Jeffrey Berk of Privé Porter: “Permatrend”

The declination of the retail, more specifically, malls, has been going on for a long time. As far back as seven years ago, Bloomberg was calling it a “permatrend’. I wouldn’t say the pandemic is the catalyst here. What the pandemic is that unexpected “ripping-off the band aid” a few years earlier than the trajectory […]

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The declination of the retail, more specifically, malls, has been going on for a long time. As far back as seven years ago, Bloomberg was calling it a “permatrend’.

I wouldn’t say the pandemic is the catalyst here. What the pandemic is that unexpected “ripping-off the band aid” a few years earlier than the trajectory was. Ultimately, retailers will have to continue to evolve from their faults and weaknesses that were exposed when the band aid was ripped off.

As part of our series about the future of retail, I had the pleasure of interviewing Jeffrey Berk, Co-Founder of Privé Porter, has worked in luxury goods sales, advertising and finance for more than two decades, working with the world’s most coveted and iconic fashion brands. As co-Founder of Privé Porter, a global leader in luxury collectable accessories, he has consulted with industry analysts, journalists, and venture capital firms on the luxury goods marketplace, and been interviewed for The New York Times, The Wall Street Journal, Forbes, Bloomberg Radio, and TheStreet. He also co-Founded the non-profit The Little Lighthouse Foundation, which has generated over 2 million dollars in donations over the past decade to assist at-risk children throughout South Florida. Jeffrey and Michelle Berk have also donated to an assortment of charities including ACLU of Los Angeles, The Leukemia & Lymphomia Society, French Institute Alliance Francaise (FIAF), Art for Life, and Literacy Partners of NY.

Thank you so much for joining us in this interview series! Before we dive in, our readers would love to learn a bit more about you. Can you tell us a story about what brought you to this specific career path?

From 2000–2010, I had a company, “accountable”, which catered to the manufacturers and retailers of high luxury, couture jewelry and watches, and was largely responsible for finding discrete outlets for their out of season models and inventory. I became the first 3rd party supplier to and without me, they probably would have never built out the fine and couture jewelry category which eventually included the high end of jewelry like Damiani, Judith Ripka, John Hardy, Roberto Coin, Gurhan, and a lot more.

Through that intimate relationship, it was easy for me to see that for almost too many reasons to list, the high luxury brands would not continue to be exposed to such a massive audience. The Gilt audience was ultimately middle class and/or aspirational, and the notion of superior brands being widely seen as discounted is a tremendous drain on the equity of the brand. The big bang for Gilt was the recession, and they got Gucci, Ralph Lauren Purple Label, YSL. Those brands, too, all abandoned ship because of the pushback they were getting from Saks and other major retailing partners.

Ultimately, the super affluent customers like deals as much as anyone else, so I set up Privé Porter in 2008 with the founder of Bag, Borrow, or Steal to concentrate on resale for that super affluent customer.

It took years of piddling and tinkering to eventually get into the collectable accessories we are doing today, but what we have proven is the super affluent will support secondhand, as our main suppliers of these Birkins and Kellys are the super affluent Hermès VIP customers who are flipping us the bags they are offered, not really crazy about, but are too invested in the Hermès process to say ‘no’ to a bag.

Can you share the most interesting story that happened to you since you started your career?

When my wife started playing around with this Hermès reselling game (2012), there were very few Birkins or Kellys on the Internet. It simply wasn’t there. Afterall, the key to the mythos of the Birkin is you can’t see them in the store, either.

So, if someone was offering my wife one for sale, let’s say a 35cm Lagoon Birkin (Lagoon is Hermès speak for turquoise), she realized the only reliable place to see a real one was on Instagram; ultimately a woman showing of her brand new #lagoonbirkin, #lagoon35, #Hermèslagoon. This was 2012 and Instagram was only an iota of what it is today.

In early 2013, in an attempt to build up goods, I did a European 10-city Hermès store tour. I dropped around 250,000 dollars and had a great collection of Birkins, Kellys, exotic-skinned CDC cuffs and more. Maybe 40 pieces total.

My wife told me she was going to not make a website or rely on eBay, rather just posting on Instagram. I thoughts it was bonkers, but I just stayed out of the way. She felt she’d be the only one offering these goods for sale, and if she simply used the same hashtags, she’d get a following.

2013 we did 4 million dollars, 2014, we did 8 million dollars, and everyone else in the resale genre was too late to catch us by 2016. It was that brave and amazingly insightful decision that made everything else possible.

We were the first ones there, but it also underscored something which will be addressed later in this session. The core players in luxury collectables at the time had been Heritage Auctions, then Christie’s stole Heritage Auction’s department.

How that model unfolded, any auction, is women would get an actual catalog to peruse let’s say as early as September for a December auction. They would have months to contemplate, wait, compete for something they wanted, and most would lose; thus, a really unsatisfying experience.

What my wife figured was she would just put her WhatsApp (“WA”) number atop of the Privé Porter Instagram page, and tell women to contact her directly if they wanted something. No one was using WA in that time for retail either. WA is a technology that allows a fluid dialogue, freely exchanging images, videos, and voice recordings.

We quickly got to the point a 40,000 dollars Birkin within two hours of posting it, thus bringing an immediacy to customer. Very soon thereafter is when the auction houses had to hard pivot into private sales.

Anyone who grew up in NYC as a young professional (like me in the 90s) has been relying on this immediacy for food delivery, so it is obviously a human desire that predates and is separate from online retail capabilities.

Can you share a story about the funniest mistake you made when you were first starting? Can you tell us what lesson or takeaway you learned from that?

I have every right to say starting Privé Porter in the midst of the 2008 recession is what never gave us liftoff, but in the spirit of self-deprecation, I was spent a lot my marketing money in 
Town & Country, Harper’s Bazaar, and more. Powerfully stupid, you cannot click on a magazine page. I was just doing what everyone else in the jewelry category was doing.

The other is I can tell myself how I read five newspapers a day, but sometimes stuff is right under your nose, you’re standing too close to the elephant. Until this first retail store, our entire business has been off of Instagram e-commerce. 35% of our customers are in the Middle East and other big portions are outside of the USA. In a 2017 conversation I had with a Chinese luxury executive, I casually pondered how we never got a following with the Chinese, as they are the biggest collectors there are. His answer, “Jeff, it is China.Instagram is banned in China”.

Are you working on any new exciting projects now? How do you think that might help people?

The collectable luxury watch business is bigger than ever, but the real fight that guys like Watchfinder and WatchBox have is the supply of the best pieces is very tight, the prices for acquisition are crazy, the grey market guys who owned this industry are happy if they make 5–7% profit on a watch now, and they sell the best pieces immediately.

Concurrent to this, even the super affluent are becoming aware of over consumption. A friend easily of nine digit wealth refuses to get a new watch unless he sells one. So, a lot of our customers are trying to qualify why buying another 68,000 dollars crocodile Birkin from us.

We are going to start giving our customers, largely women, the chance to pay for the handbags with watches such as Audemars Piguet, Richard Mille, Patek Phillipe, Rolex, etc.

Our largely female demographic are excited to have a reliable way to rollover watches they or their husbands don’t really wear anymore for new bags. Since we are a driver how these bags are valued in the secondary marketplace, we will have an acquisition advantage over Watchfinder and WatchBox and everyone for two reasons: (i) we have a profit in the bags they are paying them with as opposed to these guys who have to pay real money and (ii) since the woman is so excited and motivated about the opportunity, they aren’t going to base the sale of the watches purely on the mathematics someone else does, saying, “Oh, WatchBox offered me 35,000 dollars and Watchfinder offered me 34,250 dollars, etc.”

Which tips would you recommend to your colleagues in your industry to help them to thrive and not “burn out”

I’d say the first might seem obvious, but really like category you are in and the people within it. Years ago, in the jewelry and watch world, dealing with most of closeouts buyers was profitable but really unenjoyable.

Another I hadn’t rally mastered until my 40s, is learning that every email doesn’t have to be answered as soon as you get it. A huge crisis ultimately isn’t as bad as it first seems. Figuratively or not, I sleep on almost everything. I try to always play the long game, and if you have long term objectives, you don’t have that day-to-day anxiety from thinking your behind on things.

None of us are able to achieve success without some help along the way. Is there a particular person to whom you are grateful, who helped get you to where you are? Can you share a story?

My uncle. About to enter college, he asked me what my major was going to be. All I cared about was making the lacrosse team, so I kind of shrugged my shoulders and said, “Business?”

He reminded me of my aptitude and interest in English and literature, and he suggested instead to develop communication skills and the ability to quickly articulate a comprehensive subject.

He said I’d work for people who teach me the way their way of doing businesses anyway. He said I’d be surprised how many of those people can’t write a decent memo. He was right on both counts.

That advice absolutely changed my life trajectory. It is the core of my ability to sell, compel my employees, appeal to vendors and even work with my wife.

How have you used your success to bring goodness to the world?

During the down time I had in 2009, my two friends and I founded Miami’s The Little Lighthouse Foundation (“LLF”), disbursing funds and deploying volunteers to help impoverished families, as well as smaller charities which helped impoverished families throughout South Florida. When I got married two years later, I suddenly had not just a wife but eight and ten-year-old stepdaughters, so I had to back away. I take pride LLF generated well over 2 million dollars in donations and is still going strong today.

Now that Privé Porter has an infrastructure (defined as not just myself & my wife), I’ll be helping my wife Michelle launch the Give Them Hope charity, the first edict is buying an actual car for otherwise struggling women throughout Palm Beach County. That starts as early as February 2021. We have plans to soon thereafter have actual Give Them Hope homes where strained single mothers can come to child babysitting services, self-owned business counseling, etc. so they can be independent.

Along the way, we have been four & five digit donors to an assortment of charities including but not limited to ACLU of South LA, Leukemia & Lymphoma Society of LA, French Institute Alliance Francaise (FIAF), Literacy Partners of NYC, Art for Life.

Ok super. Now let’s jump to the main questions of our interview. The Pandemic has changed many aspects of all of our lives. One of them is the fact that so many of us have gotten used to shopping almost exclusively online. Can you share five examples of different ideas that large retail outlets are implementing to adapt to the new realities created by the Pandemic?

The declination of the retail, more specifically, malls, has been going on for a long time. As far back as seven years ago, Bloomberg was calling it a “permatrend’.

I wouldn’t say the pandemic is the catalyst here. What the pandemic is that unexpected “ripping-off the band aid” a few years earlier than the trajectory was. Ultimately, retailers will have to continue to evolve from their faults and weaknesses that were exposed when the band aid was ripped off.

In your opinion, will retail stores or malls continue to exist? How would you articulate the role of physical retail spaces at a time when online commerce platforms like Amazon Prime or Instacart can deliver the same day or the next day?

This goes back to the immediacy we wanted as a young adult ordering food delivery in NYC. The proximity of the Chinese restaurant was as important to us as the quality, as we wanted it when we wanted it. What’s important here is we also had our core of favorite dishes, and therefore, we were already familiar with what we wanted. Let’s call it speed and familiarity.

For core household and groceries that come ala Prime Delivery, we can click off a long list of stuff we want as we are familiar with what we want, and then enjoy the speed of Prime Delivery.

We are at the apex of the fashion and luxury, admittedly very extremely so. People are paying 18,000 dollars or more for a Birkin they know retails for 13,000 dollars.

Just last week, in our first retail store here in Brickell City Centre, a couple in their late 20s came in, bought a 23,000 dollars handbag in probably less than 20 minutes. I always try to ask people how they find us, how they get their motivation. The husband was very educated on all the leathers, hardware, market values of the bag he bought. He admitted that he had followed us on Instagram for years, but it was simply too big a purchase to wire money and wait for a FedEx to bring something that hopefully made his wife happy.

For fashion and many other non-urgent goods, there is no familiarity, and therefore, a need to touch, try on, contemplate before purchase. What is the color when I see it in person? How does it fit? How does this couch really feel when I sit on it, brush my hand across the fabric?

The exception to this is Nike or Lululemon which the customer is already so familiar with the brand, fit, fabric, structure, value they get from what they pay, their online businesses are flourishing as, while there is no impetus for speed of delivery, there is a familiarity of the product. This year’s Nike spike in sales and their stock price was customers’ familiarity and ease of purchase directly from Nike online.

Retailers will have to drive people into the stores for these more comprehensive sales in order to survive.

The so-called “Retail Apocalypse” has been going on for about a decade. While many retailers are struggling, some retailers, like Lululemon, Kroger, and Costco are quite profitable. Can you share a few lessons that other retailers can learn from the success of profitable retailers?

LululemonI addressed earlier. Since they only retail their own product, their profit margins are really amazing. That has enabled them to put a lot of money into online technologies. Kroger and Costco, while there are larger portions of online deliveries, they have mastered their private label categories as opposed to other groceries stores, so that is a greater profit margin in a subsector of their business.

Some are just dinosaurs that this pandemic band aid has killed off; take Debenhams. While they have the same number of categories as Walmart, they had terrible online capabilities and when this crunch came in, over 125 separate locations are going to simply be in too much debt to reorganize. I think this will be their third trip to bankruptcy court. What’s curious over there isn’t so much, “Why didn’t you adjust to Amazon?” as much as it is to me to ask, “Why didn’t you notice how Target and Walmart adjusted to Amazon?”

Others that fall into that core obsolescence. Pier One closed over 900 doors. GameStop looks like it is the Blockbuster of gaming, as they didn’t just fail to sell digitally but gaming literally became digital and the bus has left without them.

Amazon is going to exert pressure on all of retail for the foreseeable future. New Direct-To-Consumer companies based in China are emerging that offer prices that are much cheaper than US and European brands. What would you advise to retail companies and e-commerce companies, for them to be successful in the face of such strong competition?

Have a product which people ultimately want and make it as easy as possible for them to get it.
Lululemon and Nike, they have that passionate customer and expected quality and value we talked about here. Nike had been investing in their DTC capabilities for years, and when this black swan arrived, they were well positioned. Look at their stock price.

Kroger’s success, too, is because they were investing into DTC for over a year. COVID comes and they benefit from two combined factors: online grocery delivery and spike in eating at home (restaurant closures and safety). According to one research company, E-Marketing, they leaped over Macy’s and Costco to be #9 of the top ten online retailers.

Alas, it is never too late. Moncler recognized their aging customer and acted now, they picked up Stone Island. What they have now is a younger customer, but there are still territories like Asia which Stone Island will be new to. It will also be merging two great digital retail methodologies.

Wellness/Health Care is a category which people have been spending more & more on, yet another story which should have been bigger is how GNC went into bankruptcy in June. Why? A seeming failure to develop their DTC capability. Taking it one step further, at the same time, Bayer snapped up Care/Of which is essentially a startup which creates these supplements on a personalized basis, sold therefore, in a DTC manner.

You either have to be great at core retail and bring in tons of people like Apple, or capable of building your DTC. More and more, the ones who are stick in the middle, like let’s say GAP, are going to continue to get pummeled.

We can keep talking about the topline of the companies who did well, that were already shifting towards DTC, but one thing that no one is yet talking about is there was over 70 billion dollars in returns of online purchases this year. This is a fluid story, and I cannot yet wrap my head around what that does to their bottom line. The manpower to process returns, the COVID level cleaning of some goods to resell, write off unsellable inventory,

Thank you for all of that. We are nearly done. Here is our final ‘meaty’ question. You are a person of great influence. If you could start a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger. 🙂

The genesis of LLF was just us, two nights a week, cooking dinner for families staying at the Miami Ronald McDonald house (“RMH”). RMH basically gives impoverished families a free place to stay while their sick children, almost always getting free medical care, like a dorm room setting. A least in Miami, these are almost all families from Latin & South America who are scared, can’t speak English, and getting to my point, can’t walk down to Olive Garden every night. The free food is obvious, but what I later noticed is it gave the parents a few hours to simply lay back on the couch, watch TV, whatever, just veg out and decompress from all the stuff they were mentally jugging.

So, giving a car to a struggling mother is obvious, they cannot afford one. But we are then alleviating the extra hours wasted on public transportation, the days it is raining. There is an immeasurable amount of worry and anxiety, over the literal lack of freedom of movement, we have wiped out and they can put all these hours into more positive application.

It isn’t just the money; it is opening bandwidth for much more positive thoughts and vibes. We have all had tough moments and times in life, it is the worry and fear that has been most crippling, not just the challenge itself.

This was very inspiring. Thank you so much for joining us!

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