|Residential Lighting: How do you define luxury and wealth?
Milton Pedraza: People use the term luxury loosely, but we have criteria. A luxury product has consistently superior quality. It is unique and exclusive. It conveys status and makes you feel special across the entire customer experience.
We focus on the top 10 percent of consumers. They control about two-thirds of the wealth. They tend to be older—in their 50s and 60s—and clustered around the two coasts. Most live in the corridor between Florida and Massachusetts and in California.
RL: How do we lure these consumers into lighting showrooms?
MP: Have an incredibly informative Web site. A company called Blue Nile in the diamond business differentiated themselves by educating consumers. Make yourself a source of knowledge and information. Show the best lighting ideas out there.
The main way to differentiate is through service. Can you be available 24/7? Ed Mitchell, the late founder of Connecticut’s Mitchells of Westport clothing store, sold to the wealthy with legendary service. Suddenly need a tuxedo for a party? He’d have one of his people drive it down. How valuable is that? The idea is to over-compensate. If you do, then you will be creating stories of both loyalty and success—and appealing to wealthy shoppers.
RL: Do the wealthy shop for price?
MP: You need to deliver such impeccable service that they will pay a price premium. Normally, you don’t have to discount. But it would be foolish to say you won’t ever discount. If somebody in your market is commoditizing the business, then everybody has to discount. However, I’d recommend creating a special area for premium and super-premium products—an area so gorgeous it’s a “showroom within a show-room.” Don’t discount the items in that room. If you want to do a loss leader, fine. Just show wealthy customers “the real stuff” when they come in.
RL: Are there specific luxury trends to track?
MP: Consumers are becoming more minimalist, and lighting has to reflect that. I’m talking about the environment of a Mandarin Oriental or W Hotel. Consumers want less clutter in their lives; that’s especially true of wealthy people. Also, consumers are becoming more discerning about the customer experience. It’s less about the product and more about the experience. So, create an environment where people can experiment with lighting comfortably and without pressure. You have a nice venue for events, so partner with other luxury stores. Have a wine tasting at your showroom.
It’s hard to differentiate on product, but you can create a better environment than somebody else. And the service relationships you create with customers and designers can make all the difference.
Milton Pedraza is CEO at New York City’s The Luxury Institute LLC, an independent ratings and research firm focused solely on the top 10 percent of America’s wealthy. The firm publishes The Wealth Report and a variety of surveys on the luxury market.