HOW THE LUXURY INDUSTRY IS LEAVING $1.7 TRILLION ON THE TABLE

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Douglas Gollan, co-founder of Elite Traveler magazine, explains why the luxury industry’s continued robust performance is coming, despite largely missed opportunities.

My mother used to always tell me I succeeded “in spite of myself.” It was her way of telling me while my intentions and instincts and many of my actions may have been right, I was making whatever the task was more difficult than it had to be.

One could argue that the luxury industry’s continued robust performance is coming despite missing some large opportunities.

A recent report by wealth researcher Wealth-X found some 185,000 households worldwide with a Net Worth of at least $30 million. These families – commonly referred to as UHNW – or Ultra High Net Worth – cumulatively are worth between $25 Trillion and $40 Trillion depending on which report one reads.

They are without doubt the “heavy users” of luxury goods and services simply because they can afford to be. After all, who else is spending $5,000 a night on suites at luxury hotels and buying $50,000 watches or $80,000 necklaces. A 2011 Washington Post research project found that U.S. households in six major markets couldn’t make ends meet despite having a Household Income of $250,000, a level considered fairly robust by media buyers.


“ Ultra High Net Worth’s are without doubt the “heavy users” of luxury goods and services simply because they can afford to be.”


The kicker was that these families didn’t even have luxury cars, didn’t buy designer fashion and had an annual vacation budget of just $3,000. In New York this Mass Affluent family was running a deficit of nearly $30,000. In other words, there was very little upside marketing to these consumers. Hundreds of brands were competing for one or two luxury purchases per year, generally for no more than a couple thousand dollars.

Greg Furman, the Founder and CEO of The Luxury Marketing Council recently told me, “luxury companies need to be more focused on selling more watches to the person who already buys a half dozen watches a year than the first watch to a person who can’t pay his rent.” He added, that as luxury companies extend their product ranges they need to invest more in educating UHNW consumers, including advertising. He uses the term “share of wallet.”

As part of a white paper I am currently working on, we are trying to understand how much these UHNW households currently spend cumulatively across a variety of luxury product and service categories – and how deep their pocket books truly are. In other words, how much more could they spend if properly educated and motivated.


“ Hundreds of brands were competing for one or two luxury purchases per year, generally for no more than a couple thousand dollars ”


The categories we are looking at include automotive, jewelry, watches, fashion and accessories, hotels, resorts, spas, villas, adventure travel, yacht rentals (not purchases), renovating and refurnishing residences and collectibles.

Obviously there is a lot of guesswork with the formulas but using research we did with Prince & Associates that included personal interviews with over 600 private jet and fractional jet owners, the current figure comes out at around $300 billion annually. That would equate to about $1.6 million in spending for each of these 185,000 UHNW households. It would also register at only around one percent or less of Net Worth.

Interestingly, as we look at numerous other surveys of luxury lifestyle spending from Ipsos, American Affluence Research Center and Unity Marketing with Mass Affluent consumers to create a range of scenarios, we believe that the potential spending of these UHNW families could be over $2 trillion!

For the Global CEO of any major luxury brand or conglomerate, I feel pretty sure they all have well developed strategies for China and E-marketing. These are considered key areas all luxury companies need to be focused on. However, I am not sure if I would find any of these same, successful companies having a Global UHNW Marketing Officer responsible for a Global UHNW strategy with a single focus to get more spend from these UHNWs and centralized authority.


“ Luxury brands have well developed strategies for China & e-Marketing, but how many have a global UHNW strategy?”


Yes, I know there are the polo sponsorships and at the country level lots of wining and dining and event invites for key customers. What I think has slipped through the cracks is these best prospects are now not in town or even in the country most of the time. I always like to say “private jets set the rich people free.” And in fact, one Richemont executive I met with referred to this group as “Homeless with 20 Homes.” Burberry has dubbed them the TLCs, short for Traveling Luxury Consumers. Global Nomads is another moniker.

Mykolas D. Rambus, CEO of Wealth-X, was right to the point: “The growing trend of the ultra wealthy choosing to establish residences in the most cosmopolitan cities around the world has implications for all professionals operating in the financial services and luxury sectors. Professionals need to understand these ultra wealthy clients, who defy being categorized by geographical location, should they wish to create consistent strategies of approach.”

Luxury houses today are still structured on a country basis with lots of country management and lots of local focus. It is not uncommon to be questioned, ‘what if your readers buy when they are in another country?’ I do understand everyone has their own revenue targets to hit. Being a global magazine, it means that some readers who are ‘based’ in the U.S. may in fact buy when they go to London or Hong Kong but at the same time readers from South America, the Middle East or Europe probably do a good deal of their buying in the U.S.


“ It’s easier to sell lots of stuff to rich people than poor people – Milton Pedraza, CEO, The Luxury Institute.”


It underscores the point that the luxury companies are enjoying success ‘despite themselves.’ Clearly, as Rambus notes, these UHNW families live a global lifestyle. A recent Financial Times piece profiled a couple who hop from London to Venice for lunch if it looks like a rainy day, and reported that today’s Super Rich follow the good weather, good schools, good tax regimes and good entertainment as they fly around on their private jets.

Milton Pedraza, the CEO of Luxury Institute once told me, “It’s easier to sell lots of stuff to rich people than poor people.” Even if the numbers I am looking at are wrong by double, luxury brands are leaving about $850 billion in sales in the pockets of UHNW customers who just need to be motivated to spend. Either way, it’s a bigger opportunity than China, bigger than the Internet, and right out there every day around the world at the nearest FBO. That’s the acronym for private jet terminal.


To further investigate Wealth & Affluence on Luxury Society, we invite your to explore the related materials as follows:

The Dangers of Homogenising the Wealthy: Ledbury Research
Key Insights from The Wealth Report 2012
Luxury’s Mixed Messages in a Yo-Yo Economy


Douglas Gollan is Group President and Co-Founder of Elite Traveler Media Group, launched in 2001, based in New York. The company publishes Elite Traveler, the private jet lifestyle magazine, with BPA audited distribution in over 100 countries worldwide by private jet.

It also publishes an Asia Edition of Elite Traveler, Elite Traveler Superyachts, Elite Traveler Hotels/Resorts/Spas Annual, Elite Traveler Annual Watch Guide and hosts over 60 Destination Guides for UHNW consumers at Elitetraveler.


© Luxury Society, How The Luxury Industry Is Leaving $1.7 Trillion On The Table, 28 June 2012, by Douglas Gollan.


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THE LATEST APPOINTMENTS: CARTIER, CACHAREL & CHRISTIAN DIOR

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Raf Simons has been appointed as creative director of Christian Dior, succeeding John Galliano.

 

The Latest Appointments at Starwood Hotels, Christie’s, Bergdorf Goodman, Cartier, YSL Beauté, Sonia Rykiel, PPR, Bentley Motors, Akris & Cacharel

The Dior saga is finally over. After one year of speculation – where everyone from Riccardo Tisci, Marc Jacobs, Kayne West, Alber Elbaz, Alexander Wang and even the disgraced Galliano himself were rumoured to be taking the top spot – Raf Simons has been confirmed to head womenswear and haute couture, whilst Kris Van Assche continues to head design at Dior Homme.

Over at Richemont, group manufacturing director Jan Rupert is stepping down to focus on other activities and to broaden his remit within the family of companies controlled by Johann Rupert. Whilst Mr. Rupert will remain an executive director of the group, Richard Lepeu, Richemont’s deputy chief executive, will oversee the group’s manufacturing strategy as of April 1.

At PPR, Gucci America’s president Laura Lendrum has resigned to pursue other opportunities according to WWD. Ms. Lendrum joined Gucci in 1997, and moved to Yves Saint Laurent America as president in 2001. Gucci president and chief executive officer Patrizio di Marco will oversee the Americas region in the interim until the company names a successor.

Raf Simons, Creative Director, Dior

Ending a year of speculation, Belgian designer Raf Simons has been named as the next artistic director of Christian Dior, following his recent exit from Jil Sander. Mr. Simons will be in charge of haute couture, women’s ready-to-wear and accessories, starting with the couture show in July, while keeping his eponymous men’s line. Kris Van Assche remains in his position at Dior Homme.

Source: NYTimes
Stanislas de Quercize, CEO, Cartier

Cartier has appointed Stanislas de Quercize to take over from Bernard Fornas as chief executive of top-of-the-range jewellery and watchmaker Cartier. Mr. De Quercize is currently serving as CEO of fellow Richemont subsidiary Van Cleef & Arpels, and will replace Mr Fornas at the end of the year, when he is due to retire.

Source: Reuters
Joshua Schulman, President, Bergdorf Goodman

Following his departure from Jimmy Choo in late 2011, Joshua Schulman has been named president of U.S. luxury retailer Bergdorf Goodman. Prior to his tenure as CEO of Jimmy Choo, Mr. Schulman served as executive vice president at the Gucci Group, where he oversaw worldwide merchandising and wholesale for Yves Saint Laurent, and served as worldwide director of Gucci women’s ready-to-wear.

Source: WWD
Stephan Bezy, General Manager, YSL Beauté

Joining the Management Committee of L’Oreal Luxe, Stephan Bezy has been appointed International General Manager of Yves Saint Laurent Beauté. Mr. Bezy joined L’Oréal in 1991 and has since served as global President at Redken, International General Manager at Shu Uemura and General Manager of Cacharel.

Source: Premium Beauty News
Management Team, Starwood Hotels & Resorts

Starwood has restructured its executive team following the retirement of three senior leaders, Matt Avril, President of the Hotel Group; Denise Coll, President of Starwood North America; and Miguel Ko, Chairman and President of Starwood Asia Pacific.

Currently president and CEO of Starwood Vacation Ownership, Sergio Rivera, has been promoted to co-president of Starwood Americas. Osvaldo Librizzi who assumes primary responsibility for Latin America joins him as co-president of Starwood Americas. Stephen Ho, currently Senior Vice President of Acquisitions and Development for Starwood China, has been promoted to President of Asia Pacific. And finally currently head of Starwood’s operations for China, Qian Jin, has been promoted to the title of President of Greater China.

Source: PR Newswire
Vincent Gillet, Brand Chief, W & Le Meridien

Starwood has appointed Vincent Gillet as brand chief for W Hotels and Le Meridien brands, replacing Eva Ziegler. Mr. Gillet has spent the last two decades working on well-known luxury brands for LVMH, Chanel and Pernod Ricard, followed by a three-year tenure as chief marketing officer at Six Senses Resorts & Spas.

Source: USA Today
Eric Langon, Managing Director, Sonia Rykiel

Eric Langdon has been appointed as managing director of Sonia Rykiel effective April 16, where he will report to CEO Jean-Marc Loubier, also CEO of Fung Brands, which acquired an 80 per cent stake in the French fashion house in February. Most recently Mr. Langon served as chief operating officer at Lancel.

Source: WWD
Katrina Burchell, Intellectual Property Director, PPR

Katrina Burchell has been charged with the task of re-organising and monitoring PPR’s Intellectual Property function, joining the French conglomerate as Intellectual Property Director. Prior to her appointment, Ms. Burchell headed the Trademarks, copyrights and domain names at Unilever group.

Source: 4-Traders
Emile Rubenfield, CEO, Carolina Herrera

Emilie Rubinfeld has been appointed vice president of global marketing and communications, in a newly created title at Carolina Herrera. Most recently Ms. Rubinfeld served as senior vice president of marketing and communications at Akris, following tenure as vice president of marketing at Giorgio Armani Corp.

Source: WWD
Jinqing Caroline Cai, Managing Director, Christie’s China

Auction house Christie’s has appointed its first managing director in China, Jinqing Caroline Cai, effective June 1. A founder of the Brunswick Group, a global PR firm in Beijing, Ms. Cai will manage the office and oversee all activities involving the Chinese marketplace.

Source: JustLuxe
Katie Reed, Associate Vice President, Akris

Katie Reed has joined Akris as associate vice president of marketing and communications, following service at Patek Philippe North America, as public relations and communications director. Ms. Reed will oversee all areas of marketing, advertising, public relations and special events in the U.S.

Source: WWD
Kevin Rose, Sales & Marketing Chief, Bentley Motors

As part of a reshuffle of senior marketers within Volkswagen Group UK, Kevin Rose has joined Bentley Motors as its new board level sales and marketing chief, taking over from Alasdair Stewart. Mr. Rose joins from parent group Volkswagen’s China business, where he was executive vice president for sales.

Bentley has also named Andrea Baker as head of media relations, who most recently served as head of public relations with Porsche Cars Great Britain.

Source: Marketing Week
Source: JustLuxe.com
Pascal d’Halluin, CEO, Cacharel

Pascal d’Halluin has been appointed chief executive officer of Cacharel, succeeding managing director Marc Ramanantsoa, effective March 19. Mr. d’Halluin worked with L’Oréal for eight years before taking over as CEO of Lee Cooper France in 1994.

Source: Just Style
Michael Burgess, President, Saks Direct

Saks Inc. has named Michael Burgess president of Saks Direct, reporting to Denise Incandela, executive vice president and chief marketing officer. Mr. Burgess was most recently led merchandising, marketing, consumer information technology and other functions of the consumer division of FTD, the florist, which is owned by United Online Inc.

Source: WWD
Michael Kingston, SVP & CIO, Neiman Marcus

Neiman Marcus Group has named Michael R. Kingston senior vice president and chief information officer, succeeding Phillip Maxwell, who earlier this month announced his retirement. Earlier, Mr. Kingston served as vice president, applications at Coach Inc. and international director of information services at LVMH Moët Hennessy Louis Vuitton.

Source: WWD

For more in the series of The Latest Appointments, please see our most recent editions as follows:

The Latest Appointments: Givenchy, Jil Sander & Yves Saint Laurent
The Latest Appointments, Pucci, Tod’s & Girard-Perregaux
The Latest Appointments, Bulgari, Labelux & Net-a-Porter


© Luxury Society, The Latest Appointments: Cartier, Cacharel & Christian Dior, 17 April 2012, by Sophie Doran


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HAPPY BIRTHDAY: EPHRAIM MOLINGOANA

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2012 is set to be a particularly important year for South African menswear designer Ephraim Molingoana, not only because he celebrates his 41st birthday today but moreover because this year marks the 10th anniversary of his label, Ephymol.

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Ephymol S/S 2011 Collection, Joburg Fashion Week 2011.

And with the 10th anniversary of Ephymol the designer is steering the label in a new creative direction whose defining characteristics will be its trademark attention to detail and master tailoring, bespoke fabrics, prints and cuts and significantly increased brand marketing – already, Ephymol is available at select Edgars department stores and boutiques in Italy.

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So, as our founder’s most preferred menswear designer celebrates his 41st birthday, we raise a glass – literally – and salute a man who has been a much required answer to many a men’s desire for a return to male elegance and dandyism and all without the unfortunate contemporary associations with femininity.

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HAPPY BIRTHDAY, EPHRAIM!


Photography © Simon Deiner SDR Photo and African Fashion International.


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MENSWEAR A/W ‘12: EXTREME LUXURY IN CLIMATIC AUSTERITY

“There are at least two ways in which you can deal with what’s going on in the world. You can confront it right up close, or you can escape into a dream world in your gold bullion embroidered Dolce & Gabbana cape.”

Whilst Tim Blanks may have been referencing Dolce & Gabbana’s Baroque inspired, chandelier lined catwalk, he also articulated the dichotomous mix of climatic austerity and extreme luxury that categorised the Autumn Winter 2012 menswear shows in Paris and Milan.

The creative and corporate alike seemed acutely aware of the storm clouds lingering over the European economy. A conversation difficult to avoid when menswear presentations were immediately preceded by Standard & Poor’s decision to downgrade the sovereign credit ratings of both Italy and France. Yet the mood did not suffer any collateral pessimism, nor did brands seek to hide from the luxuries they are best known for.


“ A dichotomous mix of climatic austerity and extreme luxury categorised the Autumn Winter 2012 menswear shows in Paris and Milan.”


Instead houses championed the hyper luxurious. Gold filigree threads on Baroque-inspired evening suits at Dolce & Gabbana, golden studs and tuxedos encrusted with crystals at Versace, gold on gloves and leather bags at Burberry Prorsum. Even at Calvin Klein, widely known for its minimalist approach to luxury, blazers could be found in ostentatious alligator.

“Luxury! That’s it, pure luxury,” quipped menswear director Kim Jones, when The Guardian pressed him on his overall mood toward his AW12 collection for Louis Vuitton.

“We were looking at lots of Japanese references, so we were also looking at lots of Japanese fabric companies. We came across this mill that could only make twenty centimetres a day – all done by hand – and I just thought that was the ultimate luxury in terms of suiting,” Jones reiterated to Style.com.

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(L – R) Gold filigree at Dolce & Gabbana, Alligator suiting at Calvin Klein and crystal tuxedos at Versace.

The combination of the expensive and hedonistic, in a time of general frugality and preservation, seems almost nonsensical. Yet these collections – for both their timing and accents of flamboyance – make nothing other than perfect business sense. Whilst the greater economy suffers, luxury has prospered, and few segments are prospering as hard and fast as menswear.

Consultancy Bain & Co estimates the luxury menswear market to be worth 180 billion euros ($240 billion) and growing at about fourteen per cent a year, nearly double that of luxury womenswear at eight per cent (Reuters).

Jean-Marc Bellaiche, consultant at Boston Consulting Group, believes that the market has traditionally been underserved, suggesting that menswear “remains very underdeveloped compared to the woman’s market, so there is a lot of catching up to do.”


“ The luxury menswear market is worth €180 billion euros and growing at about 14% a year, nearly double that of luxury womenswear.”


Whether chief creatives are taking note of such predictions, or simply basking in the glow of 2011’S revenues, design seems to be making some space for the commercially risky. Bread-and-butter casual wear and suiting remained, but far more houses seemed more at ease experimenting with colour, embellishment and shape, than previous seasons.

Dries Van Noten expressed some commercial trepidation in launching his ‘psychedelic elegance’ collection. “It’s a risk. I’m fully aware, I’m actually quite nervous now,” he shared with Tim Blanks. “I just said ’let’s go for that, lets bring in colour, lets bring in fun’. I’m fully aware that it’s a risk to go that way, but I just wanted to do that.”

One could also muse that the importance of new geographies, particularly China and India, will begin to pave the way for more experimental and extravagant menswear. After all, these are not cultures that have been built on carbon black, achingly slim Hedi Slimane suits.

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Some of the more experimental looks from Dries Van Noten’s ‘psychedelic elegance’ collection.

Not that such suits won’t have a place in the east, particularly as the regions modernise. But hopefully there will also be space for lavish embroidery, colourful silks and less-tested-in-the-west silhouettes, incorporating elements regional traditional dress. Hermès have embraced the production of the Sari, why not menswear next?

The segment is also blooming at a particularly fertile time for luxury goods – current economic woes don’t yet seem to carry the social connotations that accompanied 2008’s GFC. In short, shopping hasn’t yet seemed to have gone out of fashion.

“Everyone stopped shopping in 2008 because there was a crisis of confidence; everyone’s financial portfolio was hit,” remarked the Business of Fashion’s Imran Ahmed to CNN. “And, even if you did have money and weren’t that affected by everything, it was seen as a bit crass to go out spending on luxury goods. Now that a certain amount of time has elapsed, I think that hesitation to shop has dissipated somewhat and the big spenders are out spending again.”

With expected double-digit growth in 2012, as well as an expanding range of products to better serve segments and regions, Menswear looks to be the luxury category to beat in the coming twelve months. And if recent collections are anything to go by, they will best positioned to satiate many different palettes.


To further investigate Menswear and Fashion Week on Luxury Society, we invite your to explore the related materials as follows:


© Luxury Society, Menswear AW12: Extreme Luxury in Climatic Austerity, 23 January 2012, by Sophie Duran.


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