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2010 Luxury Trend Report

  1. 2010  Luxury  Trend  Report  
  2. 2010  Luxury  Trends   Indian  Jones-­‐inspired,  five-­‐figure  vaca;ons,  the  Chinese   economic  boom,  social  network-­‐themed  mar;ni  lounges,  the   perceived  value  of  discounted  pres;ge  brands.  The  2010   luxury  market  is  all  over  the  map  aFer  a  year  of  budget-­‐ ;ghtening  and  nervous  nail-­‐bi;ng  amid  the  Great  Recession.   Purveyors  of  all  things  pres;ge  are  learning  lessons  and  re-­‐ strategizing  to  emerge  on-­‐top.     To  sort  through  and  make  sense  of  luxury's  re-­‐emergence  in   2010,  we  iden;fied  key  trends  to  navigate  not  only  today's   market,  but  prepare  for  tomorrow:   The  State  of  Luxury  Today  -­‐-­‐  In  2009,  the  Great  Recession   brought  great  panic  to  the  luxury  industry.  Coach  and   Nordstroms  bit  the  bullet  and  slashed  product  prices,  and   unlike  what  some  experts  predicted,  the  pres;ge  brands  have   retained  their  luster  and  thrived.  Other  high-­‐end  brands  are   hedging  losses  in  America  and  Europe  by  entering  the   booming  Chinese  market.  Boomers  are  entering  re;rement   while  Gen  X  isn't  large  enough  to  support  their  historical   spending.  From  a  global  lens,  the  luxury  market  is   experiencing  tectonic  shiFs  that  show  extraordinary  short-­‐ term  gains,  but  are  profits  sustainable?   The  Golden  Wall  of  China  -­‐-­‐  The  Chinese  market  is  trying  to   find  its  pres;gious  iden;ty  among  established  luxury  brands   in  Europe  and  America.  In  fact,  many  affluent  Chinese  reject   "Made  in  China"  products  in  lieu  of  superior  imported  quality.   "China  is  not  an  easy  market.  Chinese  consumers  are  very   demanding;  they  don't  like  'made  in  China'  products,"  said   Florent  Perrichon,  CEO,  Cerru;.  Much  like  Amish  youth  trying   to  find  their  iden;ty,  Chinese  too  will  undergo  a  cultural   transforma;on  whereby  "Made  in  China"  will  be  less   synonymous  with  ;cky  tacky  and  more  with  rich  cultural   heritage,  entrepreneurial  spirit  and  quality.     Luxury's  Love  Affair  with  High-­‐Tech  -­‐-­‐  Robot  housemaids,   electric  cars,  personal  commuter  airplanes  and  all  the   insanely  impossible  kitchen  gadgetry  imaginable.  For  nearly  a   century,  the  World's  Fair  has  illustrated  American's  strong   associa;on  between  luxury  and  technology.  Tech  enhances   our  ability  to  connect  with  the  world  and  how  the  world   connects  with  us.  It  maximizes  our  ;me  and  extends  our   pleasure.  It  helps  us  navigate  a  world  flooded  in  informa;on   while  libera;ng  us  from  its  complexi;es.     The  Luxury  of  Once-­‐In-­‐A-­‐LifeBme  Experiences  -­‐-­‐  You  are   assigned  a  mission  in  which  you  will  train  with  former  M16   agents.  Your  journey  will  take  you  around  the  world  where   you  must  complete  challenging  tasks  that  require  both  brains   and  brawn.  Do  you  wish  to  accept?  Many  high  net  worth   individuals  are  asking,  where  do  I  sign  up?  The  seven-­‐figure   Indiana-­‐Jones-­‐inspired  vaca;on  is  one  of  many  thrill-­‐seeking   experiences  coordinated  by  the  members-­‐only  luxury   concierge  service,  Quintessen;ally.  Quintessen;ally  is  leading   a  trend  that  curates  not  just  extravagant  vaca;ons,  but   extraordinary  experiences  that  yield  incredible  stories.   Recession-­‐Proof  Luxury:  Timelessness  &  Enduring  Quality  -­‐-­‐  If   you  had  a  choice  between  buying  one  uber  trendy  dress  this   season  and  another  trendy  dress  next  or  buying  a  ;meless   dress  this  season  and  a  ;meless  cardigan  next,  which  would   you  choose?  At  year  two,  you  could  either  have  one  dress  or   2  2010  Luxury  Trend  Report    
  3. 2010  Luxury  Trends   one  dress  and  one  cardigan.  Inves;ng  in  ;meless  luxury  items   is  a  way  to  maximize  spending  dollars  in  recessionary  ;mes   while  maintaining  an  affluent  lifestyle.  More  and  more,  Gen  X   men  and  Gen  Yers  consider  luxury  an  investment  and  some   pres;ge  brands,  such  as  Hermes,  are  benefi;ng  -­‐-­‐  even  when   ;mes  are  lean.     Luxury:  For  What  It's  Worth  -­‐-­‐  What  makes  a  pair  of  Jimmy   Choo  heel  sandals  worth  $1,150?  Or  a  $17,500  price  tag  for  a   night  at  the  Dunton  Hot  Springs?  In  essence,  what  is  luxury   worth?    Everyone  perceives  products  and  service  value   differently.  You've  likely  been  in  Gucci  or  Hermes  and  said,   really?  A  shoe-­‐shaped  Gucci  key  ring  is  $170.  Really?  For   some,  it's  worth  it.  As  everyone  derives  value  differently,   there  are  three  main  criteria  that  help  us  decide  whether  a   luxury  product  or  service  is  worth  it.   Personal  Renewal  with  Purpose  -­‐-­‐  All  luxury  fulfills  an   emo;onal  need.  OFen  ;mes,  that  need  is  social  relevancy   and  status  among  peers.  Think  about  what  a  Louis  Vuiion  bag   says  about  a  person:  affluence  and  they  should  be  recognized   for  it.  There  is  a  rising  trend  in  luxury  that  stretches  beyond   superficial,  Louis  Vuiion  and  D&G  status  symbols,  and  speaks   to  rejuvena;on,  personal  energy  and  sustainability.  No,   millionaires  are  not  holding  hands  around  a  camp  fire,  singing   Koombaya.  This  emerging  class  of  high  net  worth  individuals   seek  to  preserve  themselves  and  the  world  around  them.  Two   similar,  yet  different,  brands  capturing  this  rising  trend  are   Terrain  and  Lululemon  Athle;ca.   Passion  Immersion  Drives  Niche  Luxury  -­‐-­‐  A  recent  study  of   luxury  handbags,  featured  in  Psychology  Today,  suggests  once   the  price  exceeds  $300,  the  logo  decreases  in  size.  But  why   pay  more  for  a  brand  without  the  recogni;on?  Sterling  Lanier,   President  of  the  market  research  consultancy  Chaier,   performed  in-­‐home  case  studies  of  affluent  Gen  Yers  to   provide  insight.  In  one  of  Sterling’s  audience  tes;monials,  a   Gen  Yer  said  he  purchases  shirts  from  a  Sconsh  designer  with   around  three  small  stores  in  Europe.  With  only  a  small  colored   tag  to  iden;fy  the  designer,  he  gets  gra;fica;on  seeing  others   wear  the  Sconsh  brand.   3  2010  Luxury  Trend  Report    
  4. In  2009,  the  Great  Recession   brought  great  panic  to  the  luxury   industry.  Lower-­‐rung  affluents   ;ghtened  their  budgets,  slowed   luxury  spending,  causing  many   pres;ge  brands  to  consider  the   sinful  thought  of:  discoun;ng.  Coach   and  Nordstroms  bit  the  bullet  and   slashed  product  prices,  and  unlike   what  some  experts  predicted,  the   pres;ge  brands  have  retained  their   luster  and  thrived.  Other  high-­‐end   brands  are  hedging  losses  in   America  and  Europe  by  entering  the   booming  Chinese  market.  Boomers   are  entering  re;rement  while  Gen  X   isn't  large  enough  to  support  their   historical  spending.  From  a  global   lens,  the  luxury  market  is   experiencing  tectonic  shiFs  that   show  extraordinary  short-­‐term   gains,  but  are  profits  sustainable?   Nearly  across  the  board,  the  luxury   market  has  rebounded  aFer  a   recessionary  slump.  Global  luxury   sales  rose  15  percent  in  the  first   quarter  of  2010,  according  to  U.S.   consultants  Bain  &  Co.  Nearly  all   categories  are  in  the  black.  e-­‐ Commerce,  luxury,  jewelry  and   restaurants  saw  May  sales  rise  13.7   percent,  9.7  percent,  6.4  percent   and  2.8  percent,  respec;vely,   reports  Reuters.  Bricks  and  mortar   retailers  are  also  up.  Saks  countered   last  year's  loss  with  record  profits  in   the  past  quarter,  with  sales  up  6.1   percent  -­‐-­‐    and  an  astounding  395   percent  stock  increase.  Nordstrom   shares  skyrocketed  246  percent  over   last  year's  boiom.  Tiffany  &  Co's   global  strategy  benefited  them  with   interna;onal  sales  up  17  percent  in   the  most  recent  quarter  and  profit   up  nearly  fourfold.  How  have   pres;ge  brands  made  such  a   comeback?   If  the  recession  provided  any  key   lessons,  it's  the  value  of   diversifica;on.  Those  pres;ge   brands  with  all  of  their  eggs  in  one,   American  basket,  suffered  when  the   market  boiomed  in  2009.  Milton   Pedraza,  CEO  of  the  Luxury  Ins;tute,   termed  the  strategy  as  a  “self-­‐ imposed  limita;on.”  He  added  that   "overseas  markets  like  China  could   be  key  growth  engines  for  luxury   players  and  also  sees  Japan  as  a   'cash  cow'  for  those  brands  who  can   manage  costs  well."  Indeed,  Chinese   consumers  account  for  nearly  25   percent  of  global  luxury  sales,   followed  by  Americans,  Europeans   and  Japanese,  each  taking  around   20  percent  of  pie.  Many  large-­‐sized   luxury  brands  see  the  wri;ng  on  the   wall.   Taking  Pedraza's  advice,  historical   luxury  brands,  such  as  Hermes  and   LVMH,  have  bumped  up  profits  by   entering  the  Asia  market,  writes  Rob   Lever  of  AFP.  "Shiseido,  Japan's   largest  cosme;cs  firm,  expects  sales   of  its  high-­‐end  cosme;cs  to  grow  up   to  20  per  cent  a  year  in  China  over   the  near  term,  making  it  a  key  pillar   of  its  global  expansion  plans,"   reports  the  Economic  Times.  For   pres;ge  brands,  all  signs  are   poin;ng  to  Asia  right  now,  but  what   should  we  expect  for  the  future?   Global  luxury  goods  industry  sales   are  expected  to  grow  4  percent  in   2010  to  $195  billion  dollars  aFer  8   percent  decline  in  2009,  according   to  the  consul;ng  firm  Bain  &   Company.  Five  to  ten  years  out,  Gen   X  will  pick  up  the  torch  and  lead   luxury  spending.  As  Baby  Boomers   conserve  spending  in  re;rement,   Gen  X  will  be  the  primary  target  for   pres;ge  brands.  Some  experts   predict  Gen  X  cannot  support  Baby   Boomer's  historical  spending.  Gen  X   is  simply  not  a  big  enough  group  to   pick  up  the  slack,  writes  Rob  Lever   of  AFP.  Lever  suggests  Gen  Y  will  fill-­‐ in  the  gaps  leF  by  Gen  X.  "The  luxury   market  is  unlikely  to  regain  its  luster   un;l  around  2018  to  2020,  when  the   Millennials  born  aFer  1997  start   their  spending  sprees,"  he  writes.     If  this  genera;onal  shiF  occurs  as   Lever  predicts,  the  short-­‐term   profits  in  2010  will  serve  as  only  a   slight  up;ck  in  struggling  American   market.  Luxury  brands  will  have  to   shiF  focus  slightly  away  from  the   American  market  over  the  next   decade  to  sustain  growth.  The   recession  could  have  been  a  wake-­‐ up  call  for  luxury  brands  focused   en;rely  on  Western  markets,  and   considering  the  imposing   genera;onal  shiF,  they  should  look   East  for  answers.   The  State  of  Luxury  Today   4  2010  Luxury  Trend  Report    
  5. Devil's  Playground  is  a  documentary  that  captures   the  transforma;ve  period  in  a  young  Amish   person's  life,  when  they  must  decide  whether  to   stay  among  the  Amish  for  the  rest  of  their  lives,  or   join  the  "English."  This  period  is  called   Rumspringa  -­‐-­‐  the  Pennsylvania  Dutch  word  for   "running  around."  The  film  showcases  several   Amish  young  adults  going  through  Rumspringa,   who  drink,  smoke  and  even  get  hooked  on  meth   because  they  think  it's  what  the  "English"  do.   Their  "English"  reference  point  is  derived  from   stories  and  likely  tall  tales,  therefore,  some  Amish   destroy  their  lives  to  experience  the  exaggerated   "English"  perspec;ve.     China's  nouveau  riche  are  experiencing  a   Rumspringa  of  their  own,  but  careful  to  not  swing   too  far.  The  Chinese  market  is  trying  to  find  its   pres;gious  iden;ty  among  established  luxury   brands  in  Europe  and  America.  In  fact,  many   affluent  Chinese  reject  "Made  in  China"  products   in  lieu  of  superior  imported  quality.  "China  is  not   an  easy  market.  Chinese  consumers  are  very   demanding;  they  don't  like  'made  in  China'   products,"  said  Florent  Perrichon,  CEO,  Cerru;.   Much  like  Amish  youth  trying  to  find  their   iden;ty,  Chinese  too  will  undergo  a  cultural   transforma;on  whereby  "Made  in  China"  will  be   less  synonymous  with  ;cky  tacky  and  more  with   rich  cultural  heritage,  entrepreneurial  spirit  and   quality.     China's  Affluence  is  a  Brightspot  for  Global  Luxury   -­‐-­‐  Western  pres;ge  brands  are  not  unhappy  China   is  impor;ng  luxury.  Chinese  consumers  account   for  nearly  25  percent  of  global  luxury  sales,   followed  by  Americans,  Europeans  and  Japanese,   each  taking  around  20  percent  of  pie.  In  fact,   China  has  become  the  fulcrum  of  the  global   luxury  industry.  "The  euro  zone  is  a  sizable   market,  but  today  the  growth  reserve  is  in  the   emerging  countries,  and  par;cularly  in  China,   whose  demand  is  pulling  the  en;re  sector,"  said   Isabelle  Ardon,  head  of  Paris-­‐based  SG  Ges;on's   luxury  fund.  Even  while  the  Euro  market  is   suffering  amid  the  current  financial  crisis,  pres;ge   brands  are  finding  security  in  China's  growing   affluence.     Western  PresBge  Brands  Flock  to  China  -­‐-­‐  "For  the   Chinese  consumer,  luxury  is  synonymous  with   Western  heritage.  Today  there  are  no  big  Chinese   luxury  brands,  so  there  are  no  compe;tors,"   Ardon  said.  Western  brands,  Car;er,  Louis   Vuiion,  Hermès,  Tiffany  &  Co  or  Gucci,  have   established  a  foothold  in  China  through  years  of   brand  building  in  the  country,  reports  the  Wall   Street  Journal.  Indeed,  Tiffany  &  Co  reported  that   sales  at  its  Asian  stores  opened  last  year   (excluding  those  in  Japan)  had  risen  by  21  percent   during  last  quarter,  with  11  stores  in  China.  Jaguar   and  Land  Rover  are  opening  a  new  plant  in   Nanchang,  East  China  soon.  "Next  year,  Land   Rover's  sales  volume  in  China  will  surpass  Britain   as  the  world's  second,"  said  Scoi  Dicken,  the   general  manager  of  Land  Rover  China.   There  is  SBll  Room  for  "Made  in  China"  Luxury  -­‐-­‐   Alongside  Jaguar,  Land  Rover  and  Car;er  of   Western  pres;ge,  there  s;ll  resides  an   opportunity  for  "Made  in  China"  luxury.  "China's   high-­‐end  market  is  highly  fragmented,  with  no   single  brand  domina;ng  individual  product   categories,"  writes  the  WSJ.  "This  is  star;ng  to   change:  In  each  luxury-­‐goods  category,  five  brands   account  for  around  50%  of  the  market,  indica;ng   early  signs  of  concentra;on."  Shanghai  Tang  is  an   authen;c  emerging  pres;ge  fashion  house  that   appeals  to  Chinese.  The  brand  blends  China's   subtle,  delicate  cultural  heritage  with  Western   flare.  In  fact,  Fast  Company  dubbed  Shanghai  Tang   "China's  first  global,  upscale  brand."   As  China's  nouveau  riche  seile  into  their  new   status  as  purveyors  of  luxury,  expect  the  Shanghai   Tang's  -­‐-­‐  a  confluence  of  China's  rich  cultural   heritage,  entrepreneurial  spirit  and  vision  -­‐-­‐  to   make  in-­‐roads  into  the  country's  blossoming   luxury  market.  Authen;c  Chinese  heritage,  as   Tang  illustrates,  cannot  be  imported  and  presents   and  opportunity  for  "Made  in  China"  luxury  to   flourish.  AFer  all,  heritage  is  a  cornerstone  of   luxury  and  China  is  rich  with  it.   The  Golden  Wall  of  China   5  2010  Luxury  Trend  Report    
  6. Robot  housemaids,  electric  cars,  personal   commuter  airplanes  and  all  the  insanely   impossible  kitchen  gadgetry  imaginable.  For   nearly  a  century,  the  World's  Fair  has  illustrated   American's  strong  associa;on  between  luxury  and   technology.  Tech  enhances  our  ability  to  connect   with  the  world  and  how  the  world  connects  with   us.  It  maximizes  our  ;me  and  extends  our   pleasure.  It  helps  us  navigate  a  world  flooded  in   informa;on  while  libera;ng  us  from  its   complexi;es.     The  intersec;on  of  technology  and  luxury  is  more   apparent  and  pervasive  in  the  luxury  market   today  than  ever  before.  From  social  networking   restaurants,  to  vehicle  office  management   soFware,  to  accessorizing  luxury  products,   technology  is  the  height  of  luxury.  Today's  tech   speaks  to  several  pillars  of  luxury:  exclusivity,   badge  of  importance  and  an  immersive   experience.   In-­‐the-­‐Know  Luxury  Tech  -­‐-­‐  MiWorld  leverages  a   main  tenant  of  luxury:  exclusivity.  The  tech-­‐savvy   Jahannesburg  restaurant  taps  into  affluent  Gen   Yers  and  Gen  Xers  lust  for  exclusivity  and  techno-­‐ gadgetry.  To  par;cipate  in  MiWorld,  patrons  must   receive  an  invita;on  and  secret  code  to  register   online.  The  in-­‐the-­‐know  customers  can  visit   MiWorld's  modern  cocktail  bar,  MiBar  Mar;ni  or   the  sophis;cated  cocktail,  champagne  and  wine   bar,  MiLounge  Mar;ni.     When  patrons  enter  the  door,  they  must  log  in  -­‐-­‐   much  like  Facebook  or  FourSquare.  Once  inside,   users  can  play  with  interac;ve,  touchscreen   MiTables,  where  they  can  chat  with  other  tables,   sign  into  Facebook,  view  the  menu  and  access   exclusive  content  and  offers.       Complete  Tech  Immersion  -­‐-­‐  Car  phones  were  the   height  of  luxury  at  the  dawn  of  the  mobile  phone   era.  High-­‐power  CEO's  tooling  around  in  company   limos  epitomized  luxury  nearly  a  two  decades   ago.  Hartman's  System-­‐On-­‐a-­‐Chip  (SOC)  is   ushering  auto  tech  into  a  new  age  of  connec;vity.   Hartman  is  developing  a  premium  automo;ve   infotainment  system  for  entry-­‐level  luxury   vehicles.     SOC  enables  customers  to  integrate  smartphone   devices  (iPhone,  Blackberry,  Android)  to  deliver   mobile  office  features  within  their  vehicle.  That   means  e-­‐mail,  SMS,  tex;ng  and  calendar   func;ons  all  within  arms  reach.  That's  just  the   beginning...  SOC  delivers  3-­‐D  route  graphics,  real-­‐ ;me  traffic  updates,  latest  map  info,  construc;on   zone  no;fica;ons,  speed  limits,  etc.  Though  there   are  arguably  many  hazards  with  such  a  system,   SOC  epitomizes  auto  luxury.   Tech  Badge  of  Luxury    -­‐-­‐  “Although  Apple  did  not   set  out  to  be  a  luxury  brand,  it  exhibits  most  of   the  quali;es  that  luxury  brands  should  strive  for   in  the  21st  century,”  says  Milton  Pedraza,  Luxury   Ins;tute  CEO.  In  its  quest  for  the  most  beau;ful,   awe-­‐inspiring,  user-­‐friendly  device,  Apple  created   a  leading  luxury  device.  The  tech  company   “delivers  fabulous  product  design,  unbeatable   func;onality,  and  a  powerful  in-­‐store  experience   to  consumers  of  all  ages  that  many  luxury  brands   lack."     As  with  many  pres;ge  brands,  accessories  makes   the  product  pop  and  serves  as  a  badge  of  your   personality.  iSobre  knows  this  more  than  anyone.   iSobre's  offers  an  iPad  made  of  100  per  cent   leather,  with  double  s;tching  all  around  with  a   turned-­‐edge  finish  and  two  blue  leather  central   buions.  The  iSobre's  Bumble  Bee  iPad  case  tells   the  world  not  only  do  you  love  sexy  tech,  but  you   know  how  to  dress  it  up.     American's  associa;on  between  all  things  tech   and  luxury  has  accelerated  at  an  astonishing  rate   since  the  1950s  World's  Fair.  In  fact,  even  many   non-­‐affluent  individuals  splurge  on  a  $300   smartphone  with  a  $100  monthly  plan.  A   smartphone,  tablet,  high-­‐tech  soFware  system  for   your  car  or  an  invite  into  a  members-­‐only  cocktail   lounge  are  ways  individuals  -­‐-­‐  non-­‐affluent  and   high  net  worth  individuals  alike  -­‐-­‐  display  status.   Much  like  a  robot  housemaid  in  the  1950s  World's   Fair.   Luxury's  Love  Affair  with  High-­‐Tech   6  2010  Luxury  Trend  Report    
  7. You  are  assigned  a  mission  in  which  you  will  train   with  former  M16  agents.  Your  journey  will  take   you  around  the  world  where  you  must  complete   challenging  tasks  that  require  both  brains  and   brawn.  Do  you  wish  to  accept?  Many  high  net   worth  individuals  are  asking,  where  do  I  sign  up?   The  seven-­‐figure  Indiana-­‐Jones-­‐inspired  vaca;on   is  one  of  many  thrill-­‐seeking  experiences   coordinated  by  the  members-­‐only  luxury   concierge  service,  Quintessen;ally.   Quintessen;ally  is  leading  a  trend  that  curates  not   just  extravagant  vaca;ons,  but  extraordinary   experiences  that  yield  incredible  stories.   "These  days  people  are  looking  for  those  once-­‐in-­‐ a-­‐life;me  moments,"  says  Quintessen;ally's   founder,  Aaron  Simpson  to  the  WSJ.  "Genng  a   peek  into  a  closed-­‐off  sector  of  the  pyramids  or   cruising  through  Europe  in  a  Bentley  can  be  a  very   different  experience  than  your  average  vaca;on."   Indeed,  extreme  luxurious  vaca;ons  are  less   about  pampering  and  island  getaways  and  more   about  access  to  exclusive  experiences.       “Our  luxury  travelers  are  fascinated  by  the  history   in  Israel  and  nearby  Turkey  and  really  want  to   have  in-­‐depth  cultural  experiences,”  says  Ashley   Isaacs  Ganz,  founder  of  Ar;sans  of  Leisure  Travel   to  the  Luxury  Ins;tute.  Ganz  explains,  his  high   net-­‐worth  clients  seek  thrilling,  unexploited   experiences,  such  as  ren;ng  a  rehabbed  ghost   town  in  the  Colorado  wilderness  or  pay  $17,500  a   night  for  the  Dunton  Hot  Springs.   Ar;sans  of  Leisure  Travel  and  Quintessen;ally   understand  the  power  of  once-­‐in-­‐a-­‐life;me   experiences  and  re-­‐experiencing  them  through   stories.  More  unique  stories  you  have,  the  more   interes;ng  you  become.  For  instance,  who  would   have  beier  life-­‐stories:  dare-­‐devil  billionaire   Richard  Branson  or  tech  tycoon  Bill  Gates?  Sure,   Gates  could  wax  poe;c  about  soFware  systems,   but  Branson  could  regale  you  with  stories  of  hot   air  balloon  races  and  sky  diving.     More  affluent  individuals  are  searching  for   Branson-­‐esque  adventure  that  pair  risk  (exo;c   cultural  explora;ons)  with  reward  (fascina;ng   stories)  to  yield  incredible  experiences.  It's  about   finding  your  passion  -­‐-­‐  whether  it's  an  Indiana   Jones  adventure  or  archeologist  -­‐-­‐    and  realizing   the  life  you  could  have  had  through  exclusive   experiences.  It's  not  enough  to  put  your  mind  on   auto  pilot,  if  you  dreamed  of  flying  in  an  F-­‐47,  you   are  the  pilot.  And  concierge  services,  such  as   Quintessen;ally  and  Leisure  Travel,  are  making   that  possible.     The  Luxury  of  Once-­‐In-­‐A-­‐Life;me   Experiences   Image by Rob Owen-Wahl from Stock.Xchng 7  2010  Luxury  Trend  Report    
  8. If  you  had  a  choice  between  buying  one  uber   trendy  dress  this  season  and  another  trendy  dress   next  or  buying  a  ;meless  dress  this  season  and  a   ;meless  cardigan  next,  which  would  you  choose?   At  year  two,  you  could  either  have  one  dress  or   one  dress  and  one  cardigan.  Inves;ng  in  ;meless   luxury  items  is  a  way  to  maximize  spending  dollars   in  recessionary  ;mes  while  maintaining  an   affluent  lifestyle.  More  and  more,  Gen  X  men  and   Gen  Yers  consider  luxury  an  investment  and  some   pres;ge  brands,  such  as  Hermes,  are  benefi;ng  -­‐-­‐   even  when  ;mes  are  lean.     The  overall  luxury  market  fell  during  this   recessionary  dip.  It  dropped  10  percent  in  the  U.S.   and  8  percent  worldwide  in  2009.  Trendy  fashion   houses  such  as  Chris;an  Lacroix  went  belly-­‐up,   meanwhile  Hermès  managed  to  increase  sales  by   8.5  percent,  including  an  11  percent  bump  in  the   final  quarter  and  an  astonishing  20  percent  gain  in   the  Americas.  “Hermès  isn’t  about  trendy,”  said   Bob  Chavez,  the  CEO  of  Hermès’s  American   opera;on  to  the  Luxury  Ins;tute.  “It  isn’t  even  a   fashion  house.  We  are  a  house  of  craFsmanship.   We  are  commiied  to  making  products  that  have   an  enduring  quality  and  are  very  versa;le.”     Heritage,  classics  and  enduring  quality,  as  found   in  Hermes  and  Louis  Vuiion  products,  are   powerful  selling  points  to  during  recessionary   slumps  -­‐-­‐  par;cularly  to  Gen  X  men  and  Gen  Yers.   "I  believe  the  American  male  is  largely   uneducable.  We  need  to  focus  on  the  segment  of   males  that  have  real  discerning  taste,  but  I  can   also  say  that  even  the  undiscerning  American   male  is  a  smart  consumer.  That  person  is  looking   for  a  product  that  is  durable,  that  is  classic,  that   can  stand  the  test  of  ;me,"  says  Lew  Frankfort,   Chairman  and  CEO  of  Coach.  In  general,  classic   and  ;meless  value  makes  sense  when  considering   men's  fashion  versus  women's  fashion.     Women's  fashion  dras;cally  ebbs  and  flows  with   the  seasons  whereas  men's  fashion  receives   subtle  adjustments  on  exis;ng  designs.  For   instance,  slightly  v-­‐necked  shirts  or  a  small  whale   paiern  or  a  royal  blue  instead  of  a  faded  blue  or  a   European  cut  versus  relaxed  might  be  en  vogue   for  several  seasons.  For  the  most  part,  men's   fashion  remains  constant  and  therefore  inves;ng   in  one  product  could  last  many  more  seasons   than  women's  uber-­‐trendy  drop-­‐crotch  trousers  -­‐-­‐   reminiscent  of  Hammer-­‐;me.       Gucci  drop-­‐trousers  might  pique  the  interests  of   some  young  fashionistas,  but  for  the  most  part,   Gen  Yers  view  luxury  as  an  investment  -­‐-­‐  and  as   such,  have  a  discerning  eye  for  the  quality.  Unlike   its  genera;onal  counterparts,  Gen  Y  is  less   concerned  with  heritage  than  excep;onal  quality.   Heritage  brands  might  find  it  difficult  to  market  its   spot  in  history  to  turn  on  Gen  Y.  Instead,  luxury   brands  need  to  dial-­‐up  the  longevity,  both  in   quality  and  style,  of  its  products  to  make  their   brand  a  long-­‐term  investment.   Many  high  net  worth  individuals  are  savvy   shoppers  that  buy  less  on  impulse  and  think   about  purchases  in  a  calculated,  well-­‐thought-­‐out   manner.  As  we've  seen  in  2009,  trendy  fashion   houses  are  the  first  out  the  door  due  to  their   ephemeral  designs  while  enduring  quality   pres;ge  brands,  such  as  Hermes  and  Louis   Vuiion,  thrive.  Although  the  recovery  is  in  the   purview,  high  net  worth  individuals  are  s;ll  wary   of  spending  superfluously  but  interested  in   inves;ng  in  luxury.   Recession-­‐Proof  Luxury:   Timelessness  &  Enduring  Quality   Image by homero chapa from Stock.Xchng 8  2010  Luxury  Trend  Report    
  9. What  makes  a  pair  of  Jimmy  Choo  heel  sandals   worth  $1,150?  Or  a  $17,500  price  tag  for  a  night   at  the  Dunton  Hot  Springs?  In  essence,  what  is   luxury  worth?    Everyone  perceives  products  and   service  value  differently.  You've  likely  been  in   Gucci  or  Hermes  and  said,  really?  A  shoe-­‐shaped   Gucci  key  ring  is  $170.  Really?  For  some,  it's  worth   it.  "We  see  consumers  as  the  ul;mate  experts  on   brand  pres;ge  and  this  year  they  are  vo;ng  on   the  en;re  perceived  price/value  equa;on  of  the   brand  as  well  as  pres;ge,”  said  Milton  Pedraza,   CEO  of  the  Luxury  Ins;tute.  Brand,  quality,  rarity   all  play  a  role  in  how  we  valuate  pres;ge  products   and  experiences.  As  everyone  derives  value   differently,  there  are  three  main  criteria  that  help   us  decide  whether  a  luxury  product  or  service  is   worth  it:   Exclusive  Value  -­‐  Uniqueness   By  economic  standards,  value  is  derived  from   supply,  demand  and  barrier  to  entry.  Short  supply,   high  demand  and  high  barrier  to  entry  drives  the   luxury  market.  Accordingly,  only  a  select  few  high   net  worth  individuals  can  afford  to  buy  a  $1.42   million  Lamborghini  Reventon  or  even  a  $170   Gucci  key  ring.  In  fact,  only  20  individuals  own  the   Reventon,  as  they  are  so  rare.  Uniqueness  not   only  applies  to  products,  but  experiences  as  well.   Quintessen;ally  and  Ar;sans  of  Leisure  Travel   design  custom  vaca;on  packages  ranging  from   Indiana  Jones-­‐inspired  adventure  or  an  immersion   in  Turkey  and  Israeli  cultures.  For  those  high  net   worth  individuals  seeking  exclusive  value,  very   short  supply  weighs  heavier  than  quality.     Enduring  Value  -­‐  ArBsan  CraVsmanship   The  economic  recession  has  the  luxury  industry   returning  to  its  core:  enduring  quality  [LINK  TO   TIMELESSNESS  POST].  Hermes  and  Louis  Vuiion   have  flourished  amid  harsh  economic  storms,   while  other,  trendier  fashion  houses  such  as   Chris;an  Lacroix  have  gone  belly-­‐up.  Hermès   managed  to  increase  sales  by  8.5  percent,   including  an  11  percent  bump  in  the  final  quarter   and  an  astonishing  20  percent  gain  in  the   Americas.  In  fact,  Louis  Vuiion  held  an  event   called  “The  Art  of  CraFsmanship,”  to  educate   young  designers  on  the  importance  of  old-­‐ fashioned  values  such  as  ar;sanship  and  the   mastery  of  tradi;onal  skills  at  New  York  City's   Fashion  Week.     Price  Value  -­‐  Deal-­‐seekers   There  is  always  a  risk  to  integrity  whenever  a   pres;ge  brand  discounts,  says  Milton  Pedraza,   CEO  of  the  Luxury  Ins;tute.  A  discount  suggests   the  original  perceived  value  was  too  high  and   essen;ally,  you  were  genng  ripped  off.  Despite   Pedraza's  foreboding,  Guilt  Groupe  has  grown  by   leaps  and  bounds  by  offering  daily  flash  sales  to   its  "exclusive"  2  million  invite-­‐only  members.  Gilt   expects  to  pull  in  $500  million  in  revenue  in  2010   and  in  2009,  just  two  years  aFer  its  launch,  it   posted  revenues  of  $170  million.  To  counter   Pedraza's  point,  even  a  10  percent  discount  on   $1,150  Jimmy  Choo  shoes  ($1,035)  is  s;ll  not   accessible  for  most.     To  make  your  luxury  product  or  service  valuable,   you  must  first  start  with  those  consumers   passionate  about  your  category.  For  instance,   targe;ng  the  famous,  stylis;cally  challenged   Warren  Buffet  to  don  a  new  Gucci  suit  is   worthless,  as  Buffet  finds  liile  value  in  fashion.   But  marke;ng  an  Indiana  Jones-­‐inspired  vaca;on   to  thrill-­‐seeking  high  net  worth  individuals  like   Richard  Branson  is  smart.  To  obtain  a  high   perceived  value  in  your  customers  eye,  it's  about   finding  the  right  customers  and  accentua;ng  your   products  to  appeal  to  their  passion  points.     Luxury:  For  What  It's  Worth   Image by Svilen Milev from Stock.Xchng 9  2010  Luxury  Trend  Report    
  10. All  luxury  fulfills  an  emo;onal  need.  OFen  ;mes,   that  need  is  social  relevancy  and  status  among   peers.  Think  about  what  a  Louis  Vuiion  bag  says   about  a  person:  affluence  and  they  should  be   recognized  for  it.  There  is  a  rising  trend  in  luxury   that  stretches  beyond  superficial,  Louis  Vuiion   and  D&G  status  symbols,  and  speaks  to   rejuvena;on,  personal  energy  and  sustainability.     No,  millionaires  are  not  holding  hands  around  a   camp  fire,  singing  Koombaya.  This  emerging  class   of  high  net  worth  individuals  seek  to  preserve   themselves  and  the  world  around  them.  Two   similar,  yet  different,  brands  capturing  this  rising   trend  are  Terrain  and  Lululemon  Athle;ca.   Terrain,  an  outdoor  home  and  garden  store   owned  by  Urban  Ou|iiers,  is  a  calming  retreat   into  nature.  Chairs,  tables,  and  pots  look  as  if  it   grew  naturally  in  the  store.  Every  piece  of   furniture  seems  ar|ully  hand-­‐selected  from  yard   sales  and  foreign  ruins.  That's  not  to  say  you  feel   like  you're  in  a  junk  yard.     Terrain  taps  into  a  central  element  of  luxury:   rarity.  The  outdoor  home  and  garden  store  is   about  30  percent  re-­‐used  products,  but  the   company  carefully  selects  objects  that  embody   sophis;cated,  organic  style.  Each  object  feels   natural,  sustainable  and  hand-­‐selected  just  for   your  home.   Lululemon  Athle;ca  takes  a  different  approach  to   revitalizing  personal  energy.  Where  Terrain  seeks   to  rejuvenate  through  a  natural  environment,   Lululemon  takes  a  more  ac;ve  approach.     The  luxury  healthy  living  retail  site  promotes   physical  renewal  through  yoga,  Pilates  and  other   forms  of  exercise.  Its  exclusive  community  is   populated  by  former  Olympians  and  athletes  that   inspire  others  to  live  strong.  These  brand   ambassadors  promote  their  unique  healthy   lifestyle  through  images,  free  demonstra;ons  and   each  month  members  are  given  a  challenge.     Terrain  and  Lululemon  represent  an  emerging   segment  in  the  luxury  category.  Renewing   personal  energy  through  premium  products,  such   as  a  palace  door  ruin  from  Terrain  or  high-­‐end   exercise  gear  at  Lululemon,  is  only  half  the   picture.    Both  emerging  luxury  brands  offer  an  holis;c   branded  experience  either  through  a  relaxing  in-­‐ store  environment  or  empowered  online   community.  Terrain  and  Lululemon  are  making   luxury  less  superficial  and  more  sustainable  to   both  the  environment  (recycled  products  at   Terrain)  and  individual  energy  (yoga  and  pilates  at   Lululemon).     Personal  Renewal  with  Purpose   10  2010  Luxury  Trend  Report     Image vide Terrain Image vide Terrain
  11. A  recent  study  of  luxury  handbags,  featured  in   Psychology  Today,  suggests  once  the  price   exceeds  $300,  the  logo  decreases  in  size.  But  why   pay  more  for  a  brand  without  the  recogni;on?   Sterling  Lanier,  President  of  the  market  research   consultancy  Chaier,  performed  in-­‐home  case   studies  of  affluent  Gen  Yers  to  provide  insight.  In   one  of  Sterling’s  audience  tes;monials,  a  Gen  Yer   said  he  purchases  shirts  from  a  Sconsh  designer   with  around  three  small  stores  in  Europe.  With   only  a  small  colored  tag  to  iden;fy  the  designer,   he  gets  gra;fica;on  seeing  others  wear  the   Sconsh  brand.  As  consumers,  we  iden;fy   personali;es  by  the  brands  and  products  we   purchase.  And  as  Sterling's  tes;monial  illustrates,   we  strive  to  emerge  ourselves  in  brands  that  help   build  our  iden;;es.     Passion  Immersion  in  Products   For  many  high  net  worth  individuals,  luxury  is   about  finding  your  passion,  immersing  yourself  in   its  niche  culture  and  being  in-­‐the-­‐know.  Brands   are  picking  up  on  this  trend,  says  said  Luxury   Ins;tute  Chief  Execu;ve  Milton  Pedraza:  "Brands   that  are  seen  as  experts  in  a  few  categories  tend   to  manage  those  por|olios  very  well.  Sort  of   punng  one  egg  in  a  basket  and  then  taking  good   care  of  it."  Indeed,  Sterling's  research  suggests   two  pleasure  points  with  niche  brands.  Using   Sterling's  example,  the  affluent  Gen  Yers  is:  1)   passionate  about  Sconsh  fashion  and  2)  he   no;ced  people  like  him,  that  were  in-­‐the-­‐know,   wearing  the  same  designer.     Passion  Immersion  in  Services   Luxury  concierge  services  also  help  high  net  worth   individuals.  Instead  of  providing  rare  fashions,   they  cater  quite  the  opposite  service  by  offering   personalized,  once-­‐in-­‐a-­‐life;me  experiences.   These  experiences  are  typically  derived  from   individual  passion  points,  such  as  quest  for   adventure,  or  "if  I  wasn't  a  ____  I  would  have   been  a  ______."  For  instance,  if  you  wanted  to  be   an  archaeologist,  Ar;sans  of  Leisure  Travel  offers   a  Turkey  and  Israel  cultural  vaca;on.  Or,  if  you   would  have  been  a  dare-­‐devil,  Quintessen;ally   offers  an  Indiana-­‐Jone-­‐inspired  adventure.     Passion  Immersion  in  CommuniBes   Passionate  niche  communi;es  rally  around   purchasing  decisions,  as  in  Sterling's  illustra;ve   example,  but  also  connect  like-­‐minded  individuals   in  a  meaningful  way.  Lululemon  Athle;ca  excels  at   the  laier.  Lululemon  is  a  high-­‐end  athle;c  apparel   company  that  empowers  its  community  to   interact  and  engage  with  others  -­‐-­‐  using  the  brand   as  a  conduit.  The  athle;c  apparel  company  enlists   elite  ambassadors  -­‐-­‐  comprised  of  award-­‐winning   athletes,  such  as  Olympians  -­‐-­‐  who  wear  the   brand.  The  second  ;er  of  the  community  is  made   up  of  Lululemon-­‐veied  athletes  that  embody  the   brand's  healthful  living  philosophy.     When  we  look  at  where  people  allow  themselves   to  splurge,  it's  in  a  space  high  net  worth   individuals  are  passionate  about.  Whether  they   are  passionate  about  niche  designer  brands  or   once-­‐in-­‐a-­‐life;me  adventures  or  being  a  part  of   an  exclusive  athle;c  club,  they  spend  money  with   the  heart.  Products  and  services  help  consumers   feel  comfort  in  actualizing  their  dreams  of  being   in-­‐the-­‐know,  exploring  the  world  and  being  the   best  of  the  best.  Niche  luxury  offers  a  chance  for   high  net  worth  individuals  to  be  themselves,  in   the  most  fantas;c  way.   Passion  Immersion  Drives  Niche   Luxury   11  2010  Luxury  Trend  Report     Image via
  12. About the Authors
  13. Sparxoo builds sustainable relationships while delivering meaningful impact on projects with a purpose. We are expanding our network of socially minded leaders and hope to become a leader in this category. We create purposeful impact for the long-run Sparxoo is pioneering the next generation of business that is founded in the principles of: •  Social entrepreneurship •  Real responsibility •  Creative community •  Courageous leadership Branding Business Development Digital Development We fuse left-and-right brain thinking in: We build meaningful relationships 13  2010  Luxury  Trend  Report    
  14. 4400 West Spruce Street, #333 Tampa, FL 33607 646-345-1800 David Capece CEO Katherine Parsons Senior Strategist Ethan Lyon Senior Writer 14  2010  Luxury  Trend  Report