Chairman’s Letter

An Assortment of Musings, Information and Pleas from Alf

Although I have the pleasure of communicating personally, and on a regular basis, with many of our 800+ individual Luxury Marketing Council members on ad hoc issues as they arise, I don’t always get the opportunity to tell the full story in one uninterrupted missive. This is an attempt to address that shortcoming. I hope you will continue to read on. Surprises may ensue.

2010 and the Affluent Consumer

For the clear majority of our members, 2010 saw a continuation of anxiety, indecision, and tightened economic circumstances, albeit not as severe as in the previous two years. Affluent consumers, particularly the uber-wealthy, returned to the shopping counter, but in a tentative fashion, their somewhat erratic buying behavior tied to market psychology rather than personal liquidity or net worth. While the fear of appearing “indulgent” is still an obstacle to guiltless consumption, pent up demand is forcing the luxury buyer to loosen the purse strings with greater freedom and frequency. We saw this happen throughout 2010 and one can expect the trend to continue in 2011, barring catastrophe or continuing Congressional misadventure and malfeasance.

What to watch out for in 2011

There are a handful of canaries in the mine that bear monitoring as we try to divine affluent consumer intent-to-buy:

1.       Watch the DJIA: The magic number is 10,000, the on/off switch so to speak. When the Dow rises above that number, they begin to spend. When it drops below for a sustained period, the spending spigot gets shut off. It’s all psychological, of course. The truly affluent have the money, but they feel poorer when their portfolio balances drift downward.

2.     Watch the Consumer Confidence numbers: The Conference Board publishes them regularly. They’ve been all over the board reflecting fear and uncertainty as American consumers continue to worry about job security, declining home values, rising healthcare costs and an existing debt load that has to be repaid before credit cards can be reactivated. A purloined quote says it best, “Confidence grows at the rate a coconut tree grows. It falls at the rate a coconut falls”.  With the American economy driven by consumer spending to the tune of 70%, consumer confidence must rebound before the economy can fully recover. Right now, consumers are spending less, saving more and reducing credit…the very prescription for continued economic malaise. Notes economist Michael Lehmann, “When people feel good, they borrow and spend. When they feel lousy, they repay and cut back”.

3.     Watch the three time bombs: In order they are, 1.) The unemployment rate, 2.) The residential and commercial real estate markets, and 3.) Credit card debt.

The stubborn unemployment rate remains key to the recovery. As long as it hovers in the 9+% range nationally (closer to 17% if one includes those who have opted out of the job market or involuntarily transitioned from full-time to part time employment), any hopes of a significant or hastened recovery are out the question. The unemployed don’t spend. Equally corrosive, they act as a constant reminder for those Aspirationals who are gainfully employed that destitution is one capricious employer decision away. There but for the grace of God, go I.

The numbers on residential real estate remain difficult to decipher with housing starts and new home sales fluctuating month-to-month and 20+ % of mortgage holders “under water”.  Until U.S. banks and lenders flush out the remaining foreclosures on the books, the prognosis remains poor. On the commercial side, between $800 billion and a trillion dollars in assets reside in the at-risk column. A prowl down the streets of most U.S. cities, our own Union Square and Financial District included, will attest to the fact that the plethora of “For Lease” and “For Sale” signs are a prelude of difficulties still to come.

With the American consumer holding an average $8000 in credit card debt, the national credit bill totals $900 billion, with approximately $400 billion of that at risk or loss during the next five years. And we wonder why banks have reigned in their once profligate lending practices and why consumer credit spending continues to contract, wholly un-American behavior based on historical patterns.

The bottom line…the economy will recover, but at its own pace. Look for a gradual, protracted recovery that will demand rebuilding of consumer coffers as well as confidence. 2010 was a year in search of economic stability, as most likely will be the bulk 2011. But we can survive and succeed in the interim. At the high-end, there will be pent up demand that must be met. Homes will be purchased and remodeled. Cars will be traded-in. Vacations will be taken and the lifestyle practices of the Bay Area affluent and wealthy will be resumed, albeit in a quieter, more introspective, more European fashion. That means less extravagant spending on free-weight Rolexes and more investment in bespoke quality and family lifestyle enhancement.

For the opportunistic marketer it’s a once-in-a-lifetime chance to capitalize on the fear and hesitancy of others and carve out market share while aggressively pursuing new clients and customers, “marketplace Darwinism”, so to speak. The one thing a recession guarantees is that strategically-smart risk-takers get richer and that competitively-driven marketers make their mark at the expense of the meek.

How has the Council performed?

As we approach the end of our fifth year in operation in San Francisco, we can look back with some degree of satisfaction at what has been achieved in spite of the worst economic collapse since the Depression. 2010 saw continuing growth and maturation. Globally, The Luxury Marketing Council now represents more than 1000 companies and organizations, serviced by 32 Council chapters. An additional 16 chapters are slated for opening in 2011.

In Northern California, the numbers tell the story:

• Approximately 100 corporate members representing 800 individuals
• An additional network of 1200 non-member marketing influentials
• Growing Council interest with an average of 3-5 membership inquiries each week (the majority of which, however, are deemed ineligible for membership based on suitability, partnership potential, operating ethics and cultural fit)
• 35 events attended by 2743 members and guests. It should be noted that the growing appeal of Council meetings and events has necessitated implementing more stringent control on non-member invitations and attendance
• New satellite chapters inaugurated in Carmel/Monterey, Napa and Sonoma
• Maintenance of membership dues structure in recognition of the economic times
• In addition to the heavy roster of meetings and events, facilitation of more than 125 Council-driven member collaborations including networking introductions, partnership formations, joint marketing initiatives, brokered services and promotional support

What’s planned for 2011?

The meetings and event calendars have now been finalized for the year. Between the Northern California and Las Vegas chapters, more than 60 programs have been gazetted for the year, a mixture of monthly events, intimate brown bag lunches, hard-working seminar programs and purely social gatherings. Expect to receive announcements very soon about 2001’s first events scheduled for late January.

In the majority of cases, the programs follow a strict Council formula, networking time coupled with informative and entertaining business learning. Popular programs and events will be repeated and, given the continuing uncertainty surrounding the consumption of luxury, emphasis will remain on securing and presenting the best and latest research information and trend data.

Never inclined to do anything to excess, including moderation, the Council is also “going Hollywood”. In February, we bring the notorious Jeff Lewis, star of Bravo’s reality television series “Flipping Out” to San Francisco to elucidate on the method behind his madness, and the madness behind his method.

Further expansion is also on the horizon for 2011. Plans are afoot for the Northern California team to open additional chapters in the Northwest, specifically Seattle, Vancouver and Portland. Negotiations are currently underway with potential chapter partners in those markets.

Bigger and better benefits

As the Council continues to grow in size and authority, its resource level has increased accordingly:

• Members now have password access to the latest published intelligence and research data on the luxury sector which is posted to websites on a real-time basis
• In 2011, meeting notes, video recordings and copies of presentations will be posted to websites when available
• Members will continue to have access to the promotional resources of the Council in the form of web postings, eblasts and snail mailings for member news and promotions
• Ad space is now available without charge for member postings on Council websites
• Members will have access to exclusive Council-sanctioned opportunities and special promotional offers including:

o   Credit card processing services

o   Luxe Wine Guild offerings

o   Las Vegas hotel packages

o   Special member offers

• Members who travel will have reciprocal meeting privileges in other sister chapters and regions including Carmel/Monterey, Napa, Sonoma, Las Vegas, Seattle and Vancouver. Advance arrangements can also be made for members to attend meetings in any of the other 32 Council chapters world-wide.

Let’s talk!

Marriage counselors advise that constant communication is the key to successful relationships and partnerships. We concur, and that’s why we maintain a steady stream of online communications and messaging with our members. But we know that our emails are not getting through to all of our members. As such, valuable information, event announcements special promotional offers, etc. get lost in the ether. Help us fix this problem. If you have not been receiving Council communications on a regular basis (6-10 a month), please let us know. Call us at 415-332-1085 and we’ll update your information immediately on our contact database. And remain assured that no one gains access to our data files, WikiLeaks, the CIA, the NSA and the Publishers’ Clearing House included. Our data vaults remain impregnable and off limits to all but a handful of trusted Council operatives.

We also plan to be more aggressive with the Council’s communities on Facebook and LinkedIn. If you’re not already a member of both, or haven’t signed up for the RSS feed that updates you proactively about the latest Council news, research and happenings, simply go to any of the three regional websites. The process is simple and painless.

And speaking of websites, the Council’s primary mode of information-sharing remains its websites which are updated weekly, sometimes daily. If you need to know what’s happening at the Council, get information about latest events or gain access to the latest trend and research information, simply visit the following sites:

www.luxeSF.com for San Francisco

www.luxeLV.com for Las Vegas

www.luxeMP.net for Carmel/Monterey

www.luxeSeattle.net (under construction)

www.luxeVancouver.net (under construction)

Rules and tools for meetings and guests

All Council meetings incur out-of-pocket costs which are absorbed by our generous sponsors. In total, the meetings’ expense budget in 2011 will run into six figures. As with other regional organizations, our “no show” rate for confirmed reservations runs 20% on average, understandably so, given that there is no financial penalty for non-attendance since admission at all Council events is without charge. That’s one of the benefits of all-inclusive annual dues. But we can no longer afford to absorb meeting and catering losses attributed to no-shows. As such, we ask you to provide the courtesy of a 24 hour notice of cancelled reservation.

While we’re establishing rules, let’s address dress code. “Yes!” we understand that Northern Californian lifestyle is casual and informal. We can live with that, in fact, we like it. What we can’t live with is sloppy attire and T shirts. Dress code for meetings, unless otherwise advised, is business or business casual. For gentlemen, that means some form of jacket and collared shirt, even for self-made, hi-tech billionaires. We’re talking about a Luxury Marketing Council assembly, not a 49ers game. It’s recognition and a display of respect for fellow Council peers, their guests and our presenters. That’s our culture, and it will never change.

Why are we so insistent about formal RSVPs for meetings and events? First of all it allows us to plan headcount for wine, catering, seating and valet parking, where appropriate. In addition, we can pre-register attendees, pre-print name tags and alleviate the bottleneck at check-in. The new Eventbrite registration system we’re using makes it a simple, user-friendly process.

With respect to guests, Council policy has been one of encouragement, which will be continued. But because of the popularity of the events, we are now forced to impose some basic rules:

• All guests must be officially invited and accompanied by a standing member
• Walk-in guests are not permitted. Prior RSVP confirmation is required
• We must have names and company affiliation for all guests with the RSVP. It’s not enough to RSVP by saying “Bill Smith + 1”
• Guests can only attend 2 Council events. Beyond that, the guest must become a Council member in order to partake of Council activities. This prevents “shopping around”, the process of attending as the guest of different members in order to avoid membership dues. Yes, it happens, and no, it’s not fair to our dues-paying members

As we thankfully approach the wind down period for the year, I want to acknowledge our gratitude and appreciation for all the support we’ve received this year from our valued members. More importantly, I want to express how thankful we are for the friendships and partnerships we have developed. That’s what makes the job worth doing. One behalf of our Council team, Debbie, Tricia, Linda, Marlene and Jenn, we wish you a happy, relaxed and contented Holiday Season, and look forward to partnering with you in 2011, as together, we slay yesterday’s demons and dragons and conquer new territory on our way to tomorrow’s success.

With warm regards,

Alf Nucifora
Chairman
The Luxury Marketing CouncilNorthern California (San Francisco, Napa, Sonoma and Carmel/Monterey Peninsula)
Las VegasNorthwest (Seattle, Vancouver and Portland)