Retail Scope

RAPAPORT...

Luxury Sector to Change Dramatically
A new report published by retail analysts Verdict Research, part of the Datamonitor Group, found that a significantly different luxury retail sector will emerge at the end of the economic crisis. The firm forecasted a 6 percent decline in global luxury expenditures to $294 billion (EUR 211 billion) in 2009, predicting “one of the worst years on record.” Verdict said that the U.S. will see sales declines of 12.1 percent.

In addition, as frugality becomes the watchword in the West, it will also become the major theme in emerging markets, according to the report. The report’s authors advised that luxury retailers maintain their luxury propositions by incentivizing their sales staff to uphold service levels. Campaigns to drive sales could revolve around careful diversification into new sectors, such as renewed licensing activity, the report added.

Wealthy Consumers Rethinking Luxury
After the recession, high net worth consumers will not return to spending their money on luxury goods, warned Pam Danziger, president of Unity Marketing. Danziger presented a new study of 1,041 high net worth Beverly Hills consumers with average annual incomes of $204,900 at the Luxury Interactive conference, showing that many were disenfranchised with consumerism.

Her report revealed that 50 percent of respondents agreed with the statement, “Even after the economy improves, people aren’t going to go back to buying luxury like they used to.” Eighty percent agreed with the statement, “I am more thoughtful when I shop: I am thinking about whether I really need an item or just want to buy it on impulse.”

Danziger concluded that luxury brands must realign themselves and create a more thoughtful, reserved experience on the sales floor.  Her white paper on the study, “Luxury Recession: The Good, The Bad, The Ugly” is available at ww.unitymarketingonline.com.

Ultra-Wealthy Seek Safety in Jewels
Lifestyle spending by high net worth individuals (HNWI), including the jewelry category, fell significantly in 2008, according to the annual World Wealth Report produced by Capgemini and Merrill Lynch. However, wealthy people did gravitate toward buying jewelry and art as investments in a “flight to safety” and actually increased their spending in these categories beyond prerecession levels, the report stated.

The jewelry segment grew to become the third-largest “passion investment” in 2008, comprising 22 percent of this category. Wealthy buyers in Asia and the Middle East allocated the most money to jewelry, gemstone and watch investments. Luxury collectibles — such as automobiles, yachts and jets — accounted for the largest portion of the “passion investments” category at 27 percent.

The world’s population of HNWIs contracted to pre-2005 levels during 2008, the report noted. This segment of the population, which is comprised of 8.6 million individuals who own a total of $32.8 trillion in assets, lost 19.5 percent of its wealth in 2008. HNWIs were defined as those with at least $1 million in financial assets, excluding collectibles and residences.

More Brides Help Select Rings
Wedding website The Knot found that the percentage of brides who were involved in the selection or purchase of their engagement rings had increased 5 percent from a few years ago. Of the 9,000 recently married couples who were surveyed, 67 percent of the brides said that they had helped to select their ring.

The Knot also found that when the bride was involved in the process, the couple spent an average of three months shopping for the ring and viewed approximately 28 rings before making their purchase. Brides ranked stone cut/shape and style/setting as the most important attributes of a ring.

The average amount spent by all couples on engagement rings was $5,800, with 20 percent spending more than they had originally planned, according to the survey. The average amount spent on wedding bands was $2,000 and The Knot noted that only 15 percent of brides and grooms purchased matching sets.

Kay Jewelers Begins Buying Gold
Signet Group’s Kay Jewelers kicked off the Kay Gold Exchange, a way to exchange gold for cash. Customers can send in items made from 10-karat, 14-karat, 18-karat, 22-karat or 24-karat gold or their European equivalents and receive cash in return. A company statement explained that if customers are not satisfied in any way, they can return their payment checks within 14 days of its issuance and Kay will return the items at no cost.

Fortunoff Family Looks to Relaunch
The Fortunoff and Mayrock families, who owned and operated Fortunoff before its sale to private equity firms, have purchased all of the intellectual property of the now-bankrupt company for about $1.8 million and are researching ways to relaunch the brand, Newsday reported. David Fortunoff, who ran Fortunoff.com, as well as the company’s bridal registry and credit card and database marketing, explained that the new business model might involve ecommerce, product licensing and retail. He noted “tremendous opportunity” in the brand’s niches, including jewelry.*

Links of London Repositions
In his first interview since taking the position of chief executive of Links of London, Andrew Marshall spoke with the Daily Telegraph about changes at the chain. Sales at Links, which mainly sells ladies’ jewelry but also sells watches, cufflinks and gifts, increased approximately 36 percent to $102.4 million (GBP 62.2 million) in 2008 from $75.4 million (GBP 45.8 million) in 2007. For the first quarter of this financial year, Links’ sales rose by 44 percent.

Marshall told the newspaper that as part of a focus on product development, he found a new designer, appointed a new finance director, promoted the head of retail and beefed up the human resources department. He explained that when he joined the company, Links was in the process of being elevated as a brand to compete with Bulgari and Cartier when it should have been targeting what he called “affordable luxury” clientele. The average transaction at Links is $246 (GBP 150). The fact that Links’ best-performing store is in Glasgow — rather than, for example, London’s Sloane Square — suggests that Marshall’s repositioning has succeeded.

Links’ sales are expected to be $131.6 million this year (GBP 80 million) and the company has predicted that next year’s sales will be $164.5 million (GBP 100 million). “They are aggressive [targets]. But given the formula I have, we can do it,” Marshall said.*

Jewelers Participate in College Program
Cartier, Christian Dior, Hermès, Lalique, Louis Vuitton and sunglasses maker Luxottica participated in “The Design and Marketing of Luxury Goods,” a joint interdisciplinary course at Columbia Business School and Parsons The New School for Design, the Associated Press (AP) reported. The program afforded business and design school students the opportunity to evaluate the companies and offer suggestions on how to court a new generation of customers.*

James Avery Opens 51st Location
Texas-based jewelry retailer James Avery opened its 51st location in the northern Dallas suburb of Allen. The company’s plan is to open in new markets this year, keeping growth steady without being “overly ambitious.” The Allen store made a donation to the Boys and Girls Clubs of Collin County at its grand opening.

Wedding Band Website Kicks Off
Idobands.com, an online source for wedding bands, launched. The website’s featured wedding bands are preselected, but the company also has designers available to assist customers who wish to create custom pieces. The website features a section that allows brides and grooms to purchase matching gifts for their wedding parties.  
*Additional reporting by Acquire Media.

Article from the Rapaport Magazine - August 2009. To subscribe click here.