Luxury Institute's 7 Rule-Breaking Moves Needed Now to Flourish in the Most Perplexing Luxury and Retail Market Ever

NEW YORK, NY--(Marketwired - September 06, 2016) - The luxury and retail industries have just been handed the greatest gift they've received in two centuries. They just don't recognize the gift because it comes in a very ugly package. Recognizing the gift requires a huge mind shift and, as seen from recent financial results, many luxury and retail executives cannot shift mindsets easily. The gift is the opportunity to undergo a much-needed, massive transformation to allow executives and brands to thrive in the balance of the 21st century. The reaction from most luxury and retail brands has been to shut stores, cut people, cut costs and dive deep into the trenches until the crisis passes. The agencies and techies are saying the answers are more technology, robots, and digitization. That's only part of the solution. Those moves, while necessary, are all commodities that create zero competitive advantage. It's akin to suggesting someone buy a cell phone. Really? No pundit really knows what comes next, but that isn't preventing anyone who sells to the industry from predicting the future.

Luxury Institute firmly believes the future belongs to those who create it, not those who predict it. Playing defense in this highly complex downturn, where store traffic and sales can be down as much as 20%, will further weaken brands. With so many factors working against brands, the only thing that will work while others run for cover is to boldly execute highly adaptive and sometimes paradoxical steps. As Warren Buffet says, "Be fearful when others are greedy, and greedy when others are fearful."

This is definitely not a run-of-the-mill downturn. As an Italian luxury CEO recently told the Luxury Institute, "I was here in 2008, and we all knew that once the stock market and real estate values came back, so would luxury spending. This time with the stock market and real estate at record high levels, we still have a horrible downturn." Another luxury multi-brand President, citing a top ten list of negative macroeconomic factors and, another top ten list of consumer habit shifts, stated that, combined, these factors represent the most perplexing period he has experienced in three decades. Just one grim example of reality: according to travel expert Bruce Himelstein, former CMO for The Ritz-Carlton, Loews Hotels, and Asset Manager for The Ritz-Carlton Grand Cayman, a few of the largest hotel companies have their cut forecasts due to the continuing slowdown in global tourism. And there is no upturn in sight.

In these perplexing times, adaptive expertise: rapidly learning, testing, and swarming what works with rich resources is the way forward. Below, Luxury Institute provides 7 rule-breaking, highly-adaptive steps that need to be executed now to outlearn, outperform and dramatically outbehave the competition. Unlike in previous downturns, these moves require a transformational mind shift, testing, surgical attention to detail, and new metrics to achieve maximum results. This is not a drill!

1. From Less Stores to Better Staffed Stores

Given the fact that the entire world is over-retailed, luxury and retail can shut 20% of all stores without blinking. Luxury Institute observes a lot of brands shutting down stores that were opened in the drunken stupor days of 2010-2013 when 'luxury will grow forever' was the mantra. Many brands today would close stores faster, if only their leases weren't so onerous. Opening too many, and too many large stores, was a huge overreaction. Closing far too many stores today can be an overreaction, too. Yes, the luxury industry has too much brick-and-mortar. However, the notion that luxury stores will disappear is naïve at best, and foolish at worst. As others shut stores in panic, or go bankrupt, stay cool and surgically identify which of those empty locations fit clients like a glove and negotiate a bargain. Switch locations, if there is an opportunity. Opportunities have not been this good since 2008.

Most importantly, as brands right-size the number of stores for a new reality, one thing not to do is understaff them. Transform the old-school mindset from a store being a place where people come to buy and people sell, into a mindset where the store is a high-performance relationship-building center that is part of a real-time, seamless omni-channel network. The store's ability to serve clients is not limited by location, or how many people enter the store. Get over that notion. In a thriving network, any store, or associate, can serve any client, anywhere, anytime. Store associates, with the right technology, can even serve clients who are buying online in real-time. Unless luxury executives aspire their brand to be Amazon, instead of a relationship-centered, humanistic brand, they will realize that more, not less, sales staff, made up of full-timers, not part-timers, is the most effective way to build omni-channel, long-term client relationships. By combining fewer and far better-staffed stores, connecting them seamlessly with the online channel, and executing the recommendations that follow, it is possible to dramatically increase sales by taking share from weak, panicked, unadaptive competitors.

2. From Centralized Functions to Local Entrepreneurship

The luxury and retail industries preach empowerment, but act command-and-control. These times demand that the old model be finally flipped on its head and begin to establish a mostly-self-managed, networked organization. What does that look like exactly? It means that the large number of headquarters people are reduced down to the critical few, and dozens to hundreds of headcounts are deployed into the stores and call centers, with significant cost savings and increased sales. Each store, in addition to having more skilled sales people, as indicated in step 1, will have back-end operations people, and/or eventually, robots, to do inventory and other tedious, monotonous work. Sales associates will be freed up to engage customers remotely or face-to-face full-time. Clienteling will become the norm at each store and business due to outreach will increase dramatically. Each store will have an Events Manager to support sales associates in bringing people to the store, or the store to events, whatever makes the most sense. There will be a CRM team at each store to support in nurturing clients and local influencers, spam-free and in real-time. For those executives who still live in the 20th century, and fear that there will be brand chaos, realize that there is brand DNA, culture, values, contracts, education, monitoring technology, metrics and compensation schemas that inspire people to innovate locally in a brand-appropriate way.

3. From Client Retention to Sales Associate Retention

The head of retail at one European multi-billion dollar brand recently told the Luxury Institute, "My biggest challenge is not customer retention; it is sales associate retention. Without a stable sales force, we cannot build long-term relationships and retain clients." This brand turns the sales force over at an alarming rate. During a recent Luxcelerate client engagement, Luxury Institute's high performance client relationship system, one associate told the story of a client who purchased $100K annually, and who had been bounced around from associate to associate so neglectfully that she had lowered her spending to $40K annually by the time he was assigned to serve her. The client stated that while she loved the brand, no one treated her like a human being anymore, so she went elsewhere for many of her needs. If this were a one-off failure this would be somewhat acceptable. This is business-as-usual, given sales force turnover rates at most brands. Calculating the lost sales from the top 20% of clients treated this way is shocking; never mind the high-potential first-time buyers and high-potential prospects lost to neglect.

Brands are bleeding potential they fail to measure. Today, the failure to retain the high-performing and above average associates is a crisis in luxury and retail. Luxury and retail Human Resources and front-line executives have a mindset that this is impossible to solve. However, even Costco has figured out how to retain its associates with better pay and working conditions. Turnover is unusually low at Costco, at 17% overall, and just 6% after one year's employment. How many luxury brands can even come close? Luxury needs to compensate its associates better, provide intelligent retention bonuses and stock options, provide full-time jobs with decent schedules, develop the associates through education and coaching into humanistic high-performers, and provide growth opportunities beyond store management positions. Some top performing sales associates who have worked with the Luxury Institute, through its Luxcelerate System, have been able to improve personal sales by 50% in less than six months alone. And have done so simply by being nurtured by the brand through Luxcelerate's empowering and intensive education, coaching, metrics, and recognition modules. It's a wonder why brands are not investing more into their front-line teams when these individuals are not only able to create stronger sales for the brand short-term, but also stay for years with brands that develop them. Without retaining strong relationship builders and high potentials, a brand's customer retention plan is just another wish list. Retaining top talent at headquarters is important. Retaining top talent at the front-line is absolutely critical, and is proven to deliver the highest return of any brand's investment, including digital.

4. From Sales Associates to Personal Shoppers

Recently, a luxury brand retail head relayed a story to Luxury Institute about a top performing sales associate. This associate, in addition to being a top performer for the brand, is actually a personal shopper for her clients. The associate maintains a strong relationship with the brand simply because its product offerings fit each of her client's needs and tastes perfectly, encouraging her to bring in clients for individual personal styling sessions and events at a phenomenal rate. This story is not unique. The reality is that top performers, when they love their brand, behave like independent personal shoppers. Each and every associate can, and should, be a personal shopper to his/her clients. And, yes, he/she will occasionally fill client needs that their brand cannot meet with other brands to earn complete trust.

Brands need to measure the opportunity and prove that it makes sense to staff a large number of sales associates per store, and enable them to become personal shoppers. To prove that, Luxury Institute sat down with a top-tier multi-category luxury brand President to do the analytics. He calculated that a typical luxury sales associate probably has a capacity to manage 150 client relationships well annually. Fifty of those will be truly deep relationships that can last many years, if nurtured properly. He estimated that if an associate can skillfully initiate just two solid client relationships per week, from the dozens to hundreds of people who enter the store daily, he/she can develop 100 solid relationships, at different levels of depth, by the end of year one. After two years, and including normal levels of attrition, one associate can make a living from those 150 client relationships for years, and earn roughly $60-100K annually. Of course, life is not that simple, but there are enough plus and minus factors, this President stated, that make these numbers realistic. Name another industry where it is possible for a young Millennial to thrive in a fantastic work environment, be humanistic, become a personal shopper, and make $80,000 per year, which is what the average sales associate earns at this brand.

5. From Outdated Client Notebooks to Digital Client Insights

During one of Luxury Institute's recent Luxcelerate client engagements, its staff had a conversation with one of the brand's store managers who was in a panic. The top sales associate in her store had just left for more money to a key competitor that sells similar products. That happens all the time, unfortunately. The biggest problem: the top sales associate, a Boomer, left with the client black book and no one had the personal client data, besides transactions, to bridge the relationships seamlessly. The manager estimated that she would lose hundreds of thousands in annual sales from lost clients, or clients who would buy much less, due to the loss of the personal and lifestyle data.

If a brand today does not provide corporate digital devices, emails and phone numbers to each sales associate, it is completely living in the 20th century. For brands that do provide those critical devices, the grim reality is that while they require associates to use them, the older, higher performing Boomer and Gen-X associates reject using them. Even Millennials are sloppy about their use. Managers are afraid to follow up with any rigor, or fail to monitor exactly how well associates record the data and the use the technology. Many associates continue to use their personal emails and phones for clienteling and outreach. They may be booking client appointments but no one knows how effective they are, such that significant improvements cannot be measured or achieved. The failure to provide relationship building technology, and/or use it efficiently and effectively, is a huge lost opportunity that few luxury brands recognize. One well-known multi-billion dollar brand, has the reputation for being the most digitally savvy, and yet it has failed to deliver solid financial results. One key reason, an insider told Luxury Institute, is that the brand turns its sales force over every two years and its sales associates refuse to use the client relationship technology in a meaningful way. Without the culture to select and retain talent, along with the lack of discipline to develop and maintain data and technology best practices, this brand continues to stumble.

6. From Clienteling 101 to 3-Tiered Clienteling

At a recent Luxcelerate client engagement, one store manager revealed that approximately 50% of the flagship store's consignment business comes from clients who live within a five block radius. That is not a typo. That is five blocks! And he stated that they are far from being tapped out on local consignment opportunities. Many wealthy clients want the store to come to them even if they live blocks away. This indicates the lost opportunities from building local relationships that went largely ignored while luxury brands drank from the tourist Kool-Aid glass. It also indicates that the action does not have to be in the store when humans trust each other. Clienteling is the buzzword among luxury executives today, as they implore their store managers to become entrepreneurial. All the motivational speeches and hero stories, however, are no substitute for proven expertise in building a rigorous, empowered, and effective clienteling system.

When Luxury Institute executes its Luxcelerate System with clients, the sales team identifies three major ways to do clienteling. The first is clienteling with existing clients. That is the most common form that is practiced, albeit poorly, today. The second is institutional clienteling, or community clienteling. That is where associates seek to design and generate events, within the store, or at other brand-appropriate locations, that result in immediate significant sales and/or future sales. This is a process that requires art and science, and today it is practiced ad hoc, with little thought for true best practices, or not at all. It is as if setting a high target for store events is enough to compel sales associates to magically master the new skills. Finally, there is clienteling with high-potential prospects. That is an area where brands have not yet even figured out which data and/or process is relevant in identifying and contacting the critical people. All three add up to a mountain of potential equivalent to Mount Everest. Yet, all that most brand executives do is talk about it. By focusing brands on all three clienteling opportunities, and installing the best proven practices, processes and metrics to deliver results for each, Luxury Institute has been able to help brands build and maintain double digit sales increases.

7. From Store Managers to High-Performance Coaches

The current job description of the store manager is obsolete. Today's Millennials are not looking for a boss or bureaucrat. What associates yearn for, and need today, is effective coaching. They can manage themselves at work the same way they manage to get to work every morning and back home at night without managerial intervention. Retail associates need humanistic, highly skilled, effective coaches who understand the true art and science of the craft, and practice it daily to help them achieve high-performance relationship building. That's the stuff that drives sales increases. Few retail heads understand what evidence-based, scientific coaching means; never mind the store managers. The stereotype of coaching today is what is seen on the surface in sports teams. But today, those who study high performance as an art and science, know that even in sports, coaching innovations occur almost daily. For a taste of that, attend the MIT Sports Analytics Conference. Today in luxury and retail, the term 'coaching', like clienteling, omni-channel and digital, is a buzzword that everyone has adopted without a clue as how to execute it effectively. If luxury is going to survive, it will have to learn to put away its command-and-control management style that is obsolete for the networked future. Evidence-based, scientific coaching is the way forward. Using Luxury Institute's High Performance Coaching Program, an evidence-based, proprietary program of the Luxcelerate System, retail teams develop emotional intelligence skills along with optimized processes that build relationships. Managers who have implemented the Luxcelerate High Performance Coaching Program have been able to help their sales associates increase metrics such as average transaction value by 20%, units per transaction by 1.5 units, and conversion rates by over 20%, on average.

While pundits heatedly debate whether stores will disappear and whether robots will replace retail associates, ignore the noise, and take an aggressive people-centric approach to this crisis. Yes, brands need to innovate product lines, and redesign and digitize stores. Everyone will do that. The above rule-breaking moves are designed for the bold, not the benchmarkers. The bold know that in luxury and specialty retail, rich client relationships, achieved by humanistic and skilled associates, will be the brand differentiators and drivers of competitive advantage for the 21st century.

One more critical point. There will be the Blockers. Those are the executives who will hinder any attempts to innovate quickly. These individuals cannot shift their outdated mindset due to the personal status and bureaucracy they lose as front-line people are empowered via a flat, omni-channel, networked organization. Luxury brands cannot afford the Blockers any longer. Be kind, but disengage them. In this market, courage, speed and precision in breaking the old rules matter.

About Luxcelerate: A High Performance Client Relationship System by Luxury Institute

The Luxury Institute was founded in 2004 and is, first and foremost, a high performance client relationship consulting firm. The Institute's proprietary Luxcelerate System has helped clients to significantly improve client data collection, average transaction value, conversion, and retention rates. The purpose of Luxcelerate is to transform the brand's sales professionals from being predominantly disengaged transactors into highly proactive, expert, empathetic, trustworthy and generous client relationship builders. It transforms managers into skilled, evidence-based coaches. By enabling the brand's DNA to come to life daily through customized techniques and education and coaching methodologies, Luxury Institute has been able to assist brands to improve online and offline conversion by over 20-40% in six months, retention by 60% over the previous year, and sales by over 30% over the previous year.

This advanced, high performance system is based on continuously conducted and tested empirical research and proven best practices, with insights derived from aviation, the military, education, medicine, professional sports, video gaming, and behavioral and cognitive psychology, as well as from Luxury Institute's own innovative and leading-edge tested and proven techniques. Luxury Institute's team has the expertise to guide and track execution to guarantee the success of the system, as well as engage, empower and humanistically inspire the front-line and corporate teams to take ownership and accountability for their results.

Luxury Institute has conducted more research with affluent consumers and front-line associates than any other entity in the world, allowing clients to have true insight and decision-making expertise in the global luxury market. In the last decade, Luxury Institute has served over 1,000 luxury and premium goods and services brands across dozens of categories.

For more information and additional insights visit, or contact Luxury Institute CEO Milton Pedraza directly with questions (

Contact Information: