cushion - Luxury Institute

the
Luxury
cushion:
PaddingYourIncomePortfoliowithHigh-EndSales
Inashakymarket,whenmany
retailersfearlosingtheirgrip,
thosewhocatertotheaffluent
couldlandonaplushpileof
revenues.Here,discoverthe
keystounlockingthewallets
ofthewealthy.
Luxury, as a category, has
the good fortune of setting the
bar. An aspirational space, luxury
is sought by many, attained by
some and a way of life for a select
few. Jewelry and accessories, a
longtime luxe staple, are approximations of royalty for consumers
and a goldmine for savvy retailers.
To appeal to the wealthy, the first task is to crystallize an image of
who they are and what they want. Then, make them an offer they
can’t refuse.
Luxury Personified
Know thy customer – and her bank balance. The golden measure for affluence is a household income of $250,000 to $500,000.
Eighty percent of wealthy consumers comprise this group. “These
are highly educated and discerning consumers who have sacrificed
to become self-made millionaires,” says Milton Pedraza, chief exec-
utive officer of the Luxury
Institute, a leading consultancy.
“They want value for money, and
brands that make them be seen
as special and feel special.”
Most of the affluent are
married, which is why household
income is a stronger vital sign
than individual earnings. “They
tend to be dual-income couples,” says Pedraza. “And in almost onethird of these couples, women earn more than their spouse these
days, so they have their own economic power.”
Admission into the foyer of wealth generally requires $100,000
in yearly income. By this standard, 20 percent of U.S. households are
wealthy, with the highest concentration in the South, according to
the Bureau of Labor Statistics. Many, including Pedraza, argue that
$150,000 is a more accurate base. But the six-figure mark is relevant
for tracking fashion, rather than pricier purchases like real estate or
yachts. continued on page 47 »
Luxury consumers can be divided into three
basic groups, according Milton Pedraza of the
Luxury Institute. These generalized profiles can
help you tune into customer mindsets to tailor
effective promotions.
Empty Nester: Baby Boomer couple, over 55
• Worth more than $10 million,
$500,000+ income
• Resilient to economic shifts
“This group will continue to buy luxury not only
because they have effective demand, but because
their life clocks are ticking.And they understand
that after years of sacrifice building their business,
they better enjoy life right now.”
The Joneses: Married with kids,
in their 30s and 40s
• $1–10 million net worth, $300,000+ income
• Focused on long-term wealth building
“They have children at home, and many have
aging parents who need financial assistance.
While they are very strong luxury consumers,
in times of uncertainty they will throttle back
spending. Not dramatically, but enough to affect
luxury growth rates.”
Upwardly Mobiles:Young, single,
career-minded urbanites
• Low or no net worth, income
around $150,000
• High living costs, stretched to buy luxe when
job and wealth were on upward spiral
“These educated and rational consumers scale
back as job prospects dim, and they see their
wealth accumulation slow or decline, especially in
their first real asset: real estate.Although they
were not the biggest spenders by far, there were
many more of them trading up, and their dramatic
cutbacks also affect luxury growth rates.”
Images courtesy of Andrea Barnett,
Dori Csengeri, S & A, Sorrelli
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June 2008 AmericasMart®Atlanta
45
FASHIO
ELRYFASHIONACCESSORIES&FINE JEWELRY
Stratifying theWealthy
FASHIONACCESSORIES&FINE JEWELRY
.Toappealtothewealthy,the
firsttaskistocrystallizeanimage
ofwhotheyareandwhatthey
want.Then,makethemanoffer
theycan’trefuse.
FASHIO
» continued from page 44
Skyrocketing upward are the stratospherically rich, the world’s
946 billionaires whose average net worth was $3.6 billion in 2007,
according to Forbes magazine.They have amassed and secured their
wealth to be unsinkable in the face of an economic tidal wave.These
elites dominate the largest sum of money in the luxe market (and
the globe). If you are selling to them, you are likely selling to them
exclusively.
Consumption of the Crème de la Crème
No matter how you slice the luxury pie chart, fashion accessories and fine jewelry is an iconic category. The Luxury Institute
reaches out to ultra-luxe jewelry buyers with a minimum net worth
of $5 million and $200,000 income. Drawing from their insights,
Pedraza explains how FAFJ retailers can impress the most demanding and rewarding of customers.
• Customize and brand.
“Wealthywomentodayarelookinglessfortrendy
products.Theyarelookingforpiecesthatare
unique,exclusive,one-of-a-kindandlimitededitions[...]Theyarelookingforlasting,classicvalue.”
Last year’s top two holiday sellers were custom-made and
designer brands, according to National Jeweler. Sales were strong,
despite the sour economy, weak dollar and high price of metals.
“Wealthy women today are looking less for trendy products.
They are looking for pieces that are unique, exclusive, one-of-a-kind
and limited editions, so that not everyone they know can access the
same piece, and so that the pieces will hold their value,” Pedraza
says. “They still prefer branded pieces so the prestige value will be
there. They are looking for lasting, classic value.”
• Be a curator.
Luxury shoppers are purebred brand specialists. Pedraza suggests guiding them through your store like a museum.“Letting them
in on how the product is created, the history and the details makes
for smarter and more engaged customers,” he says. “The more education the client receives – especially ‘new money’ – the more they
are likely to justify the purchase.”
Like fine art, when sourcing luxury product, the country of origin plays into the value equation for many buyers. Goods from the
United States, Italy, France and Germany are most trusted by luxury consumers, according to Unity Marketing.
“Specialty retailing is not just about product. It’s about creating extraordinary customer experiences for clients,” says Pedraza.
“And extraordinary experiences are often about executing the fundamentals of retailing service extraordinarily well.” ::
Luxe Shopping List
As for what drives spending, consumers
earning $250,000+ ranked their preferences:
Milton Pedraza is CEO of the NewYork City based Luxury Institute, a research firm and
marketing consultancy specializing in luxury. Find out more at www.luxuryinstitute.com,
or reach Pedraza at 646-792-2669. For a fine collection of FAFJ product, visit Floors 6, 7
and 8 of Building 3.
• Handbags are the leading splurge, with price
points commonly at $500+
• Shoes are what they “can’t live without,”
and 80 percent have spent $150+ on a pair
• 95 percent prefer quality and expect to pay
a premium for it
• Nearly half prefer boutiques over department
stores for the personalized experience
• Flexible return policies are the most
important factor when deciding where to shop
• Top-rated reason for why they splurge:
“Because I can afford to.”
Source: Global Strategy Group and Women’s Wear Daily, 2008
• Get personal.
“Having a dedicated person to care for you and serve you longterm, maybe the owner in the case of a small shop, makes a client
feel special,” says Pedraza. “They relate to a person who is knowledgeable and highly trustworthy. Fail to deliver those two attributes,
and you are out.”
Close contact with preferred customers creates an invaluable
context for selling. “Having a history of a client’s needs and desires
allows you to cross-sell and up-sell naturally,” he says.
• Live to serve.
Service is the fastest-growing sector in luxury, while products
are perceived as ever-more commoditized. Capitalize on this trend
by offering impeccable, customer-centric service. Invite high-rollers
to private celebrations in the store, offer them special gifts or take
them out to dinner. Most importantly, always be ready to accommodate their needs and over-deliver.
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AmericasMart.com
Images courtesy of Cynthia Gale, Dori Csengeri,
S & A, Sorrelli, Andrew Hamilton Crawford
“Theywantvalueformoney,andbrandsthatmake
thembeseenasspecialandfeelspecial.”
June 2008 AmericasMart®Atlanta
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ELRYFASHIONACCESSORIES&FINE JEWELRY
Courting Big Spenders
FASHIONACCESSORIES&FINE JEWELRY
Though not impervious to the market, luxury consumers spend
more than any other segment, despite woes on Wall Street. “There
are several layers of wealth out there that respond differently to
economic booms and busts,” Pedraza says. Luxury spending is cyclical.While currently on the downward slope for the moderately affluent, he assures it is destined to spike back up. In the meantime,
stores that give customers something inimitable can bank on a
solid future.