This article on luxury products discusses the new trends in this growing and diversifying industry, naming Bratt Decor as one the most luxurious names in baby.

Welcome to the new reality of luxury retailing......

Out of nowhere in the summer of 2002, you couldn't walk down the street--in both cities and suburbs--without tripping over a young mother pushing her baby in a luxurious $800 Dutch-manufactured Bugaboo stroller festooned with fancy accessories.

It seemingly had no rhyme or reason to it.

Where had they come from? Why were so many women plopping down so much cash on an item they'd be dumping as soon as their child got a little bigger?

The answer is that the character of Miranda on HBO's popular Sex and the City was shown ferrying her tot around the city in one of the pricey strollers. Just like that, a new trend was born. And it persists to this day as the strollers have inspired an almost cult-like following in consumer circles, and not just among the wealthy. Today Bugaboos are sold at 350 venues nationwide and in many stores are the best-selling item on the floor.

Welcome to the new reality of luxury retailing.

Couture brands are not just for the superrich anymore. The maturing trend of -aspirational shopping has seen to it that a much wider audience is now tapping into once elite brands, who are in turn responding with low-end (for them) items that enable shoppers with less disposable income to buy something with a Tiffany, Gucci, Coach or other posh name on it.

In 2007, the luxury retail market, defined by James Hurley, managing director and senior research analyst with New York-based Telsey Advisory Group as a $45 billion industry encompassing apparel, accessories, wines, perfumes and cosmetics, will grow by up to 9 percent. In contrast, Hurley estimates that the mid-tier retail sector is growing at a modest 3 percent to 4 percent annual rate.

When it comes to same store sales figures, the difference is even more striking - in March, luxury stores posted growth of 11.2 percent, according to research by ICSC, compared to the overall growth of 2.5 percent for all U. S. chain stores.

Part of the reason for the strength of luxury brands is quite simple: The rich have gotten richer. A recent study by Professors Emmanuel Saez of the University of California, Berkeley and Thomas Piketty of the Paris School of Economics showed that the top 1 percent of all Americans received 21.8 percent of all U.S. income while the top 10 percent account for 48.5 percent (the highest share since 1928).

Spending on luxury items was a privilege reserved for the wealthy for much of the 20th century, says Jay McIntosh, director of consumer products with New York City-based Ernst & Young. But today it is also no longer limited to the top 2 percent of the income bracket. Now, middle-class and upper middle-class households actually spend quite a bit on the traditional luxury brands--accounting for up to 70 percent of sales, according to Michael J. Silverstein, a Chicago-based senior partner with Boston Consulting Group, an international strategy and general management consulting firm.

While the idea of aspirational shopping isn't new, Silverstein says it has accelerated in recent years, especially with the heightened attention being paid to socialite lifestyles. An explosion of sites tracking the daily (and nightly) romps of celebrities and fashionistas have huge followings. And where celebrities shop and hang out end up driving shopping patterns for legions of shoppers.

"I don't think we've seen this level of awareness of high-end brands ever before," says Hurley. And luxury brands are more than happy to oblige this added attention. Companies like Louis Vuitton and Burberry have made their lines more accessible by adding new-more affordable items so people that want a piece of them can, say, spend $165 on a key chain when they can't afford a $2,400 handbag.

As a result of all of this, luxury brands across the board continue to thrive and that's going to lead to accelerated store openings for years to come.

Tough deal making

However, just because luxury brands want space, that doesn't mean they're not trying to drive hard bargains with landlords, says Lori Pawley, vice president of fashion leasing with General Growth Properties. Conscious of how sought after they are, luxury retailers want to make sure they get the best deals on their real estate. When deciding on a new location, they are interested not only in demographics, but also psychographics, says Pawley, who has dealt with brands in leasing 14 luxury centers in General Growth's 200 plus portfolio. These retailers want to know how brand conscious the consumers in a given trade area are, how much they spend on luxury items, what clothes they buy and what kinds of cars they drive.

In addition, not all luxury is created equal with some of the most elite chains boxing out others they may consider low-rent. For example, an upper-echelon chain like Hermes' that is trying to strictly cater to the wealthy may not want to be located near Coach, which has been more aggressive in courting aspirational shoppers.

The most inclusive of the luxury chains are the department stores. Nordstrom, "You would see [them] fine with being next to Ann Taylor or J. Jill, while Neiman Marcus will be looking for Gucci or Versace," says Jack Oliaro, senior vice president and director of retail development with Jones Lang LaSalle, a third party property manager with a 36-million-square-foot portfolio. Being aware of these distinctions is critical to the success of a leasing campaign.

Luxury retailers are also very picky when it comes to the design of shopping centers, often insisting on high-end design, premium materials, a consistent tenant mix and lots of supplementary services like personal shoppers and valet parking, according to Milton Pedraza, CEO of the Luxury Institute, an independent research institution that focuses on the top 10 percent of America's wealthy.

That means that centers wooing luxury tenants should not be just a shopping venue, but a destination, and should cater to both the young and the elderly.

"Wealthy people are older, they have families, so obviously safety and security are paramount," Pedraza says. "And people-sensitive services make a difference-valet parking is expected, convenience is a major factor and the message should be "Bring your kids and bring your parents."

Pedraza points to the popular Bal Harbour Shops in a suburb of Miami as a center that hits on all cylinders. The center, which has some of the highest sales in the United States at $1,350 per square foot, delivers quality not only through its tenants, which include Saks Fifth Avenue, Neiman Marcus, Prada and Hermes, but through its ambience as well. Visitors can take advantage of a number of exclusive eateries and entertainment events at the center, including appearances by famous designers, charity auctions and book signings. Among available services are valet parking, personal shoppers and a Bal Harbour gift card. In addition, the center's meticulously groomed gardens and fountains make it a pleasant place to linger.

This exclusive atmosphere might also help the owner charge higher rents. While most rents are based on sales, according to Pawley, and so follow the same formula for mid-tier and luxury tenants, the landlord of a well-established luxury mecca may be able to charge higher than the developer of a ground-up center, says Oliaro.

"The owner of the mall will look at the business deal and estimate what other tenants it might attract and, working backwards, decide how much to charge or not charge," he notes.

Luxury retailers look at rent in the same terms. "How much we are willing to pay would really depend on what we are being offered," says Mary Bauer, who with her husband Stephen runs an upscale children furnishings store Bratt Decor, where a crib set starts at $800. The couple, who already have locations at the Belvedere Square in Baltimore, Maryland and in Falls Church, Virginia, are planning a 20-store rollout over the next five to seven years, and want to enter Los Angeles, Chicago, Dallas, Boston, Miami and London.

In addition, retailers who tend to attract other stores may get some added perks, including lower rates and greater build-out budgets, according to Oliaro. "Nordstrom is great for pulling in lots of other tenants and, consequently, they drive some of the best deals for themselves," he says.

Key players

Among department stores, Nordstrom, Barneys and Neiman Marcus hold consumers' preference, says a study by the Luxury Institute. Of the 1,650 consumers surveyed in January 2007, 43 percent said that they visited a Nordstrom in the past 12 months, compared with 20.7 percent for Bloomingdale's and 19.5 percent for Saks Fifth Avenue. "Nordstrom is not the most upscale store by reputation, but customers love them--they have friendly knowledgeable salespeople," Pedraza notes. "These are fundamentals, but they know how to execute them."

Nordstrom's current expansion program reflects its growing popularity--the 155-unit department store is planning to open at least 25 new locations by 2011, including stores at the to-be-developed Mall at Oyster Bay in Syosset, N.Y., Westfield Palm Desert in Palm Desert, Calif. and CityNorth in Phoenix. Nordstrom did not return calls for comment.

Neiman Marcus, however, which operates 39 stores, including two Bergdorf Goodman locations, had annual square footage growth plans of only 2 percent to 3 percent before it was purchased by Texas Pacific Group and Warburg Pincus, LLC in May 2005. But the new owners are already rolling out an offshoot concept called Cusp--aimed at younger, more casually dressed consumers than Neiman Marcus' core clientele. Three stores measuring up to 10,000 square feet have already opened at Tysons Corner Center in McLean, Va., at Century City in Los Angeles, Calif. and in Washington, D.C. A fourth unit, at Northbrook Court in Northbrook, Ill., is scheduled to open in July. This year, the company also opened an 80,000-square-foot Neiman Marcus in Charlotte, N.C.

Another staple of the luxury scene, Bloomingdale's, has limited expansion plans. Its parent, Federated Department Stores, has been concentrating on repositioning the Macy's brand and Bloomingdale's opened only two new locations in 2006 at the Fashion Valley Mall in San Diego and at City by the Bay in San Francisco.

The chain most likely to step up its expansion is Saks Fifth Avenue, Oliaro speculates--the retailer has recently streamlined its operations by selling off various divisions, including its 38-unit fleet of Parisian stores, and is posting a strong performance. In February of this year, Saks' same-store sales rose 24.7 percent due to improved customer traffic, while Nordstrom posted 9.1 percent growth and Neiman Marcus 5.3 percent growth. In addition, Saks previously announced its intent to take advantage of growth opportunities in both new and existing markets. Outside the department store space, fashion house Gucci, along with jewelry seller Tiffany & Co. and leather goods retailer Louis Vuitton serve as staple tenants in almost any upscale shopping center, according to Pawley. "They are the three powerhouse tenants," she notes.

New frontiers

But while previously luxury retailers would only pursue older, wealthier customers, now they are paying closer attention to the middle class, in particular the luxury-conscious consumers in the 20- to 30-year-old age bracket, says Pawley. "The awareness on the luxury end is so big, everyone knows that there is such a thing as a hot bag out there, she notes. As a result, a luxury brand with a well- established market presence, like Louis Vuitton, might consider opening a new store in a trade area with slightly lower incomes.

Newcomers, however, are still sticking to the super wealthy. "Each retailer has to decide this for themselves-you certainly don't want to put off your core customers," says McIntosh.

In addition, the next luxury frontier might not be in the United States at all. It will most likely be in China or India, says Pedraza.

"Tere is tremendous wealth creation going on and it will continue, but it won't be necessarily in this part of the world,  he notes. "In the future, Neiman Marcus, and Bergdorf Goodman and maybe even Nordstrom will go international."

Written by: Elaine Misonzhnik