November, 2011 – This article from The Wealth Report of The Wall Street Journal discusses expectations that the richest 1% of Americans will spend about 2.3% more than they did last year on their holiday shopping. ( http://blogs.wsj.com/wealth/2011/11/29/what-the-1-want-for-the-holidays/?mod=google_news_blog )

By Robert Frank

The excesses of the 1% are now universally scorned – except when it comes to spending season.

Since the economy is so dependent on consumer spending, and consumer spending is dependent on the wealthy, the spending of the wealthy will be critical for a strong fourth quarter and possible recovery.

Early reports are mixed, depending on wealth and income levels. According to Harrison Group and American Express Publishing, consumers who make between $100,000 and $250,000 are expected to spend 17% less than they did in 2010.

Those with discretionary income of $250,000 or more, however, plan to spend 7% more than they did last year, the study found.

The American Affluence Research Center expects the richest 1% to spend about 2.3% more than they did last year. That increase comes despite (or perhaps because of) the unusually pessimistic outlook of the 1%.

“The wealthy can afford to brighten their lives by buying nice things to offset the gloomy environment,” Kurtz told CNBC.

What kind of bling are they buying to brighten things up?

According to Kurtz, the most popular gift that all income groups want to receive is money, either in the form of gift card, check or gift certificate. Ranking second was clothing. Among those worth $800,000 to $1.49 million, the third most popular gift is an iPad or similar tablet computer. For the $6 million or more crowd (the real one-percenters), the second most popular gift is books or CDs.

Fine jewelry was more popular with the affluent than the one-percenters (only 2% of the one-percenters want jewelry this season, compared with 8% for the affluent). Yet the one-percenters are twice as likely to buy sport equipment.

If that sounds overly modest, perhaps that’s because the survey didn’t include “G650″ “Feadship” or “Mulsanne” as gift options.

What do you think the 1% want this Christmas?

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November, 2011 – This Consumer Nation article on CNBC.com discusses the holiday spending projections for the affluent and their current mood concerning the economic situation. (http://www.cnbc.com/id/45278612/)

By Christina Cheddar Berk

Wealthy Americans may appear to the masses as a unified group, but there is divergence in the attitudes of the rich toward holiday spending this year — which means that the key to how the holiday season unfolds may rest in the hands of the wealthiest.

Affluent households, or those who represent the top 10 percent of American wage-earning households, are expected to account for 23 percent of the total 2011 holiday spending this season, according to Harrison Group, a market research firm.

Here’s the surprise: Although forecasts are calling for average — or in a few cases, above average — gains in holiday spending, gift-giving budgets of affluent families are down, according to Harrison’s research. However, among the wealthiest of the wealthy spending is projected to be higher.

The data collected by Harrison Group and American Express Publishing from 769 affluent Americans with discretionary household incomes ranging from $100,000 to more than $1 million dollars. It projects an overall decline of $1.04 billion, or a 6.1 percent drop, in plans to give gifts among affluent and wealthy families compared with 2010.

The decline in spending is being led by the consumers who make between $100,000 and $250,000. Those in that income bracket are expected to spend 17 percent less than they did in 2010, according to the study. On the other hand, those at the very top of the income spectrum, with discretionary income of $250,000 or more, plan on spending 7 percent more than they did last year.

Those who are cutting back are not doing it because they are worried about their economic situation, according to Jim Taylor, vice-president of Harrison Group. Instead, he suspects the shift reflects a change in priorities over the last few years, resulting in less emphasis on material goods.

A More Meaningful Christmas

“We’re a lot more mature as a society,” Taylor said. This means there is a desire to have a more meaningful holiday season, with the focus on spending time with the people they care about versus giving or receiving gifts.

“Expressions of happiness are being increasingly decoupled from the desire to acquire more and more things,” he said.

The American Affluence Research Center, which specializes in surveys and mailing lists of the affluent, also found that the wealthiest one percentile of households by net worth will be a pocket of strength this holiday season. The group expects the affluent as a whole to spend about 2.3 percent more than they did last year.

But the AARC is not seeing the same level of happiness that turned up in Taylor’s research. Instead, the group, which also polls a sample of the wealthiest 10 percent of U.S. households by net worth, discovered a record-low outlook for current business conditions and the 12-month outlook for the economy in their fall survey.

But Ron Kurtz, the center’s president, said the glum mood might encourage more spending.

“The wealthy can afford to brighten their lives by buying nice things to offset the gloomy environment,” Kurtz said.

Luxury Sales Seen Higher

If that is true, it would be good news for online sales, department stores and luxury goods.

Craig Johnson, president of retail consultancy Customer Growth Partners, expects sales of luxury items will rise 12 percent this holiday season, with strength in apparel, accessories such as handbags, and jewelry.

This is one factor in Johnson’s overall opinion that holiday sales will be much stronger than many industry analysts are expecting. (He is expecting retail sales to rise 6.5 percent from last year, which if true would be the best growth since 2004. This compares with the National Retail Federation’s forecast of 2.8 percent increase in holiday sales.)

But luxury sales also are being helped by a new crop of consumers who had previously not spent on luxury at all, but have been responsible for driving a significant portion of luxury spending growth this year, according to Ed Jay, senior vice president of American Express Business Insights.

These luxury newcomers make up about 61 percent of all luxury consumers and are responsible for 36 percent of all luxury spending, Jay said. By contrast, the active luxury spender, who is most likely a baby boomer, was responsible for 68 percent of all luxury spending, and when the recession hit, 25 percent of these consumers stopped spending, he said.

Also, the average consumer has been trying to spend more up-market and that has helped the luxury goods market, Jay said.

And that points to a growing perception that affluence doesn’t mean what it used to. An affluent consumer may not be someone who has enough expendable income to buy more goods; it may be a person who is so dedicated to a particular category that they are spending on those goods.

We’ve seen this behavior during the recession, as consumers cut back on nearly everything —but some still found the money to buy new gadgets such as iPhones and iPads.

All this means that if affluent consumers do focus more on experiences rather than goods, the luxury market still may see a strong holiday.

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November, 2011 – This Luxury Daily article discusses the rise in luxury men’s apparel (http://www.luxurydaily.com/why-the-scramble-for-luxury-menswear/).

By Rachel Lamb

At one point taking a backseat to the much-more-hyped women’s apparel, luxury menswear is now the most quickly-rising and lucrative segments of the industry, causing female-centric designers to pay more attention to the other half of the population.

Notable companies and brands such as PPR, Christian Lacroix and Net-A-Porter have been honing in on menswear, bespoke goods and tailors. Why the sudden interest in luxury menswear?

“Men are becoming more fashion-conscious as the media shows how celebrities are exhibiting different fashion styles,” said Ron Kurtz, president of American Affluence Research Center, Atlanta.

“Participation in menswear can add value to a brand by extending its product line and base of customers, both of which can contribute to increased sales,” he said. “Menswear can enhance a brand’s relations with the channels of distribution that feature both women’s and men’s fashions.”

Mad for fashion
The reason why menswear is booming is still out for verdict, but experts have a few hypotheses.

“Brands are getting into luxury menswear because of the perception that it is an under-served area,” said Paula Rosenblum, managing partner at RSR, Miami. “Men are generally not as price-sensitive as women and they just want something that works for them.”

Another possibility is media influence.

Indeed, fashion-savvy men on television, in movies and on the red carpet could get consumers’ creative juices flowing.

For example, retailer Banana Republic based an entire collection off of the popular TV show Mad Men.

Well-tailored suits, ties and an overall “done up” look was brought back when men realized they could look like Don Draper and let go of grunge.

Another fashion guru could likely be Chuck Bass from Gossip Girl who has a penchant for velvet blazers, bowties and pocket squares.

Of course, the ever-growing infatuation with celebrities’ apparel and accessories on the red carpet is broadcast across the Internet and on TV, burning images of well-coifed gentlemen into watchers’ minds.

Further possibilities for the sudden surge in menswear could include the end of casual Friday and the rise of the metrosexual, according to Ms. Rosenblum.

Mr. Tailored
Luxury brands are definitely noticing this trend and are using menswear as leverage to entice affluent consumers.

For example, early last week, luxury conglomerate PPR announced its intent to acquire men’s fashion label and tailor Brioni.

On Wednesday Nov. 9, PPR chairman/CEO François-Henri Pinault said that Brioni’s acquisition makes a lot of sense for the conglomerate, especially since the growth in menswear is significantly stronger than in women’s fashion.

Since PPR has a multitude of either women-focused brands such as Alexander McQueen, Stella McCartney and Boucheron, or men-and-women-split brands such as Gucci and Bottega Veneta, its planned acquisition of Brioni makes it clear that the conglomerate is aiming to get into menswear.

In addition, label Christian Lacroix announced intent create tailored men’s clothing including suits retailing $1,000 and up, according to a report from Women’s Wear Daily.

Other brands that have primarily focused on women’s clothing are also focusing on menswear as of late.

Gilt Groupe ditched flash-sale sites in June to launch its first full-priced mens retailer Park and Bond in a partnership with Conde Nast’s GQ magazine (see story).

Furthermore, online retailer Net-A-Porter launched a men’s ecommerce destination Mr. Porter earlier this year that has seen momentous success (see story).

Even department store Bergdorf Goodman is using social media as a way to connect with males with its “What I’m Wearing” feature on Facebook that chooses one employee to take a picture of and describe each outfit of the work week once a month.

“The luxury shopping is [changing],” Ms. Rosenblum said. “I think dress styles among the population shift over time and luxury is no exception.

“We’ve come out of a 25-year period of ever-more casual dressing back to a point where dressing well is considered appropriate,” she said. “Men are bored with the plain suit and traditional tux.”

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November, 2011 – This Luxury Daily article discusses the affluent community’s attraction to the Breitling American Tribute Watch promotion to honor U.S. troops (http://www.luxurydaily.com/breitling-honors-veterans-with-limited-edition-watch/).

By Rachel Lamb

Swiss watchmaker Breitling is celebrating the United States’ armed forces with a limited-edition American Tribute Watch, of which only 50 will be produced.

The brand will be donating all proceeds from the American Tribute Watch to the Fisher House, a military-oriented charity. The watch will be sold only in New York and Florida.

“Breitling wanted to pay special tribute to U.S. troops this Veterans Day, so the brand created the limited-edition American Tribute Watch,” said Thierry Prissert, president of Breitling USA, Wilton, CT.

Fisher House is an organization that builds homes to provide free, temporary housing to families to service members needing medical care across the country.

About face
The American Tribute Watch is based on the Breitling Chronomat 44 watch. It features Caliber 01, the watchmaker’s movement.

Each of the 50 pieces are individually numbered and have an etching on the back of the watchface that reads, “Breitling for America. United We Stand.”

The watch will retail for $8,960 and is available only in Breitling’s New York and Aventura, FL boutiques.

“This promotion will stimulate positive media exposure for Breitling at a time leading into the holiday gift season, which is an important time for selling watches,” said Ron Kurtz, president of American Affluence Research Center, Atlanta.

“[Also], it will strengthen Breitling’s image as being a patriotic supporter of veterans,” he said. “The exclusivity of limited-edition products contributes to a perception of luxury.”

Mr. Kurtz is not affiliated with Breitling, but agreed to comment as an industry expert.

Breitling has been closely linked with the armed services, specially aviation. This has enabled Breitling to count on this professional advice in designing products to military standards of functional excellence and reliability, according to Breitling’s Mr. Prissert said.

However, this timepiece is to celebrate all veterans, not just the United States Air Force, according to Breitling.

CSR for CRM
Breitling’s veteran-inspired watch makes sense since the company is intertwined with aviation for some time now and prides itself on designing products made to withstand extreme air, water, wind and atmospheric pressure.

Many Breitling customers are extreme athletes whose hobbies or professions include aviation and deep-sea diving. Actor John Travolta, himself a passionate aviator, also models for Breitling.

That said, it is entirely possible that a chunk of Breitling’s customer base have, or have family members who have, been part of the armed forces.

Breitling is committing to its customer base by engaging them in an area that it believes will target the greatest number of people.

“Segments of the affluent community will be attracted by this promotion,” Affluent Research’s Mr. Kurtz said. “Retired military officers, affluent people who have served in the military and affluent people who are very patriotic will be among those favorably disposed by this promotion.

“[Additionally], some in the affluent market will want to wear and proudly display such a watch as a conversation piece,” he said.

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November, 2011 – This Travel Weekly article features AARC research about how the affluent plan to increase their cruising plans for 2012 (http://www.travelweekly.com/Cruise-Travel/Wealthy-consumers-step-up-cruising-plans/).

By Donna Tunney

Plans to cruise during the next 12 months rose to 18% of the wealthiest U.S. households, up from 15% last spring and 12% in the fall of 2010, according to a survey by the American Affluence Research Center.

According to the center, 11 million households qualify as affluent; 18% represents about 2 million households, meaning that about 4 million people from that category will cruise during the next 12 months.

The groups most likely to cruise are those with a net worth of more than $6 million (32%), those with income above $200,000 (21%), and those age 60 and older (20%).

Only 13% of the under-50 age group indicated plans to cruise, while 16% of the 50-59 age group plan to do so during the next 12 months.

The American Affluence Research Center has been conducting twice-yearly studies of the wealthiest 10% of U.S. households since 2002.

The latest report is based on 499 male and female survey participants who have an average annual household income of $282,000, an average net worth of $3.1 million, average investable assets of $1.7 million, and a primary residence with an average value of $1.1 million.

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November, 2011 – This Sea Trade Insider article features AARC research about how the affluent have increased their cruising plans for 2012 (http://www.seatrade-insider.com/News/News-Headlines/Study-finds-affluent-likely-to-cruise-more-in-next-12-months.html).

In a recent survey of the wealthiest 10% of US households, the American Affluence Research Center (AARC) found that intentions to cruise during the next 12 months rose to 18% of the affluent, a 50% improvement over the Fall 2010 survey (12%).

Despite a sharp decline in the respondents’ assessment of current business conditions and their 12-month outlook for the economy and their personal financial situation from the more positive mood evident in the Spring 2011 survey, the intentions to cruise are above the 15% reading in the spring.

Other good news for the luxury cruise lines, said AARC president Ron Kurtz, is that plans to cruise during the next 12 months among their primary source markets—the wealthiest 1% (those with a minimum net worth of $6m) and the more mature (age 60-plus) groups—were at 32% and 20% respectively.

About two-thirds of the affluent say they expect to spend more or the same for international vacation travel during the next year as they did during the prior 12 months.

At 18% of a population of 11.4m households, the estimated number of affluent cruise buyers is 2.05m households or 4.1m total cruisers over the next 12 months.

Kurtz, a former president and chief marketing officer of several cruise lines, noted that ‘this number of affluent cruisers far exceeds the capacity of the luxury lines and indicates the affluent will continue to be an important source of business for the premium and contemporary cruise lines.’

The Fall 2011 Affluent Market Tracking Study, No. 20 in a series of twice-yearly surveys, is based on a national sample of 499 men and women who have an average annual household income of $282,000, an average net worth of $3.1m, average investable assets of $1.7m and a primary residence with an average value of $1.1m.

Information: http://affluenceresearch.org/most-recent-tracking-study/highlights-of-most-recent-survey/.

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November, 2011 – This Luxury Daily article discusses the growth in the men’s segment of luxury apparel (http://www.luxurydaily.com/ppr-has-the-power-to-bring-brioni-to-a-1b-company-expert/).

By Rachel Lamb

With its planned acquisition of Italian label Brioni, Gucci and Yves Saint Laurent owner PPR has made clear its interest in a market segment where it sees much potential: luxury menswear.

Founed in 1942, Brioni is known for both season collections and bespoke products targeting men looking to addstyle and pizazz to their wardrobe. Financial details of the planned transaction were not disclosed yesterday.

“Brioni’s acquisition makes a lot of sense for PPR,” said François-Henri Pinault, chairman/CEO of PPR. “The brand is complementary and does not compete with the group’s other brands, as much as in regards with its market positioning than on its stylistic content.

“Growth in the men’s segment is significantly stronger than in women’s, and Brioni is the perfect match for this,” he said.

PPR owns Gucci, Bottega Veneta, Yves Saint Laurent, Alexander McQueen, Balenciaga, Boucheron, Girard-Perregaux, JeanRichard, Sergio Rossi and Stella McCartney.

Spoken for
PPR announced the signing of an agreement with Brioni shareholders to acquire all of its capital yesterday morning.

The transaction should be finalized at the beginning of 2012, according to PPR.

Brioni has significant intrinsic growth potential and PPR will enable it to accelerate its expansion and boost its profitability, notably through a wider product range and geographic expansion in strong growth markets, according to the conglomerate.

“PPR is buying one of the most prestigious and exclusive brands in the mens clothing business – Brioni is a gem of a brand,” said Milton Pedraza, CEO of the Luxury Institute, New York. “As PPR has shown with Bottega Veneta and Gucci, it knows how to scale a brand.

“Most of these brands are for men’s and women’s clothing, but Brioni is very distinctive and will give PPR an edge for custom and bespoke men’s clothing,” he said. “They can even expand the brand into accessories because men’s is such a growing business.

“PPR has the power to bring Brioni to a $1 billion company.”

Indeed, many experts believe that Brioni will certainly flourish under the control of PPR.

The addition of Brioni is a quick expansion of PPR’s product line and adds a new customer base for other PPR brands, according to Ron Kurtz, president of the American Affluence Research Center, Atlanta.

Brioni can benefit from having access to the capital resources of PPR and PPR’s relationships with the channels of distribution, he said.

Luxury brands that are part of conglomerates are provided with extra protection, especially in light of economic uncertainty.

PPR has taken brands such as Bottega Veneta and Gucci under its wings, turning them into extremely lucrative and successful labels.

“I think that Bottega Veneta is one of the most successful luxury brands in the last 10 years,” Luxury Institute’s Mr. Pedraza said. “The marketing and the customer experience expertise of PPR will be a tremendous asset to building Brioni.”

Acquiring gems
The luxury industry has witnessed several mergers and acquisitions in the past year.

Some experts believe that the reemergence of M&A is indicative of a recovery economy (see story).

Following the recent acquisition of sportswear manufacturer Volcom, PPR announced in July its 50.1-percent stake majority control of Swiss watchmaker Sowind Group, parent company of Girard-Perregaux and JeanRichard (see story).

This is just the most recent in a whirlwind of mergers and acquisitions in the luxury industry.

For example, footwear manufacturer Jones Group acquired Kurt Geiger in June, which followed the sale of Jimmy Choo to Labelux in May (see story).

Additionally, Richemont, the conglomerate that owns luxury brands such as Jaeger-LeCoultre, Cartier and Montblanc, recently acquired online retailer Net-A-Porter this summer.

Furthermore, the ever-hungry LVMH Moët Hennessy Louis Vuitton set its sights on, and soon acquired, Italian jeweler Bulgari in the first quarter of this year (see story).

This begs the question: Is there any hope for independently-owned luxury brands in the future, or will they all eventually be owned by conglomerates?

“I think that luxury brands can achieve a certain level on their own – look at Coach,” Luxury Institute’s Mr. Pedraza said. “Gaining capital is the easiest thing to do right now, but having great financial management is a skill that these companies [such as PPR] have.

“There is no question that luxury brands can remain independent, but a brand in a conglomerate that has this certain level of expertise will grow tremendously,” he said. “The portfolio management approach works well for both the conglomerates that acquire brands and the brands that are acquired.”

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