double its sales.

“You can offer an entry-level product, but you also must revamp and enhance your higher-level offerings as well,” says Milton Pedraza, founder of the Manhattan-based Luxury Institute. “Your upper-tier-level offerings must be extremely competitive, and then you’ve got to throw that halo effect continuously on your entry-level sports car.”

Click the link to see the entire article: http://http://www.forbes.com/sites/hannahelliott/2014/05/07/the-99000-aston-martin/

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May 4, 2014

Derek Lam Believes in Fashion for the Masses He’s part of a breed of hot designers making luxury more accessible

By: Emma Bazilian
ADWEEK
May 4, 2014

Derek Lam remembers a time when it would take years before an apparel brand was established enough to spin off a secondary line aimed at catering to the masses.
But Lam, one of the hottest designers around, is not a man who likes to wait.
He is one of a breed of contemporary fashion stars—including Alexander Wang, Jason Wu and Prabal Gurung—for whom accessible luxury is not just an afterthought but part of their DNA.

“Traditionally, the plan would have been to just stick to high-end,” Lam explains one April afternoon at his company headquarters and studio near New York’s Madison Square Park. “But I went into it saying, ‘I want to do as many different levels as possible because I want to reach a wider audience.’ It used to be that designers could sit and wait for the audience to come to them—now, they have to go to the audience.”

Lam’s lower-priced 10 Crosby line bowed in 2011, eight years after his runway debut. Lam made sure to adhere to one of the crucial tenets of a successful diffusion line: maintaining a brand identity. “I think that before, designers would do secondary lines that were maybe more derivative of their main collections,” he says. “I recognized that 10 Crosby couldn’t be just a knockoff of what I was doing [at Derek Lam]. So when we started marketing the line, we built an ideal of this 10 Crosby woman, and that was really key.”

With dresses in the $400 to $700 range, 10 Crosby is not cheap. But compared to the $3,000 to $4,000 dresses in the core Derek Lam line, it’s practically a steal. As a result, 10 Crosby is growing considerably faster than its pricier parent, says Derek Lam International CEO Jan-Hendrik Schlottmann. The number of stores carrying 10 Crosby has increased 150 percent in the last year, and the brand recently expanded into footwear. “I think the overall potential is much larger because you can sell in places where you can’t really sell [the main] collection,” Schlottmann says. As sales of luxury goods have slowed for companies like Louis Vuitton and Gucci, business has been booming further down the price ladder.

Michael Kors, which launched in 1981 and has steadily grown its lower-priced offshoot Michael Michael Kors over the last decade, enjoyed a wildly popular IPO in 2011 and last year racked up $2.2 billion in sales. Kate Spade, which lost some of its luster following a sale to Liz Claiborne in 2006, underwent a major revamp as an aspirational lifestyle brand and is now looking at a near 70 percent year-over-year bump in its stock price, on top of $1.3 billion in sales for 2013. (Incidentally, Liz Claiborne sold its namesake brand and renamed itself Kate Spade & Co.) Meantime, Tory Burch, the decade-old brand rumored to be heading toward its own IPO, is valued at some $3.3 billion.

“A smart designer understands the importance of developing a business that’s profitable but without losing that creative spirit and losing that dream of what the runway is really about,” says Milton Pedraza, CEO of the Luxury Institute, a research and consulting firm. “They know that they need to often embrace the idea of the secondary lines to help fuel the financing of their main collection.” Consider Victoria Beckham. In 2011, the entertainer-turned-designer added a diffusion line, Victoria Victoria Beckham, to her then two-year-old main collection. Within a year, the success of the secondary label helped put her company in the black for the first time.

Of course, accessible luxury also continues to be an important enterprise for more established brands. Helmut Lang, Catherine Malandrino and Balmain have all launched diffusion lines in recent years, while Valentino has pushed its previously under-the-radar Red Valentino line. Another diffusion makeover is under way at Marc Jacobs. Last year, the designer left his post as creative director at Louis Vuitton to concentrate on both his high-end line and the more youthful Marc by Marc Jacobs, whose sales account for the majority of company revenue.

Another key factor in the growth of this space is the influence of millennials. “Young consumers are looking for quality and design, but they’re also looking for ‘new,’” says Pedraza. “They’re much more open to new and affordable brands than baby boomers.”

Considering their proximity to fashion, consumers are under more pressure to compete in the fashion space. “Even though we say we’re not a class-conscious society, this is a very status-conscious society, and these brands help elevate people who may not have a lot of money but want to show off these accessible luxury brands,” explains Pedraza. “They want that stature that comes with these products as well.”

There can be a downside to becoming too accessible, however. Flooding the market takes away from the feeling of exclusivity that makes luxury brands seem special in the first place. “Ubiquity does breed some backlash,” says Pedraza. “The problem with luxury retail is that you often don’t know where the line is until you’ve crossed it.”

See full article with quotes from Milton Pedraza, CEO of Luxury Institute: http://www.adweek.com/news/advertising-branding/derek-lam-believes-fashion-masses-157455

 

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