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.

Posted in Affluence Research, Luxury Market & Goods | No Comments »

October, 2011 – This article from The Fiscal Times features data about the growth for the wider luxury industry (http://www.thefiscaltimes.com/Articles/2011/10/07/9-Must-Have-Status-Symbols-that-Say-Im-Rich.aspx#page1).

By Drew Gannon

Take walk down Fifth Avenue, Michigan Avenue or Rodeo Drive, and you might think Louis Vuitton had finally had a sale. Block by block, the signature brown bags fill the streets. Never mind that the bags in the Spring 2011 collection start at $2,930 for a small clutch, and go up to a whopping $35,500.

With sales up 23 percent from last year to $23.4 billion, Louis Vuitton is setting the tone of growth for the wider luxury industry. In 2011, spending on premium items and services is expected to rise 8 percent over last year to $359 billion, according to an annual survey by American Express Publishing and Harrison Group.

But the big players are not just the barons of Wall Street, sports, and entertainment.

“America’s top one percent – a little over one million households with a net worth of six million plus – are spending on luxuries,” says Ron Kurtz, president of the American Affluence Research Center. “But the bigger growth has come from the BRIC markets – Brazil, Russia, India and particularly China.”

China, the deus ex machina of the luxury market, is expected to account for 20 percent (roughly $27 billion) of global luxury sales by 2015, according to research by McKinsey, as the Chinese shift their consumption preferences from generic goods and materials to the status of internationally well-known brands. China’s unprecedented wealth has bolstered consumer confidence throughout the country; the fifth annual China Luxury Summit in December 2010 was aptly titled “China Luxury Market: An Oasis of Hope and Possibility.”

In the U.S., despite the belt-tightening across most of the country, wealthy Americans are starting to enjoy the good life once again, buying high-status items and services they had cut out of their 2009 and 2010 budgets. Indeed, rich Americans’ expenditures on luxury are set to rise $26.6 billion this year.

Whether such optimism will trickle down to the middle class is to be seen. Overall spending is still at a standstill, with consumer confidence declining sharply in August. Online shopping and social media may be the key to bringing up luxury sales in the United States as well as abroad. A recent study by Italian luxury foundation Altagamma found online sales (now only 2.6 percent of the market) growing at a rate of 20 percent a year as luxury brands multiply their friends on Facebook and activity on other social media sites.
Here are nine popular purchases helping wealthy consumers live high. Some people just can’t live without their Louboutins.

1. Swanky Strollers
Think a stroller is just a way to transport your kids? Think again. The mommy wars are being played out on the playground, with parents sizing up each others’ wheels. High-end strollers like those by the Bugaboo brand are flying off the shelves, and run anywhere from $500 to $2,000. One Bugaboo model that converts from a single stroller into a side-by-side double has a $1,659 price tag, and a waiting list to buy one. Another stroller by Kid Kustoms has a vinyl leather seat and optional iPod speakers, for a mere $3,500. Celebrities like Naomi Watts and Gwen Stefani have been spotted pushing around expensive Bugaboo prams, and their popularity has spread to suburban streets across the country.

2.Specialty Bikes
Biking became more popular in the last year, with bike sales rising 15 percent between 2009 and 2010, according to the Bicycle Manufacturing Association. But the bikes that are gaining the most popularity? Pricy, custom-built bikes. Specialty bike retailers command only 14 percent of the market, but 44 percent of the dollars, according to the National Bicycle Dealers Association. For example, custom bicycle company KGS Bikes does an elaborate three-hour fitting session, and has sold bikes for as much as $32,000. “I’ve seen growing demand,” says KGS Bikes’ owner Kevin Saunders. “My customers want a bike that is perfect for them.”

3. Designer Fashion
Last year, Carolina Herrera reported that, to her pleasant surprise, her $7,990 gray sequined ball gowns were “selling like hotcakes.” Other top designers have also reported stellar earnings, including Louis Vuitton (up 23 percent from 2010 to $24.3 billion), Hermes (up 41 percent to $11.9 billion), and Chanel (up 23 percent to $6.8 billion). The king of American style, Ralph Lauren, has seen his $13 billion-valued company’s stock grow 150 percent in the two years since June 2009. Sales for Ralph Lauren’s heritage Rugby brand jumped 34 percent last year after an online-only fashion show where online shoppers could purchase items in real time. High-end department stores and online designer sale sites have snagged some of the profits as well. Saks reported quarterly earnings up 50 percent and sales up nine percent ($726.7 million) in May this year, thanks in part to a boost in full-price sales.

4. Fine Wines
Forget two-buck chuck. Nielson Co. reporting a 4.1 percent rise in total U.S. wine sales to $9.32 billion this year, but wine priced $20 plus saw an even larger increase in sales (11 percent), demonstrating that pricier wines are becoming more popular. In its 22nd Annual Restaurant poll, Wine & Spirits magazine found the average price for the most popular wines in restaurants was $62. One of the magazines’ most popular restaurant brands, Duckhorn Vineyards, boasts an array of reds, including a 2007 estate-grown Rector Creek Vineyard Cabernet Sauvignon, which goes for $95 per bottle.

5. The Fur Effect
Fur is in, according to America’s top fashion magazines. Many September issues– including long-time fashion bible Vogue – featured fur and faux fur as the next big thing for the coming cold. According to them, fur goes with and on anything, from apparel like vests and coats, to accessories like purses and even shoes. Global retail sales for fur were up 5.4 percent to $14 billion in 2010, according to the International Fur Trade Federation. Alexander Wang’s fur sandals sell for $895 a pop. And while just this month West Hollywood becomes the first U.S. city to ban all fur sales, fur’s popularity continues to rise as the temperature falls.

6. …to Furry Friends
American pets are living the good life – sometimes even better than their owners. In 2010, Americans spent a record $55 billion on their pets, according to research firm Packaged Facts, more than the gross domestic product of many countries. Gourmet pet food tasty enough for humans to eat (think duck and quinoa) and premier pet care facilities like the Barkley Hotel and Day Spa, are popping up everywhere. Packaged Facts estimates that pet insurance sales, which rose 27 percent from 2008 to 2009 to $303 million, will reach $881 million by 2014. By the end of 2010, one in five Fortune 500 companies offered pet insurance by Veterinary Pet Insurance (VPI), the industry’s largest provider. Expensive designer dogs, like “teacup” dogs as well as hybrids between two breeds are growing more and more popular, and can cost thousands of dollars. Celebrities buying into the designer dog trend include Mischa Barton with her Shih Pom (cross between a Shih Tzu and Pomeranian) and Jessica Simpson with her Maltipoo (cross between a Maltese and Toy Poodle). But pure breeds have also kept their place on the upper crust. An 11-month old red Tibetan mastiff named Big Splash became the world’s most expensive dog after being sold to a Chinese millionaire for 10 million yuan, or $1.5 million.

7. Fast Cars
Despite the doom and gloom in Detroit, the luxury car sector is revving its engine. In July, Mercedes-Benz reported its highest monthly sales growth (16.7 percent) since 2006, with 21,065 cars sold. Still, BMW outsold its competitor that same month by over 5,000 vehicles, an 11.7 percent increase from sales on year prior. BMW’s SAV, a midsize SUV starting at $37,000, led the pack, with sales up 56 percent in 2011. And the high-end Z4 Roadster was BMW’s third highest selling vehicle, up 92.4 percent in July from the previous month. U.S. News & World report named the Z4 one of the best luxury cars of 2011, describing it as a car suited for drivers more interested in luxury than performance. The Z4 sells for between $47,450 and $62,500.

8. Cruising Through Life
An estimated 73.7 million Americans will travel outside the United States in 2011, estimates Business Monitor International in last month’s United States Tourism report. And while air travel sales remains on a perpetual roller coaster of ebbs and flows, cruises have grown more popular for wealthier Americans this year. Business Monitor International reports that in 2011, 9.6 million will have traveled outside of the United States by cruise. The Cruise Line International Association plans to welcome 22 new ships to its 25 lines, including the 3,690-passenger Carnival Cruise Lines’ Carnival Magic, launched in May 2011. A 12-night stay in the Mediterranean on luxury cruise liner Celebrity Solstice costs $9,299 per person.

9. The Bling
Rolex, recovering from a 14 percent decline in brand value last year, is making a comeback. Sales are up 11 percent to $5.3 billion this year, making it the sixth most powerful luxury brand according to consulting firm Millward Brown. The Rolex Presidential Day-Date watch has long been considered a quintessential luxury item, worn by celebrities and several U.S. Presidents from Roosevelt to Reagan, and costing upwards of $35,000 depending on its materials and dealer. Rolex’s signature men’s watch has now opened its doors to women, with InStyle featuring Jennifer Aniston and Courtney Cox among others wearing the brand. Other jewelers have also seen strides in the last year. Milward Brown ranks French jeweler and watchmaker Cartier fifth on its luxury list, up 34 percent to $5.3 billion net worth. Tiffany & Co.’s American sales rose 22 percent in the first half of 2011.

Posted in Affluence Research, Apparel, Automobiles, Cruises, Entertainment & Recreation, Fine Jewelry & Watches, Luxury Market & Goods, Travel, Vacations | No Comments »

October, 2011 – This Justluxe.com article features information about the economic mood/confidence of the affluent (http://www.justluxe.com/luxe-insider/trends/feature-1652235.php).

By Susan Kime

Taking a meta-view, we don’t need to be told again that the economic mood of the country does not look hopeful right now. Below are some statistics from some unusual sources not generally associated with the luxury segment, but could be benchmarks for future concern.

• MedHelp, the world’s largest health social network and leading provider of consumer health applications, today (September 26, 2011) announced that the average mood across the United States is the worst it has been in the last year. Using data points from MedHelp’s online and mobile health applications, MedHelp recently saw a significant drop in the average mood across the country, from average to bad.

• According to a recent CBS/New York Times Poll, 72% of those questioned by the Roper Public Opinion Polls said the country was going in the wrong direction.

• And recently a Goldman Sachs report of September, 2011, said the world economy was moving toward not great depression, or recession, but a great stagnation.

The idea of stasis, combined with inflation or, as many economists now say, stagflation, is an interesting one, as are inferred in the stats mentioned above. But this prognosis is for the general population. The question, then, remains: How does this socio-economic attitude relating to mostly European and American economics, affect those who buy and sell HNW and UHNW products? Is there is a correlation between the mood of the country and the mood of the luxury bandwidth?

Ron Kurtz, founder and CEO of the Affluence Research Group, understands this complicated picture, and has recently said in personal communication, “Most times there is some correlation between the general consumer confidence index of The Conference Board and the mood/confidence of the affluent, as measured in our twice-yearly tracking studies of the wealthiest 10% of U.S. households. They both tend to move in the same direction, especially in terms of describing current business conditions. The mood of the affluent seems to be more influenced by what is happening in the stock market rather than actual economic or business conditions. The wealthiest 1% (1.1 million households with a minimum $6 million net worth, based on research by the Federal Reserve Board) are usually more confident and optimistic about the future than the general public. Among the wealthiest 10%, there are often some differences between groups defined by age, gender, income, or net worth.”

Dr. Kurtz’s last two sentences dealing with the wealthiest 1%, the UHNWs (Ultra High Net Worths) and the wealthiest 10%, the HNWs (High Net Worths), sheds light on the division between mood and spending as seen in some recent numbers.

On one side of the luxury argument, and most likely where the HNW 10% lies, there may indeed be some recession-based anxiety, as this is probably the first time in many years this group has heard that no investment is safe in these capricious times, given the cooling of the world economy, how badly in debt the U.S. is, and how Europe is handling its credit/debt crisis.

Adding fuel to this anxiety are articles on new spending patterns for all economic levels, including the most wealthy: The Dollar Store Economy (August 21, 2011) is taking hold says The New York Times, and the Wall Street Journal’s cover piece, The Frontier Of Frugality (October 4, 2011).

On the more optimistic 1% UHNW side, are the sales stats of classic luxury products. Tiffany’s net sales rose 30% in 2011 over the prior year, and according to Bloomberg News, the highest end luxury car manufacturers had much to say at the September 2011 Frankfurt Car Show, with many attitudes counter to the prevailing economic climate.

• “If you go to the Ferrari stand, there aren’t any customers worried about the recession,” Fiat Chief Executive Officer Sergio Marchionne said. Ferrari expects to deliver 7,000 cars in 2011 on demand for its first family car, the $356,000 four-seat FF that came to market this year.

• Maserati aims to boost deliveries nearly eightfold to 45,000 cars in 2014 as it increases dealers by 150 percent worldwide. Lamborghini SpA’s new Aventador model is sold out for 18 months.

• Rolls-Royce Cars recently announced a 10 million-pound ($15.8 million) expansion at its Goodwood, England plant.

• Sales of the main high-end European luxury brands – Maserati, Lamborghini, Ferrari, Bentley, Rolls-Royce and Aston Martin – will rise between 19% and 30% percent this year and gain another 13 percent in 2012, according to a forecast from industry analyst IHS Automotive.

And in addition, according to Reuters (October 2, 2011) French luxury goods maker Hermes sees no sign yet of affluent buyers tightening their purse strings in spite of a somber global economic outlook, the head of the brand said on Sunday at Paris Fashion Week.

So, what is happening? What is the relationship between a somber economic outlook and the open purse? It may depend on who is buying, how seriously they believe they are an actual part of the global economic whole, and what the results will be when developing economies are experiencing strong growth while advanced economies are in a sluggish mode — this experience being in opposition to what has been customary in past years.

The highest end, which now comprises many newly minted BRIC (Brazil, Russia, India and China) young millionaires, or as Reuters says, “the strong appetite in emerging markets,” have allowed the luxury goods industry to grow at a solid pace. But what about tomorrow? That is the question.

“For the moment, there is no impact on our sales,” Hermes Chief Executive Patrick Thomas told Reuters at the brand’s fashion show in Paris, recently. “But the fact that we see nothing today, does not mean that we will not see anything tomorrow. When there are moments of macroeconomic concern, they always tend to affect our markets.” …Stay tuned.

Posted in Affluence Research, Luxury Market & Goods | No Comments »

September, 2011 – This Luxury Daily article features AARC research on the effectiveness of email sales campaigns with an affluent audience (http://www.luxurydaily.com/gieves-and-hawkes-drives-in-store-ecommerce-sales-for-anniversary-celebration/).

By Rachel Lamb

Savile Row tailor Gieves & Hawkes is celebrating 100 years of its Naval Warrants with an in-store and online sale that it is promoting to its email database.

Running Sept. 17-Oct. 16, the promotion is offering a discount on ready-to-wear and made-to-measure ranges both online and in-store. Gieves & Hawkes sent out email blasts and has a section on its Web site dedicated to the sale.

“If the emails are going to past clients, this can be a very effective promotion,” said Ron Kurtz, principal of American Affluence Research Center, Atlanta.

“Email announcements work with people who are past clients and people who have otherwise opted in,” he said. “[However], if the emails are being used to make initial contact with an affluent audience, the results are apt to be very limited.”

Gieves & Hawkes did not respond by press deadline.

Mr. Kurtz is not affiliated with the brand but agreed to comment as an industry expert.

Gieves & Hawkes is a 240-year-old tailor in London specializing in bespoke and made-to-measure men’s suits and tuxedos.

The company is based at No. 1 Savile Row with two other London stores in Sloane Square and Lime Street as well as boutiques in department stores Harvey Nichols and Selfridges.

There are multiple locations across Britain including Bath, Birmingham, Chester, Liverpool, Winchester and Dublin.

The company is continuing its expansion into China, Hong Kong and Taiwan with 100 stores and concessions.

Private bespoke
Opt-in consumers were alerted via email to the new discounts.

Individuals are discounted $157 off suits and all outwear and $117 off all jackets excluding blazers.

Furthermore, consumers can buy any three shirts for $471.

Gieves & Hawkes is offering made-to-measure suits for $1,178 or $1,250 if two or more suits are bought.

The offer is only available on select fabrics and consumers must go in-store to learn specifics of this offer.

“I believe this promotion will attract consumers to the store,” Mr. Kurtz said. “It gives a special reason for providing extra value, which even the affluent appreciate.

“It is also being conducted at the start of the new Fall season, when men will be thinking about adding to their wardrobe,” he said.

“And, the recipients of the offer are familiar with the quality Gieves & Hawkes offers.”

Tailor-made
Although email is a more modern vehicle to attract an interested consumer group, some experts think that traditional marketing could be a better ploy.

“For a high-end product such as this, a personal letter in the form of an invitation to enjoy this special offer would be the most effective both for sales and luxury branding,” said Karen Weiner Escalera, president of KWE Group, Miami. “The letter would be on a very high-quality stationery and personally signed.

Luxury consumers, especially those who will be spending considerable amounts of money on customized suits and tuxedos, like to feel important to the brands they covet and buy from.

Therefore, it is important for brands to highlight their heritage and the quality of their products, the reasons why luxury products cost so much.

“What needs to be projected most prominently are the qualities that make for luxury that they feature in the section Discover Grieves & Hawkes Tailoring, namely the history, quality and craftsmanship,” she said. “Then, the special offer is perceived as real value.”

Posted in Affluence Research, Apparel, Luxury Market & Goods | No Comments »

September, 2011 – This article from The Centurion (E-Newsletter & Info Hub for Prestuge Jewelers) features AARC research about the differences between the affluent market and the luxury market—and who jewelers actually are serving (http://news.centurionjewelry.com/articles/view/who-are-americas-highest-ticket-jewelry-stores).

By Hedda Schupak

New study finds the average ticket among top 15 most expensive luxury jewelry stores is $5,559. But typical guild jewelers’ average receipt is only $1,100. Why is there such a difference?

New York—What jeweler is writing the highest tickets in America?

Not surprisingly, it’s Harry Winston (left). According to a report released Tuesday by bundle.com, the tony jeweler averages $8,388 per ticket sale. Trabert & Hoeffer in Chicago is second, with an average sale of $6,627. By contrast, the typical guild jewelry store’s average ticket is around $1,100, says industry analyst Ken Gassman. (This figure is adjusted and does not include watch batteries, repairs, or bead sales, he told The Centurion.)

Bundle.com’s report is based on data provided by Citi for average receipt amounts based on millions of transactions in jewelry stores across the United States from July 2010 to June 2011. The study includes only Mastercard and Visa transactions; it does not include cash transactions or those made with American Express, Diners Club, Discover, or private store accounts, says Mike Dang, the article’s author.

“We were surprised at how many stores that made the list were names that most consumers [outside the retailer’s trading area] probably never heard of,” Dang told The Centurion. “We also were surprised to see that three stores on our list are in Dallas. It’s the first time that Texas made it on a list,” he said, referring to a number of lists the site tracks. William Noble Rare Jewelry with an average ticket of $5,839 took the number-four spot, Sue Gragg Precious Jewels came in fifth with an average receipt of $5,605, and Eiseman Jewels is in 11th place with an average of $5,028.

The three Dallas stores and Trabert & Hoeffer were among nine independent stores on the list of 15 jewelers. The others were Betteridge’s Vail, CO store (average ticket, $5,391, number nine on the list), Fourtane in Carmel, CA ($5,937, number three), Hyde Park Jewelers, Las Vegas, NV ($5,423, number seven), Belluso, a watch store also in Las Vegas, ($4,753, number 13), and Westime, a watch store in Los Angeles, CA ($4,591, number 15).

Also on the list were De Beers, New York City ($4,625, number 14), the Rolex boutique in South Coast Plaza, Costa Mesa, CA ($4,861, number 12), Chopard, New York City ($5,305, number 10), Wynn & Co. Jewelry, Las Vegas ($5,412, number eight), and Van Cleef & Arpels’ store at South Coast Plaza ($5,599, number six.)

Read bundle.com’s entire jewelry article here.

The consumer finance website also recently released its list of the top 25 most expensive apparel stores. According to its research from Citi, the top store is Oscar De La Renta. The designer’s eponymous dress shop on Madison Avenue in New York City had an average sale of $3,217. The lowest of the bundle.com apparel list is Prada, with an average ticket of $1,429—still higher than the $1,100 average guild-level fine jewelry store ticket.

The average ticket for chain jewelers is, not surprisingly, even lower than for guild stores. It’s about $400 at Zale, $350 at Kay, and $800 at Sterling’s higher-end Jared division, according to Gassman’s research. Tiffany, incidentally, did not make Bundle.com’s list of priciest jewelers either, presumably because its wide selection of affordable sterling silver jewelry brings down the calculation of the average ticket.

“I bought a sterling silver necklace for my girlfriend, so I’m probably one of those people who brings their average down,” laughed Bundle.com’s Mike Dang.

But why is the sales figure for a typical guild store tracking below even the apparel leaders?

Part of the reason could be that the jewelry industry is highly fragmented, with few brands big enough to spend with the kind of dollar clout that global luxury brands have, says Huw Daniel, president of Platinum Guild International. Now that De Beers has shifted marketing to its own Forevermark brand and away from generic diamond advertising, there’s no entity pushing jewelry into consumers’ lives with the same impact as luxury brands.

“The global luxury brands have made themselves relevant for today’s woman’s lifestyle, and their objects—bags, shoes—are a highly telegraphic marker of one’s status and personal style,” says Daniel. “That being said, however, adornment will always be a human need, so jewelry has a big role to play and the brands that can seize this can make a very nice profit.”

“Jewelers spend 4-6% of sales on advertising, while true luxury retailers or brands spend up to 20% or more of sales on advertising,” says Gassman. Plus, he says, don’t discount the fact that Mother’s Day and Valentine’s Day—even at guild stores—tend to be fairly low ticket sales, which brings the overall average down.

But that doesn’t explain why some jewelers are hitting the mid $4,000’s and $5,000’s for an average ticket.

What might, however, is identifying the differences between the affluent market and the luxury market—and who those jewelers actually are serving.

According to the American Affluence Research Center, those differences are both distinct and important. The AARC defines the affluent market as the wealthiest 10% of U.S. households as determined by the Federal Reserve Board, based on net worth. But only 10% of the affluent market—or 1% of U.S. consumers, approximately 1.1 million—have the means to acquire and are familiar with the brands and price points of products or services generally considered to be true luxury, says Ron Kurtz, AARC president.

AARC identifies true luxury consumers, who are the most likely to be viewed as conspicuous consumers, with the following profile:

• Average annual income of $982,000
• Minimum net worth of $6 million; average net worth is $15.3 million, or 33% of total net worth of all U.S. households.
• They earn about 14% of the total income earned by all American households.

The affluent market, by contrast, has this profile:

• Average annual income of $256,000
• Average net worth of $3.1 million; and comprise 70% of the total net worth of all U.S. households.
• They earn 36% of the total income earned by all American households and account for almost half of all consumer spending. This represents about a third of total GDP (gross domestic product).
• Additionally, these 11.4 million households hold 89% of the value of all publicly traded stock and stock mutual funds in the United States.
• Only a small segment of this demographic are conspicuous consumers; most are careful spenders and aggressive savers.

According to Forbes.com, the most affluent towns in the United States are Westlake, TX—a suburb of Dallas—and the Village of Kenilworth, IL, a suburb of Chicago. No surprise, then, that four of the 15 stores on the Bundle.com list are nearby. Several more of Forbes’ most affluent towns are New York City suburbs, while Orange County, CA, where South Coast Plaza is located (Rolex and Van Cleef & Arpels’ boutiques from the list) also has a number of very tony zip codes. Cities like Vail and Las Vegas, meanwhile, may not make the list for permanent residents, but they’re favorite affluent vacation spots.

The definition of “luxury” is ambiguous, not quantifiable, says the AARC. In fall of 2008, the organization polled well-heeled consumers asking, “what’s the most you could imagine spending” for 37 different categories of products and brands.

“The numbers were much lower than we expected,” Kurtz told The Centurion. Consumers offered up a very wide spread of price points they considered luxury—but the medians (the point at which half of the responses were above and half below) were surprisingly low.

Kurtz shared the jewelry and watch results—three of the 37 categories—with The Centurion. When asked “what’s the most you could imagine spending for a watch for a dressy occasion,” the median value among respondents was $1,000. 36% of men and 26% of women responding indicated they would spend $2,000 or more. Among the top 1% of respondents—those with net worth over $6 million—the median figure rose to $3,000, and the top value cited was $30,000. Not surprisingly, the most popular brand named was Rolex.

For an everyday watch, the median was a shockingly low $130. 29% of men and 27% of women said they’d spend $500 or more on an everyday watch, and the top value cited for this category was over $20,000. Only about half of the respondents naming a maximum price for this question named a brand; however, among those, the brand most often cited (22%) was Timex.

For diamond stud earrings, only women were polled. The median response was $1,000, with a point spread ranging from less than $100 to more than $10,000. 20% of women said they could imagine spending $2,000 or more for a pair of diamond studs. Only about 15% of women naming a maximum price also named a brand, says Kurtz, and the brand cited most often was Tiffany.

In recent years, says AARC, much of the growth of the luxury market has come from people who have the income ($100,000 to $250,000) to purchase some luxurious products, but not the wealth (or credit) to sustain such purchases, especially if portfolio values dip or the breadwinner loses a bonus or job.

That said, however, AARC’s conclusion from its research is that in the long run, marketers of luxury goods and services will find it far more productive, accurate, and practical to focus on the larger affluent market than the very ambiguous and often elusive luxury market.

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

September, 2011 – This Luxury Daily article features AARC research on how the tactile quality of a catalogue can contribute to an image of luxury (http://www.luxurydaily.com/bergdorf-encourages-multichannel-interaction-with-catalog-touchpoints/).

By Rachel Lamb

Department store Bergdorf Goodman is coaxing consumers to its blog, mobile site, store and Web site using touchpoints in its Fall collections catalog.

The retailer is implementing calls-to-action to its blog, 5th/58th, via bar codes while also drawing consumers in-store to check out the season’s newest looks. The catalog is double-sided and includes editorial, interviews and analyses on Fall fashion.

“The importance of catalogues varies according to the product,” said Ron Kurtz, president of American Affluence Research Center, Atlanta.

“The tactile quality of a catalogue, based on page size and paper quality, can contribute to an image of luxury,” he said. “The color and size of the product image can enhance the perception of luxury.

“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 Bergdorf, but offered to comment as an industry expert.

Bergdorf was not able to provide comment by press deadline.

Direct male
The Fall 2011 Bergdorf catalog is double-sided, with one section dedicated to editorial, advertisements and looks for women, while the flip-side is for men.

The men’s side boasts ads from Ralph Lauren Black Label, Hermes and Paul Smith.

Bergdorf editors analyze their favorite looks from the runways. This season, it is twists on classic tailoring, rugged looks and urban outfits that can be worn anywhere from the office to the stadium.

Looks from luxury brands are expanded in four sections throughout the men’s side of the catalog.

The catalog also details seasonal surprises and new additions to the store, such as Jimmy Choo shoes for men, hipster hybrids and British biker looks.

The women’s side of the Bergdorf catalog is a little longer and incorporates more multichannel touchpoints.

Ads for this section include Lauren by Ralph Lauren, Hermes, Tom Ford and La Mer.

Where the men’s side is straight-forward and matter-of-fact, the women’s editorial and analyses are slightly more conversational and in-depth.

Bergdorf creative director Linda Fargo gives insight into the hottest trends for women this season, including coats, fur and ultra-glamour.

The catalog has editorial such as an interview with designer Tom Ford who discusses his new lines, surprises from Fall’s collections and beauty trends.

Bergdorf Buzz also takes up a considerable section, where consumers can scan QR codes that take them to sections on the retailer’s blog, 5th/58th.

The buzz touches on social media campaigns such as Faces of 5F (see story), Bergdorf’s shoe-centric mobile application and beauty news. These sections are all linked to mobile or online counterparts.

What’s in-store
With the overwhelming amount of digital media, some younger consumers are ignoring traditional advertising such as catalogs, print ads and mail.

However, social media and online images cannot hold a candle to the textures, detail and overall luxury that is displayed through printed pages.

“Each [print and digital] could be designed to lead the prospect to the other for information best provided through that medium,” Mr. Kurtz said.

“For example, if the product lends itself to display with sound and motion, the prospect might be directed to a video available through a digital medium,” he said.

For instance, other retailers such as Barneys New York, Bloomingdale’s and Neiman Marcus are using QR codes in newspaper ads, magazine ads and mail to engage consumers and drive in-store or mobile traffic (see story).

Retailers must find a way to combine traditional and modern marketing techniques to freshen up old-world marketing without leaving them behind.

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

“The same is true where extended text is helpful,” he said.

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This article on Wall Street Journal Digita Network features AARC research about aspirational consumers (http://www.smartmoney.com/spend/deal-of-the-day/how-to-buy-luxury-goods-at-a-discount-1313705085759/?link=SM_hp_middle_optStory).

by Kelli Grant

August 2011

While the market upheaval and economic uncertainty has encouraged many people to tighten their budgets, shoppers lusting after that “it” bag, a first-class airline seat or a pricey car may now find those luxuries are more affordable than before.

Companies that make or sell high-end goods are increasingly aiming for what they call aspiration buyers — middle-class shoppers who can afford to occasionally splurge. The tactics are vast, including pitching less-expensive product lines, selling overstock online and allowing consumers to buy luxury perks in lieu of earning them. Audi, for example, is rewarding brand loyalty by offering $1,000 to $3,000 cash-back to households that already own an Audi and want another one. In September, eBay (EBAY: 30.49, 1.03, 3.50%) will team up with Nieman Marcus and other luxury e-tailers to sell goods at discounts of up to 65%. And new credit cards from American Airlines (AMR: 3.54, 0.28, 8.59%) and United (UAL: 18.59, 0.67, 3.74%) offer a cheaper buy-in for perks previously available only to elite road warriors and big spenders. “Luxury has become more democratized these days, and everyone wants access,” says Milton Pedraza, the president of Luxury Institute LLC, a marketing firm.

The luxury-for-everyone pitch may seem at odds with brands that owe some of their success to their elite images. But going down-market has become a survival tactic during tough economic times. Luxury goods sales fell 5% during 2008 and 2009, the biggest drop since 1995, according to Bain & Co., and experts say most of those lost sales were from these so-called aspiration buyers. (Shoppers with a net worth of $800,000 or more scaled back somewhat during the recession, but have largely kept spending, according to the American Affluence Research Center.) Recent market volatility could make middle-class shoppers even more important. Less than the very wealthy, aspiration buyers tend to have less of their net worth tied up in the stock market, and so the occasional downdraft may not stop them from spending, says AARC president Ron Kurtz.

The best deals on luxury goods may not come via coupon — or Groupon. Instead, luxury brands often use subtler tactics, like private sale events and invitation-only deals, Pedraza says: “You don’t want to scream ‘discount’ when you’re a luxury brand.” Getting in on these offers isn’t so hard, though. Consumers can give their contact information to the high-end stores and brands they like, says Fred Thompson, a partner at LoyaltyOne Consulting. Invited guests often gossip on sites like SheFinds.com or Mizhattan.com, where, in June, notices about Chanel’s two-day private sale with deals of 40% off made the rounds a week beforehand. Auto pricing site Edmunds.com tracks unadvertised auto incentives, including loyalty rebates.

Shoppers on the hunt for luxury goods are also finding success with so-called flash-sale sites such as Gilt Groupe, which offer discounts of 50% or better for a short time on clothing, home goods and other products. eBay launched its version, Fashion Vault, last fall and Amazon (AMZN: 206.53, 7.26, 3.64%) debuted MyHabit in May. But shoppers may find the same problem that outlet-mall shoppers often do: Some items on sale aren’t a part of the brands’ usual collections, they’ve been produced specifically for the sites. Which ones? The sites don’t usually say. Amazon and Gilt spokeswomen said there’s no need, because the items are legitimately from that brand or designer and have quality consistent with their price. “We make sure not to give the [buyer] lesser quality,” says a spokeswoman for Gilt.

Even non-luxury brands — think American Airlines, for example — are offering new opportunities to pay for a higher-end experience, says Thomas Jacobson, a senior executive in consulting firm Accenture’s pricing division. For example, airline credit cards have grown in popularity over the past year with the introduction of bigger benefits and waived fees for the first year, while the airlines have also started offering more a la carte purchase options to cut the line for boarding or pick a cushier seat. Cable companies, amusement parks and other companies are also offering pay-in options for a shorter wait. Here, consumers need to evaluate what they’re getting for the extra cash, Jacobson says. Your luxury experience might be little more than a convenience fee.

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This article posted on Daily Finance features quotes from Ron Kurtz about affluent spending in the luxury market (http://www.dailyfinance.com/2011/08/25/why-oscar-de-la-renta-is-americas-most-expensive-store/).

by Alice Hines

Date: August 25, 2011

Of the 25 stores that made consumer finance website Bundle’s “most expensive stores” list, Oscar de la Renta was the only one to break the $3,000 mark: That’s $3,217 on average that customers spend at his Madison Avenue location in New York City.

The top 25 list reads like the credits of a Vogue editorial: big names, big numbers, big cities. Bundle, a data-analysis startup, took price data from millions of credit card transactions provided by Citibank over the course of one year to generate average receipt numbers for each store.

While Oscar De La Renta is not out of place on the list, it does seem a little strange that the brand would trump the likes of Chanel, Chloe, Lanvin and Prada. Giorgio Armani, down the street, comes in second at $2,821.

One reason for its list-topping status does stand out: De la Renta sells dresses. While many of the brand’s original competitors such as Gucci or Louis Vuitton have been absorbed into luxury conglomerates, and now focus more on the high-margin sales of shoes and bags, Oscar de la Renta has stayed private and family-run, and held true to its pricey roots. (CEO Alex Bolen is de la Renta’s son-in-law). Today, Oscar de la Renta is known for the same sort of timeless, womanly gowns that it made for the socialites of the 1960s.

And as Oscar de la Renta fans like Oprah and Sarah Jessica Parker know too well, looking timeless is a pricey habit. As Ron Kurtz, president of the American Affluence Research Center put it, “Unlike even Armani, [Oscar de la Renta] doesn’t carry a diverse range of merchandise to serve different segments of the market. Everything starts at a very high price point.”

Madison Avenue — home to three of the top four locations on the list — is also an international tourist destination, where people come to buy brands that may not be available in their home countries. “Some of these stores have a very limited distribution and become more appealing,” Kurtz says.

Kurtz also notes that Bundle’s study takes into account only part of the luxury market, since until recently, Citibank dealt only with Mastercard and Visa — not American Express cards or private store accounts. So while the numbers give an idea of how people are spending, they aren’t representative of the entire market.

The only top-four boutique not on Madison Avenue is Boston’s Loro Piana, a family-owned Italian brand known for its fine cashmere that came in at No. 3 at $2.818. It would seem that top spenders are also willing to pay for established glamor and exceptionally well-made products, even when they aren’t flashy or avant-garde.

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This article posted on the Luxury Daily website discusses whether or not the luxury market is on a rebound, and it includes AARC research on the topic (http://www.luxurydaily.com/25886/).

by Rachel Lamb

Date:  August 5, 2011

Is luxury back?

Mixed reports on consumer satisfaction and the economy are confusing experts as to whether or not luxury marketers should expect a rebound — and how they should prepare for the future.

Recent reports have been indicating that luxury sales are on the rise and that consumers are spending close to pre-recession levels, but whether or not the industry is rebounding is still up in the air. Experts are still trying to decide whether or not this is a lucky streak or if the economy is still in danger of double-dipping.

“I think luxury retailers appear to be back only in comparison to the rest of the retail sector,” said Pam Danziger, president of Unity Marketing, Stephens, PA.

“Yes, there are people who can and will pay $1,500 for a pair of shoes, but their numbers are small relative to the population as a whole,” she said.

Confidence confusion

Indeed, analyses and articles have been reporting confusing statistics about whether or not the affluent are truly back to spending.

This uncertainty is making experts uneasy about which way to sway.

For instance, the New York Times released an article reporting that the affluent are back to spending again.

The article mentions that luxury department stores such as Neiman Marcus and Saks Fifth Avenue have been running out of luxury goods because of high demand and luxury car companies have been reporting their best months in years.

While this is true, there has been much tension in the past few weeks as Washington officials have been butting heads in the debt-ceiling debate.

Luxury brands have had an impressive second quarter, but the dip in consumer confidence is putting a damper on spending.

“Most of the aspirational or mass affluent in the U.S. are still out of the market,” said Ron Kurtz, president of American Affluence Research Center, Atlanta.

“The true luxury consumers are still holding back because they lack confidence in the strength of the economy and the outlook for the stock market, which is an important determinant of their mood,” he said.

Indeed, a report from Women’s Wear Daily claimed that the S&P Retail Index fell 3.8 percent Aug. 2 as the Dow Jones Industrial Average lost 2.2 percent.

Additionally, gold prices shot up to a new high of $1,664.20 an ounce.

Luxury retailers such as Nordstrom and Tiffany & Co. were also down that day, according to WWD.

Looking ahead

These mixed reports pose a problem for some luxury brands that may not know how to prepare for the future.

A recent study by Epsilon claimed that luxury marketers looking to make the most of their holiday campaigns are advised to start early and keep pushing post-holiday season.

However, this could waste a lot of energy and money if consumers are not spending as early and as quickly as in previous years.

“Ninety-eight percent of the households in the country are on hold, sitting tight and watching all their spending,” Unity’s Ms. Danziger said.

Other occasions on the horizon, such as summer spending and back-to-school campaigns, have already begun.

“It is very challenging as environmental factors, such as economic conditions and job compensation and factors affecting wealth — such as the stock market and home values — have the most influence on luxury consumption,” American Affluence’s Mr. Kurtz said.

“The best any luxury marketer can do is to keep offering new products at an attractive value and with excellent service and communicate this effectively to the target market,” he said.

Posted in Affluence Research, Apparel, Luxury Market & Goods | Comments Off

June, 2011 – This Luxury Daily article features AARC research on how the decline in consumer confidence is not particularly relevant to the luxury industry (http://www.luxurydaily.com/low-consumer-confidence-does-not-affect-luxury-consumers-study/).

By Rachel Lamb

Consumers’ short-term outlook on business, the economy and gas prices have led to a purchasing slump and pessimistic outlook in May, but this may not apply to luxury consumers.

Although spending confidence was up in April, research from the Conference Board Consumer Confidence Index has shown that certain factors in the environment and economy have made consumers hesitant when it comes to spending. However, these factors do not affect the truly wealthy American consumers.

“It’s a variety of factors, because we haven’t had any significant job growth and there hasn’t been robust growth that we’ve been accustomed to after a recession like this,” said Lynn Franco, director of Consumer Research Center, New York. “The high gas prices also accounted for diminishing purchasing power.

“We saw that there wasn’t a huge change in consumer conditions and hasn’t been a change in the pace of economic growth,” she said. “The recession is having a greater impact on consumers who are on a tight budget and influenced by increases in food and gas, while high-end consumers are not very influenced by it and are better financially positioned are more likely to spend.”

The monthly Consumer Confidence Survey is based on probability-design random sampling and is conducted by Nielsen Co.

The survey provides information and analytics around what consumers buy and watch.

Comfortable luxury consumers
Although things are looking grim for the average consumer, this may not have any effect on the luxury consumer.

Ron Kurtz, president of the American Affluence Research Center, agrees with Ms. Franco and her analysis of the study.

“The decline in consumer confidence of the general public is not particularly relevant to the luxury industry,” Mr. Kurtz said.

“Only a small portion of the population, perhaps as little as the wealthiest 1 percent of United States households, are the foundation of the luxury industry and they are not that concerned by those issues,” he said.

The Index stands at 60.8 – of 100 – down from 66 in April. Furthermore, the Expectations Index declined from 75.2 from 83.2 last month.

Furthermore, consumers’ assessment of the current economy and conditions are more pessimistic than last month.

For instance, those claiming that business conditions are “good” decreased from 15.5 percent to 14.6 percent, and those claiming business conditions are “bad” increased from 35.9 percent to 37.1 percent from last month.

Consumers analyzing the job market found it was less favorable than last month. An increase from 42.4 percent to 43.9 percent stated that jobs are “hard to find,” where those stating that jobs are “plentiful” went from 5.6 percent to 5.1 percent.

Looking forward
The truly affluent are less likely to worry about economic recessions, as they were never truly affected.

However, studies from American Affluence Research Center showed that wealthy consumers were ready to spend again (see story).

“Our spring survey of the affluent showed they are returning to higher levels of spending and this is showing up in the reported sales and profits of upscale retailers and brands in recent weeks,” Mr. Kurtz said.

Indeed, strong numbers from powerful luxury brands such as Louis Vuitton, Gucci, Saks Fifth Avenue, Hermes and LVMH Moet Hennessey Louis Vuitton showed extremely high numbers in the first quarter (see story).

“Brands should focus on the importance of focusing their efforts on the small segment of the population that can afford and appreciate true luxury products,” Mr. Kurtz said.

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