Consumer Lab

MediaPost Publications - Luxury Shoppers Migrate Toward The Web - 07/21/2008

A new poll from the Luxury Institute finds that Americans with annual incomes of at least $150,000 are more likely to research luxury purchases on the Web.

Once seemingly invincible marquee chains like Coach, Starbucks and
Abercrombie & Fitch are settling for ho-hum growth this winter.

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Major Retailers Feel the Squeeze From Consumers - New York Times
As the nation’s merchants began poring — or weeping — over holiday sales receipts Wednesday, a surprising pattern emerged: even brands that for years have inspired the undying devotion of shoppers felt the pinch of tightening wallets.

Once seemingly invincible marquee chains like Coach, Target, Starbucks and Abercrombie & Fitch are settling for ho-hum growth this winter, after surpassing even the most rosy expectations season after season.

Though they sell very different products, at very different prices,
these companies all shared the same bragging rights. Their customers
considered them indispensable, even expressions of who they were.

But in this turbulent economy, the indispensable is becoming disposable.

More than 200 new prestige perfumes–those sold in department stores and
cosmetics shops, rather than drugstores or supermarkets–were unveiled in the
U.S. in 2006, according to NPD Group. But sales of these high-end
perfumes–which make up 60% of the overall fragrance market — have been
slowing. Total revenue is expected to grow less than 3% globally this year,
according to Euromonitor, while the overall luxury goods sector is up by about
12%.

The reason is olfactory overkill. To lure consumers, perfume brands
have mounted huge advertising and distribution campaigns, selling perfumes in
their own boutiques as well as in department stores and airport duty-free shops
world-wide. They have also kept prices low; while high-end leather bags and
sunglasses have steadily risen in price, most designer perfumes still cost less
than $100.

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Why the Perfume Business Is Beginning to Stink - WSJ.com
PARIS — After years of gorging on celebrity scents and fashion-house fragrances, consumers are turning up their noses at designer perfumes.

“The offer is so enormous, you get lost going into a perfume shop,” says Daniela Andrier, a perfume-maker at Swiss fragrance company Givaudan SA. “It’s like eating off a plate with too much food and you lose your appetite.”

Over the past few years, exclusive fashion brands such as Prada, Gucci and Hermès have been churning out new fragrances as a way to ensnare consumers who can’t afford their $5,000 bags, but will splurge on a $100 bottle of “eau de toilette.” Celebrities such as Jennifer Lopez and Celine Dion have also unveiled eponymous fragrance lines.

High-end retailers are installing concierges in the race to attract customers and set themselves apart.

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Latest Luxury: The Store Concierge - WSJ.com
Not long ago, Mark Krug, a concierge at the Rosewood Mansion on Turtle Creek, dealt with a panicked hotel guest who had arrived at 10 p.m. in an irreparably ripped pair of pants.

The executive had an important business meeting the next morning and needed new slacks to match his suit jacket. Mr. Krug knew exactly what to do. He dialed the cell phone of the concierge at the Dallas store of luxury retailer Barneys New York. The concierge, Gary Jackson, who goes by the name Jackson, opened the locked store, scooped up some potential selections and brought them to the hotel by 11 p.m.

For dealers that sell the three top luxury brands — Lexus, BMW and
Mercedes — building palace-like showrooms is also just about the only
way to grow. Many of these dealerships offer services such as manicures, coffee bars, massage chairs and other luxurious amenities to draw in super-rich customers.

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Luxury-Car Sellers Put on the Ritz - WSJ.com
For many people, a trip to the auto dealer means a mind-numbing hour or two in a plastic chair with some tattered magazines and stale coffee.

But some major auto retailers are starting to change that, at least for buyers and owners of luxury vehicles. In the past year or so, several dealership chains have begun giving their luxury-car showrooms multimillion-dollar makeovers. The goal is to create the look and feel of five-star hotels for customers, increase the dealerships’ car allocations and even make it less likely that rival dealerships will pop up nearby.

Many luxury brands, known for their focus on women, are hoping to spur
sales by luring male shoppers with new stores and product lines.

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Male Bonding - WSJ.com
While Christmas shopping recently, Stuart R. Gelles stopped in a Louis Vuitton store in New York in search of a handbag for his wife. Instead, he found himself lingering in the men’s department, where he bought a $1,330 briefcase-style bag for himself.

“I never thought I would be looking for something for myself,” says the 50-year-old professional-development coach, who was surprised to see so many men’s items. He says he’s returning to the store to buy a gift for his wife.

A more stable selling environment and rational pricing bodes well for store
profitability. “We also saw a significant change in the composition of what was
selling-there were a lot more lower-dollar-value items than we’ve seen in
previous years, and a lot of accessories,” says an NPD analyst, “and those tend
to be a little more profitable.”

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MediaPost Publications - Report: Shoppers Losing Their Appetite For High-End Toys - 12/06/2007
BASED ON THE FIRST READING of holiday sales of consumer electronics, consumers seem to be losing some of their tech enthusiasm.

Total spending on electronics gained just 6%–to $2.2 billion–in the first week of the holiday season, compared to a gain of 12% in the same period a year ago, reports The NPD Group. And it’s the first time in the six years that NPD has tracked this point-of-sale data that dollar-sales growth has dipped below double digits.

Men are becoming increasingly comfortable with the expertise they’ve gained buying women’s jewelry “and are now willing to use that expertise on themselves.” In addition to cufflinks and tie bars, says Saks Fifth Avenue, sales of bracelets and necklaces have been strong, as have ring sales, reflecting a rise in gay marriages.

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MediaPost Publications - High-End Marketers Push Higher Men’s Jewelry Sales - 12/05/2007
BEEN NOTICING A LITTLE MORE bling in your weekly sales meetings? A new report from Unity Marketing says that’s because sales of men’s fine jewelry is hot, doubling to $6 billion from 2004 to 2006. While that still accounts for just about 10% of the total jewelry market, says Pam Danziger, president of Unity, “it’s becoming too large a market for most companies to ignore.”

Fueling the gains, she says, is “a return to more formal business attire, with men wanting to buy tie tacks and cufflinks. It’s not all about watches anymore.”

The Luxury Institute, which specializes in reviewing high-net worth marketing
trends sees several trends for the upcoming new year.

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To Reach Upscale Consumers, Upscale Customer Service is Essential
If you want to reach upscale consumers with luxury products, be prepared to go above and beyond the typical call of duty. The Luxury Institute, which specializes in reviewing high-net worth marketing programs, sees several trends for the upcoming new year.

Here are some predictions on the luxury trends for 2008:

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News: Eight key luxury retail trends for 2008 - Customer loyalty, customer retention, and customer relationship marketing daily news and information - free, unbiased news for the marketing executive or researcher.
The world of luxury consumerism and luxury retail is changing at an impressive pace, according to the latest report from the US-based Luxury Institute, which has compiled a list of the top luxury retail trends that are expected to characterise the market during 2008.

According to Milton Pedraza, CEO for the Luxury Institute, the main trends will be:

1. Old guard passes the baton to a new generation
   Throughout Luxurydom the founders, family members and their trusted
   lieutenants who built the grand luxury behemoths and boutiques alike
   have begun to retire, to sell, and consider family legacy and
   philanthropy. The new generation of leaders who will inherit these
   brands must not seek to merely replicate old business models. Attend
   luxury conferences and you hear the same old messages, strategies and
   tactics, with lively debate on whether or not to sell to the masses, or
   on the internet. Attend a Silicon Valley conference and you will
   understand that the luxury industry lives in another world, detached
   from its consumers (who have already moved beyond Web 2.0 and into
   community). As a result, expect innovative luxury leaders to take the
   leap into new worlds.
    
2. Luxury rediscovers great service as a differentiator
   As economic slowdown in the US impacts the luxury industry,
   particularly those who sell to the affluent masses, luxury firms will
   rediscover or perhaps discover, that mainstream millionaire consumers,
   not just celebrities and heirs, require great service to earn their
   loyalty. With so many luxury categories inundated with brands vying for
   the attention of the same consumers, luxury CEOs will begin to allocate
   resources to continuously train their well-intentioned, but generally
   unskilled, salespeople and customer representatives who must prove
   competence and trustworthiness to discerning customers. Luxury
   Institute surveys show 29% of wealthy consumers have had a problem with
   a luxury firm that required resolution in the past year. Ironically,
   getting luxury firms to admit to problems was one of the biggest
   problems.
    
3. The luxury access revolution, phase three
   A few years ago, the Luxury Institute predicted the advent of the
   “Luxury Access Revolution” - an accelerating phenomenon at every price
   point on the luxury-spend spectrum. Jets, yachts, vacation homes,
   autos, vineyards, golf clubs, even typically less pricey items such as
   handbags, jewellery, and watches, were embracing membership - all
   selling variety, convenience and utility, without the hassles of
   ownership. The organisation also predicted that brash entrepreneurs
   would drive the first phase of innovation to be eventually overrun by
   better-capitalised luxury brands. Right on cue, in 2007, many
   entrepreneurial providers of these membership models merged,
   consolidated, or disappeared. Next, top luxury brands and original
   manufacturers will take over, leveraging their trusted brands,
   synergistic offerings, fixing flawed business models, providing
   direly-needed transparency, and using vast resources to legitimise
   these access models for the mainstream affluent and the wealthy. For
   all those savvy millionaires waiting on the sidelines, it may finally
   be time to become a member.
    
4. Beyond concierge services
   It seems that these days everyone provides concierge services, along
   with their product or service. From credit card companies to private
   banks, concierge services are the rage. Well, expect these
   commoditized, low-margin services to begin to morph into high-fee,
   high-value consulting services, worthy of the name. Companies such as
   Quincy Consulting Group are reshaping the industry, applying a
   McKinsey-like model to serving the seamlessly personal and professional
   needs of the wealthy. While they will not manage your assets, they will
   handle many critical needs beyond the basic restaurant and theatre
   reservations call-centre model. They will, for example, plan a wedding,
   charter a mega-yacht; find a trained nanny, a competent wealth manager,
   a trustworthy art dealer, and so on. They will bring in specialists to
   help execute each task, and manage the project. Most importantly, they
   will do so in an objective, independent manner not been typical of most
   concierge firms, which have created conflicts of interest by steering
   clients to “preferred” suppliers. Concierge services will never be the
   same again.
    
5. Philanthropy industry shake-out, phase two
   Bill Gates and Warren Buffet’s entry into big-league philanthropy did
   not just create the “alms race” that was predicted by The Luxury
   Institute. Their participation, and the trend they started, have
   brought with them great media attention, and a level of accountability,
   that has lifted the veil to expose the incompetence and, sometimes
   dishonesty, that plagues a large segment of this tax-sheltered
   industry. What these icons of efficiency have done is to bring upon
   charities a level of scrutiny and transparency that will force out bad
   apples and eliminate conflicts of interest. New transparent models of
   philanthropy, often web-based, will accelerate the trend so that the
   neediest can benefit from this generosity.
    
6. Luxury brands to embrace communities of raving fans
   If any brands have truly devoted, emotionally invested fans, it is the
   luxury brands. However luxury firms, many of which are trapped in
   traditional media, have failed to listen to, engage, and create a
   community dialogue among their most ardent fans (read: customers;
   current and future). Could it be because when you inspire fans to have
   a sincere dialogue online, and make it transparent and public, you tend
   to lose the level of brand control that you had before? You have to
   earn the right to facilitate a community dialogue with good,
   old-fashioned trust. Giving up control to communicate honestly with the
   customer community is exactly what leading luxury brands will do. By
   creating a community of fans, and listening to the good, the bad, and
   the ugly, and then acting on it, the best luxury brands will begin to
   enhance the experiences of their customers in ways loyal customers
   want, and will begin to co-create products that their customers desire.
   That will be extremely hard for many luxury brands to do. Expect more
   than a few to wither.
    
7. Mass scalability is hard without a good service experience
   It seems that those luxury brands racing to transform themselves into
   affordable luxury (a contradiction in terms, by the way) by making
   deals with mass retailers, have forgotten that their business model is
   not just about stamping out more luxury “widgets”. Quality production
   may be scalable when you serve the masses, but which ones have
   forgotten that part of the experience of luxury is the great,
   over-the-top, personalised service? Walk into any mass retailer and
   indulge yourself in the service levels they provide. That may not be
   the service level you want your luxury brand name to be associated with
   because, in a transparent world, consumers tend to share and rate their
   experiences and define your brand for you. Expect some luxury brands to
   head back toward Madison Avenue to try to recover damaged reputations.
    
8. Luxury retailers eliminate marginal brands
   Top luxury retailers (such as Nordstrom, Neiman Marcus, Barney’s,
   Bergdorf’s, and Saks) have long prided themselves on being expert
   guides to luxury for their wealthy customers. But brands such as Vivre
   have created inroads by becoming curators, delivering connoisseurship,
   and a higher level of consistently unique and exclusive offerings.
   Next, expect retailers to go up-market and start to eliminate
   marginally luxurious product lines as they embrace and experiment with
   unique, new designers who wish to remain bespoke. Luxury retailers will
   earn their curatorial stripes with their wealthy customers once again.

The Luxury Institute is an independent ratings and research institution
that presents marketers and retailers with the “voice of the high
net-worth consumer”. The institute publishes several publications on
luxury trends, high net-worth consumer rankings, ratings of luxury
brands, and best practices.