January, 2012 – This article from Luxury Daily discusses seven facts that should serve as signs of caution before basing marketing plans on trend forecasts. ( http://www.luxurydaily.com/7-trend-caveats-for-the-2012-luxury-and-affluent-market/ )

By Ron Kurtz

At this time of year, the media is inundated with trend forecasts and predictions from marketing and research agencies, consultants and pundits of all types. These predictions are often based on anecdotal research, old data or large changes in very small numbers, if they are quantified at all.

It is important to keep these predictions in perspective, as they are frequently prompted by a hidden agenda to attract media attention and to generate new business prospects.

Rather than joining the fray of trend predictions, we would like to remind you of certain facts that should serve as signs of caution before you start to base your marketing plans on these trend forecasts.

1) Affluent consumers are not prone to substantial changes in their basic behavior and values from year to year or even over an extended period of time. This is evidenced by research begun in the 1970s by Thomas Stanley, author of “The Millionaire Next Door” and the more recent “Stop Acting Rich and Start Living like a Real Millionaire.” Our research since 2002 has been consistent with that of Mr. Stanley’s.

2) A change from one year to the next is not necessarily a trend, especially if it applies to a large increase in a very small percentage of the market. That is more likely to be a fad that may or may not become a meaningful trend over a period of two or more years.

For example, a market segment that triples from 1 percent to 3 percent is not a trend but may be an indicator of an emerging market.

3) Affluent consumers are not necessarily luxury consumers. Of course, the definition of “luxury” is in the eye of the beholder, which could be another important caveat when considering the forecasts of the trend pundits.

Only the wealthiest 1 percent of U.S. households appear to be knowledgeable about the price points and brands of true luxury products.

Before the recession, some luxury consumers were among the so-called mass or aspirational affluent. These consumers have been largely shaken out of the true luxury market.

4) It is important to stay focused on the key marketing priorities of attracting new customers and retaining the loyalty and increasing the purchases of existing customers.

Marketers should avoid chasing emerging consumer market segments if that will cause them to be distracted and dilute efforts targeting their existing primary consumer markets.

5) Traditional marketing communications channels should not be forsaken, especially if marketers are targeting affluent and luxury consumers.

The conversations among marketing professionals seem to be exclusively focused on the opinions and statistics regarding the importance of the various forms of digital channels of communications.

An unintended consequence of digital media is that the consumer audience has been substantially fractionated.

While this provides the opportunity to personalize communications, it can also make it more difficult to reach large portions of the target market effectively and cost-effectively.

Equally important, many in the large numbers of digital fans and followers of luxury brands are aspirational consumers and other “luxury-curious” voyeurs who cannot afford the products.

6) The true affluent, who are typically careful spenders who live within their means, are the more knowledgeable and more sophisticated consumers. Their priorities have always been quality and value when making a purchase decision.

In addition, the vast majority of the affluent have always avoided ostentatious or conspicuous consumption. These are not new priorities for the affluent.

7) Last but not least, there is no substitute for using common sense when thinking about how to be consumer-sensitive in all aspects of the relationship, interaction and communication with customers.

Just put yourself in the shoes of your customers. This Golden Rule applies to product, pricing, service, post-sale relations, communications and all forms of interaction with the customer.

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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 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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October, 2011 – This Diamond News Broadcast article features AARC research about the affluents’ view on current business conditions and their plans for holiday gift spending this year (http://www.diamonds.net/news/NewsItem.aspx?ArticleID=37579&ArticleTitle=Diamond+News+Broadcast).

By Rapaport News

Global luxury goods sales have continued 2010’s double-digit growth trajectory and will see an increase of 10 percent, to €191 billion in 2011, according to Bain & Company in the 10th Edition of its industry bellwether “Luxury Goods Worldwide Market Study,” which was unveiled at a conference today hosted by Fondazione Altagamma (the Italian luxury goods industry trade association).

The study points to a consumer whose return to luxury spending is not simply a rebound, but instead a sustained renewal of spending on luxury apparel, accessories, leather goods, shoes, jewelry, watches, perfume and cosmetics. As luxury revenues have surged out of the trough and continued their momentum to record-breaking sales levels, the study shows, luxury distribution has undergone a significant shift, with 14 percent growth for direct-owned stores, more than 50 percent higher than the growth rate of wholesale and department stores. Direct-owned retail now accounts for nearly 30 percent of luxury sales worldwide.

“Top brands are now master retailers as well,” said Claudia D’Arpizio, a Bain partner in Milan and lead author of the study. “Product still matters, but retailing strength has let luxury brands take control of their growth more than ever before.”

The post-crisis world of luxury goods has also proven that luxury’s mature markets are still relevant, both in absolute terms and in impressive growth rates. Bain expects 10 percent growth in Europe and 12 percent growth in the Americas for 2011 at constant exchange rates, although the weakening Euro eats into these growth rates by 3 to 4 percent. Japan yields the biggest surprise in terms of growth. It remains luxury’s second market. Declines, which stabilized to result in a flat 2010, have now reversed to five percent growth at constant exchange rates for 2011. The over 230 brands reporting 2011 revenue for the study report a much lower impact to luxury goods sales from Japan’s March earthquake; the effects on luxury sales lasted only one quarter before this year’s growth cycle restarted. Developing market growth (China, 35 percent; Brazil, 20 percent; Middle East, 12 percent) is still notable and remains a priority for brands. When factoring in spending in Mainland China and spending by Chinese tourists abroad, luxury consumption by Chinese people is now just over 20 percent of the global market.

The 10th Edition of Bain’s Luxury Goods Worldwide Market Study also finds that the luxury sector’s growth is robust, by looking at organic growth versus new openings. Comparable growth will exceed growth from new stores by 2 percent in 2011, indicating that luxury growth is not exclusively driven by store openings. Eighty percent of brands saw growth in 2011, with 20 percent of brands seeing more than 20 percent growth.

Finally, the study shows growth across all major luxury categories. Apparel will experience eight percent growth in 2011, driven by both menswear (9 percent) and womenswear (7 percent). Perfumes and cosmetics consumption will grow by 3 percent globally, with much of that growth found in emerging markets such as China and Brazil. As with 2010, however, accessories and hard luxury (jewelry and watches) are the strongest growth stories. Accessories (including shoes and leather goods) will grow by 13 percent in 2011, as consumers often rely on these products as an entry to luxury consumption. Hard luxury is delivering the strongest growth for 2011, however, with 18 percent estimated for 2011. Increasingly, consumers are shifting their hard luxury purchasing from unbranded to branded items, and purchasing these branded products in direct-owned stores.

”Despite the headwinds of global events and economic uncertainty, luxury is experiencing a sort of ‘anti-crisis,” concluded D’Arpizio. “We expect to see the sector continue to outperform other categories, if brands stay as nimble as they have been in their approach to recovery.”

The American Affluence Research Center produced the 20th in a continuing series of the original and only twice-yearly tracking studies of the mood and spending plans of the wealthiest 10 percent of U.S. households, which account for almost half of all consumer spending, this survey was designed to provide information critical to understanding today’s affluent and luxury consumers.

1 – Affluent to Spend $23.6 billion, 2.3 percent over 2010, on Christmas gifts, with a greater number of households buying gifts to offset plans to reduce gift expenditures by 3.7 percent per household.

2 – Affluent households to spend over four times the average family on Christmas gifts at an average $2,270 in gift purchases versus $518 for all families in National Retail Federation survey.

3 – Affluent men and women name the top two items on their Christmas gift list as currency and clothing.

4 – Over 40 percent of affluent families plan to reduce or defer expenditures due to economic conditions.

5 – Only 3 percent of affluent are “under water” with their mortgage, compared with 25 percent of all home mortgages; affluent have average equity in home equal to 72 percent of its market value.

6 – Internet is favorite source for Christmas gift purchases.

7 – Affluent turn very negative in their view of current business conditions and 12-month outlook for the U.S. economy, stock market, and personal income.

8 – Spending plans of affluent fall less than expected given their negative outlook.

9 – Pockets of strength exist in spending plans of the affluent.

Posted in Affluence Research, Apparel, Fine Jewelry & Watches, Holiday Spending, Luxury Market & Goods | No Comments »

October, 2011 – This Luxury Daily article features AARC research on the increase in 2011 holiday spending plans of the affluent (http://www.luxurydaily.com/10pc-wealthiest-us-consumer-holiday-spend-up-2pc-american-affluence-research-center/).

By Rachel Lamb

Although affluent consumers’ confidence fell sharply from the spring, there has not been a drop in intention to spend during the holiday season, according to findings from a recent study by the American Affluence Research Center.

Consumers are most likely to be spending in-store — in regular department stores and in specialty boutiques – and online, which has been steadily gaining share. The rich may still be spending because they still have a positive image of their own personal worth, as opposed to those less well-off.

“We are seeing some pockets of strength, particularly in the wealthiest of the consumers who are really the prime prospects for luxury goods,” said Ron Kurtz, principal of American Affluence Research Center, Atlanta. There are three factors that could be contributing to this phenomenon, according to him.

“The first is that during the recession, there was a large amount of uncertainty about personal compensation that has dissipated for the affluent and they’re feeling more comfortable about their personal situations lately,” Mr. Kurtz said. “People are also at the point of wanting to do nice things for themselves and for others to offset the gloomy environment.

“The third is that brands and retailers are doing whatever they can to coax the affluent and the enhancement of products and services and improved value to get them to spend,” he said.

Participants in this survey consisted of 499 individuals who make up the top 10 percent of wealthiest U.S. consumers.

They have an average household income of $282,000, an average primary residence value of $1.1 million, an average net worth of $3.1 million and average investment-worthy assets of $1.7 million.

Spending frenzy
Affluent consumers are becoming more comfortable with their spending habits and, in fact, intend to spend more this year than last, according to the research.

For instance, 3 percent of the U.S.’s wealthiest individuals plan to spend more on holiday gifts than last year. Sixty-nine percent expect to spend the same amount and 28 percent intend to spend less.

Approximately 10 percent of consumers that will spend $4,000 or more on gifts plan to spend more than last year. In addition, 51 percent will spend the same amount and 40 percent will spend less.

For both men and women, the top item that they wished to receive for the holidays is some sort of currency, such as a gift card, money or check.

Apparel and accessories are the second choice for both women and men at 33 percent and 42 percent, respectively.

The third choice for women is fine jewelry at 26 percent and books, CDs and DVDs at 23 percent for men.

Another big item this year is tablets.

“These people are realistic about how long it’s going to be before stock market and unemployment returns to prerecession levels,” Mr. Kurtz said. “They’re basically looking at three years or more until we get a real turnaround in those factors.

“Given the negative news that was going on in July and August in the stock markets when the survey was being conducted, the affluent are still relatively positive about spending,” he said. “And, in contrast to what kind of news that was going on in the market and in the environment, it’s somewhat encouraging to see that they still plan to spend.”

Channeling holiday spirit
Consumers will be spending on a variety of channels this year.

The Internet has seen the most share of total dollar value in holiday gift purchasing by the affluent.

The channel is named by half or more of all demographic segments except the highest net worth and older-than-60 groups, both of which are over 40 percent, according to the study. All groups indicate intentions to maintain or increase the share of business given to the Internet in 2011.

Based on total dollar value of holiday gifts purchased, traditional department stores have been losing share to other sources among the total group of affluent households, according to the study. However, they have remained a strong spending outlet for consumers in the highest net-worth group.

Additionally, specialty retail stores have been losing share to other sources among the total group of affluent households, according to the study.

“The thing is, this is a segment of the population which is fairly constant over time,” Mr. Kurtz said. “I know that some would like to say that there are new trends emerging over the years, but that’s over-blowing what those people are like.

“There has been a consistency for 30-40 years about being careful spenders, good savers and are focused on enduring style and fashion and quality,” he said. “They are not ones to jump on any kind of gimmick or new fads in the business.”

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October, 2011 – This Luxury Daily article discusses the importance of product catalogs in the luxury world (http://www.luxurydaily.com/barneys-emphasizes-malleable-new-york-personalities-through-catalog).

By Rachel Lamb

Department store chain Barneys New York is using real New York residents to promote its newest Co-Op inventory through a “New York Stories” catalog.

The two-part catalog uses up-and-coming design students, models, actors and musicians from New York to showcase the line’s urban, edgy spirit. The first part consists of the new crop of New Yorkers modeling collections while the second part is purely products.

“The importance of catalogs in the luxury world varies according to the product,” said Ron Kurtz, president of American Affluence Research Center, Atlanta. “The tactile quality of a catalog, based on page size and paper quality, can contribute to an image of luxury, as does the type font and use of color and photography.

“The color and size of the product image can enhance the perception of luxury,” he said. “Some products may require extended text, best provided in hard copy, to explain or describe important features of the product.”

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

Killer looks
The first part of the Barneys catalog features apparel and footwear for men and women.

Each model has a small blurb under his or her name and age. Some photographs are shot against an urban background such as a wall covered with graffiti or the outside of a building.

Many of the models have artistic backgrounds and are studying art, music or literature in New York educational institutions such as New York University, Hunter College or Parsons School of Design.

Others moved to New York to make a name for themselves as artists, while some were born and raised there.

Under each blurb is the name and price of whatever the model is wearing.

Brands such as Theory, Helmut Lang, Barneys New York, Opening Ceremony and Marc by Marc Jacobs are represented.

In the second half of the catalog, there are accessories and footwear from brands such as Alexander Wang, Iosselliani, Helmut Lang and Isabel Marant.

Barneys includes a Web call-to-action by placing its Web address at http://www.barneys.com on the side of every page.

The retailer also included a list of store locations and their numbers on the back of the catalog.

Mail bondage
In the face of an increasingly digital world, luxury retailers strive to stand out from rivals through traditional media such as catalogs, print and out-of-home ads.

Luxury marketers tend to differentiate their direct mail pieces from competitors, as well.

For instance, the Barneys catalog is made with thicker stock paper and is bound. Its unique fold-out mechanism is also helpful to differentiate the catalog from other retailers.

A thicker paper stock and a clean catalog layout look more elegant, which affluent consumers appreciate.

In addition, many luxury marketers tend to add multichannel touch points, similar to Barneys’ Web call-to-action.

For example, department store Bergdorf Goodman coaxed consumers to its blog, mobile site, store and Web site using touch points in its Fall collections catalog (see story).

In addition, Bloomingdale’s and Neiman Marcus are using QR codes in newspaper and magazine ads and mail to engage consumers and drive in-store or mobile traffic (see story).

“Catalogs can be designed to incorporate other media by using QR codes and directing people to video where sound and motion are important to the use or understanding of the product,” Mr. Kurtz said. “They can also be the carrier of a CD that provides additional information.

“Direct mail, especially catalogs, can help the consumer to have a better understanding of colors, textures and scale than what is normally achieved in broadcast or digital advertising, especially if being viewed on a small screen or mobile device,” he said.

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October, 2011 – This 4Hoteliers article features information about the use of direct mail marketing campaigns with the affluent (http://www.4hoteliers.com/4hots_fshw.php?mwi=6370).

By Pam Danziger

Conventional wisdom in marketing circles is that nobody does direct mail marketing anymore, direct mail is too expensive, direct doesn’t work today.

The conventional wisdom says: Shift your marketing investment to email, social media and the new darling, mobile media.

“Direct mail is probably the most cost-efficient method for reaching the truly affluent, i.e. the wealthiest U.S. households — These are the households with a net worth of $800,000 or more and incomes of $200,000 plus.” – Ron Kurtz, AARC

With my contrarian bent, that is all the reason that I need to recommend old-fashioned direct mail to my clients. If nobody is using direct mail anymore, then the marketer that swims against the tide will get noticed.

When I open my mail box each day, I see proof positive that marketers haven’t yet abandoned direct mail. But I do think those marketers that are getting results through direct mail want their competitors to believe the conventional wisdom in order to keep the secret that direct mail can be a powerful tool in the 21st century luxury marketer’s arsenal.

The fact is direct mail is still an important vehicle to deliver sales directly, but also it works with other marketing platforms synergistically to connect with customers. For example, I shop catalogs quite frequently but never order by phone or mail – rather, I always go online to make my purchases. Statistics from the Direct Marketing Association confirms the synergies between direct mail and other multichannel strategies:

Fifteen percent of customers receiving a catalog and 12 percent receiving a letter, postcard or flyer from a company made a purchase on the company’s website.

It all comes down to the best way to get in the customer’s door and capture their attention. Direct mail continues to deliver on that score, particularly among the affluent luxury consumers.

Ron Kurtz, of the American Affluence Research Center (AARC), says that “Contrary to conventional wisdom, direct mail is probably the most cost-efficient method for reaching the truly affluent, i.e. the wealthiest U.S. households — These are the households with a net worth of $800,000 or more and incomes of $200,000 or more.”

Ron Kurtz knows where the wealthy live – and he can help you find them too.

Ron’s company offers marketers direct mail lists based upon detailed customer specifications, such as of wealth (defined by net worth and/or income), age of householder, gender, various life style and recreation interests, and geography (state, county, metro area, or zip code). And these mailing lists are not just for big businesses with huge marketing budgets, either. Just think about the power it gives local businesses to target the richest folks in their neighborhoods with customized marketing communications that talk to their special needs and interests?

Ron has written a white paper that explains more about the power of direct marketing to reach the affluent luxury consumers, entitled Direct Mail: Becoming Extinct or More Effective for Luxury Marketers?, which you can download by clicking the link: http://bit.ly/nJqsXI

Take Action>>

Direct mail is still a viable marketing vehicle and should be part of a luxury brand’s multichannel strategy.

Luxury marketers still get results through direct mail. It both supports other marketing efforts, as well as producing results immediately and directly. Luxury marketers, in particular, need to be mindful of how the touch and feel of their mail packages reflects on the brand.

Ron reminds us, “Direct mail is a tactile medium that can communicate the quality and imagery of your luxury brand.” Because of this, the quality of the product imagery can be far superior in print than online. That is why direct mail so powerfully drives shoppers to websites to buy or to the store to try on.

Yet some luxury marketers can’t track orders to the mailed piece directly unless orders come via phone or mail. So these marketers can’t directly measure the effectiveness of their mailed campaigns as inspiration for shopping via other channels.

Specialty Retailers: Are you using direct mail to attract new shoppers to your store?

For retailers looking to attract shoppers in their local communities, direct mail is too frequently ignored in favor of less effective and less profitable options.

Rather than go after a very broad audience with a space ad in the local newspaper which often promotes a sale, retailers that hanker after a more affluent customer would be better served to buy a local list and create a special mail package for these high-value customers emphasizing products and services tailored to their discerning tastes or special needs.

For example, the Christmas shopping season is rapidly approaching and husbands notoriously hate shopping for gifts for their wives. Why not send a special V.I.P. invitation to affluent married men in your area, offering special evening men’s-mostly shopping hours or private by-appointment hours with trained personal shoppers to pick the right gift? (If any of my local jewelers are reading this blog, be sure to add my husband Greg to that list).

Of course, you’d offer the same services to your current customers (assuming you have a list of them and shame on you, if you don’t), but with the help of an outside list like Ron’s group can provide, you can to reach out into your community and invite the right kind of new customers into your store.

It all comes down to whether you are using your marketing and advertising budgets to make sales (e.g. running a newspaper ad) or to create customer relationships. Specialty retailers need to be focused on building those relationships. A carefully crafted and executed direct mail program tailored explicitly for the needs of the customer will take you far in creating such a relationship, which is money in the bank for your business’ future.

For more ideas on ways to market your specialty retail business, get a copy of my book, Shopping: Why We Love It and How to Create the Ultimate Customer Experience – http://amzn.to/iFCSlW

For those marketers targeting the luxury consumers, my new book, Putting the Luxe Back in Luxury, is written specifically for you.

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