The Moneyed Market

Private jets. Diamond-encrusted false eyelashes. Cashmere carpet. While recent U.S. economic reports may be full of doom and gloom, the luxury goods market is moving full steam ahead, with wealthy consumers spending on non-necessities like never before.

In February 2008, BusinessWeek reported that Bernard Arnault, CEO of LVMH Moet Hennessy Louis Vuitton, predicted worldwide spending on luxury goods will double by 2013, to nearly $440 billion. Consumers in emerging markets such as China and Russia are buying luxury items at a feverish pace. And despite fears of a recession, a survey by Elite Traveler magazine revealed that Americans whose net worth exceeds $10 million plan to increase spending on luxury goods and services in 2008.

Texas caught up with four McCombs alumni who have found their way into the business of luxury.

The Clotheshorse

If you pay $4,000 for a suit, the average plastic or metal clothes hanger might seem unworthy. That’s what Kirby Allison, BBA ’05, discovered after constructing a suit jacket in a tailoring class during his senior year of college. The project made him appreciate both the craftsmanship that goes into a fine suit and the dearth of hangers that adequately support a jacket.

Recognizing an untapped market, Allison initiated an independent study, interviewing industry experts, tailors and potential customers. After building two prototypes, he created one that met his functional and aesthetic standards and founded The Hanger Project in November 2006.

Selling for $21.95 each, made of solid maple, with contoured shoulder flares and a felted trouser bar, Allison’s initial order of 1,200 suit hangers sold out within one month. Sales continued to grow, and then a November 2007 profile in the Wall Street Journal introduced The Hanger Project to consumers just in time for the holiday shopping rush. Online sales went through the roof, with November and December sales 20 times higher than previous months.

The dramatic sales jump, combined with a deal to supply hangers to Guatemala’s largest men’s retailer, allowed Allison to quit his day job as a corporate finance consultant with FTI Consulting to manage The Hanger Project full time.

Allison has since added men’s shirt and women’s shirt and skirt hangers, as well as shoe trees to his line of apparel accessories. He also hopes to establish a relationship with a top-tier U.S. luxury retailer such as Neiman Marcus or Barney’s and expand further in Central and South America.

Because his customers pay a premium price, Allison wants to ensure their buying experience parallels the quality of the product. A gesture such as including a handwritten card with gift orders may seem like a small detail, but it is actually a key part of the company’s luxury brand.

“The luxury market is a very specific market,” Allison says. “Your goods do not have broad appeal, so your product and customer service have to exceed the expectations of the customers you do have.”

The Spa Partisan

For the ultimate in self-indulgence, nothing beats a day at the spa. A relaxing massage, custom facial, aromatherapy oils or exfoliating pedicure can melt away stress and restore inner calm.

“A day at the spa is like getting a week’s vacation of relaxation in a few hours, without the hassle of packing and traveling,” says Alissa Bayer, MBA ’04, and owner of Austin’s milk + honey spa.

To stand out from busy strip-mall chains or spa–hair salon hybrids, milk + honey offers clients plush robes and slippers, a tranquil relaxation lounge and treatments using exclusively all-natural ingredients. Bayer says the small details are what keep customers coming back.

“Luxury is detail,” Bayer says. “You must delight discriminating clients in unexpected ways if you want to win their loyalty.”

Bayer also believes that satisfied employees lead to satisfied customers. In an industry with very high turnover, she has built a stable, dedicated staff by providing paid vacation, health coverage and other benefits. The result is lower turnover and lasting staff-client relationships.

Bayer’s philosophy seems to be a hit, as milk + honey recently opened a second Austin location and has grown from 15 employees to more than 75. Her goal is to continue to grow her company by expanding nationally and perhaps franchise the milk + honey brand.

The Art Collector

What’s a luxury shopper to buy after purchasing the dream house, yacht and designer clothes? Fine art may not have the flash of a Ferrari, but it’s quickly becoming a must-have for the very wealthy

“The art market has exploded over the last five years,” says Richard Rabel, MBA ’95 and senior vice president and head of sales for old master paintings at Christie’s in New York. “People are making a lot of money, and they’re looking for new ways to spend it.”

Rabel says there are generally two types of art collectors: those who have an emotional attachment to a piece, and those whose interest lies less in the art and more in the investment value. Of course, any investor can appreciate the prestige that comes with owning a masterpiece.

“Collectors either want to see a piece in their home, or they at least want other people to see they have it,” Rabel says. “With buyers of old European masters, we have history connoisseurs who are interested in how we fit into the context of history. These paintings connect them to the past.”

It was that historical intrigue that brought Rabel one of his most significant sales. In 2007 he discovered a previously unknown sketch by Sir Anthony Van Dyck in a private collection. Rabel estimated “A study of a bearded man” to be worth $400,000–$600,000, but bidders were eager to own a piece that was “new” to the art world. It sold at auction for $1.8 million, a world-record price for the artist and certainly a treasured investment for the new owner.

The Social Director

There is no room for the ordinary when event planner Cindy Lo throws a party. She forgoes the ubiquitous crepe paper and balloons in favor of a decidedly more upscale vibe.

“Our clients want something they’ve never seen before,” says Lo, BBA ’98 and the owner of Red Velvet Events. A bar made entirely of ice is one such extravagance. She has also transformed a client’s home to replicate the North Pole, complete with faux snow, elves and Santa Claus himself riding in a sleigh; coordinated a business dinner in the middle of a live shark tank; and helped plan two events accessible only by boat.

Those extra touches that create a “wow factor” and leave guests buzzing about their experience are what separate luxury events from the average party, Lo says.

Her largest and perhaps best-known occasion was a three-day grand opening celebration for Austin’s Chinatown Center in September 2006. The center’s banquet hall was not yet fully constructed, so Lo improvised a grand ballroom in the facility’s parking lot, complete with a 384-foot red carpet, yards of opulent fabrics draping a 6,000 square-foot tent and professional lighting. Martial arts performers, dragon and lion dancers, firecrackers and famous international singers added extra flair to the event, which won a 2007 International Special Events Society Esprit Award, beating even the special-events pros at Disneyworld.

Lo says a key way to impress guests is to pick one item, usually the entertainment, and splurge to get something unusual—a Chinese acrobat team or handmade cigars rolled right before your eyes.

And what of the cost? “You can have a really nice party if you’re willing to spend $100 per guest,” Lo says. “But if you’re interested in really spoiling your guests, it’s better to estimate at least $250 per person.” The most expensive event she has planned was a private party that ran $1,000 per guest.

Regardless of the price, the experience is what matters, Lo says. “I think the mark of a great event is when every guest feels like a VIP, like they’re a part of something really special.”

— Tracy Mueller and Ashley Warren