Portia Antonia Alexis is a leading consumer business analyst, neuroeconomist and mathematician

Portia Antonia Alexis is a consumer goods analyst and researcher specialising in the realm of neuroeconomics, where she uses advanced analytics to determine the thought processes of consumers and how best to appeal to them. Here, the McKinsey alumnus speaks to LUX about the impact of the pandemic on consumer habits and the future of hard luxury

LUX: How do you define hard luxury?
Portia Antonia Alexis: Hard luxury is simply a term that refers to timeless products such as watches and jewellery, while soft luxury refers to products such as leather accessories, bags, and designer clothing. While this may sound a little basic, an easy way to remember the difference is that hard luxury refers to pieces that are physically harder to break, while soft luxury refers to pieces that are soft to the touch.

LUX: What was the relationship between hard luxury and e-commerce pre-pandemic?
Portia Antonia Alexis: Pre-pandemic, hard luxury goods were very rarely sold online. After all, while major hard luxury retailers such as Tiffany & Co., Longines, and Rolex consistently advertised through online channels, the idea behind these advertisements would be to drive people to their in-person stores rather than try to drive online purchases.

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The reasons behind this can mostly be attributed to the price of hard luxury brands. Generally speaking, a high-quality piece of jewellery or a luxury watch will cost over $1,000, and in an online setting, many people were uncomfortable with spending such a large sum of money. Online shopping was also much less conducive to driving sales, as while an in-person salesperson could use sales tactics to condition the brain into making a purchase, the nature of an online shop made it much harder to do so. As a final note, many people enjoyed the experience of shopping for hard luxury in-person, as they get a psychological ‘high’ of sorts due to the increase in perceived status that they felt when shopping for an expensive item in person; however, when online, this reaction was greatly muted.

LUX: How has the hard luxury sector been affected by COVID-19?
Portia Antonia Alexis: As with many industries, hard luxury sales plummeted during the first few months of the pandemic, but by the third quarter of 2020, there was a large resurgence in sales. For example, in the third quarter of 2020, the luxury conglomerate Richemont had a 5% increase in sales that was largely bolstered by its jewellery assets and during that same time period, Maisons had a 13.3% increase in sales, which was largely thanks to a strong performance by its hard luxury brands Cartier and Van Cleef & Arpels. I expect to see this positive momentum continue in 2022, and I would not be surprised if hard luxury revenues meet 2019 levels this year.

LUX: From a neuroeconomic standpoint, why do you believe this rise in sales occurred?
Portia Antonia Alexis: Given that most hard luxury brands were reliant on in-person traffic to drive sales, the pandemic necessitated a complete revamping of the online experience so that these brands could replicate the same psychological triggers that shoppers felt when they were in-store.

One of the biggest innovations in this field was the advent of personalised online appointments. These appointments involve a salesperson booking a time with a client and then having a video conference where they have their entire collection on offer, and these were great substitutes for in-person appointments for two main reasons. The first was that the salespeople were able to use many of the same sales tactics that they used in store, and from a neuroeconomic standpoint, this generated a more positive response in the brain of the client that then led to a higher conversion rate than a simple online store would have. The second major difference was that the salesperson could physically try on a piece of jewellery, and this was important because it not only allowed the client to analyse the fit of a piece using a real person as a point of reference, but made the client more comfortable with shelling out large sums of cash for an item.

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Another major innovation was the increased emphasis on customer service. On a basic level, this was done by having more people on hand to answer questions and do sales calls and by making the waiting time for answers either online or on the phone much shorter. This helped give clients peace of mind while shopping, alleviating a lot of the unknowns that come with purchasing while only having a picture as a frame of reference. This customer service also extended to details such as warranties and returns. In the past, many hard luxury companies had strict return policies, but in light of the pandemic, many made it so that you could try a piece on and then return it if necessary. This was crucial as it made people much more comfortable with making a large online purchase. However, since it is generally a bit of a hassle to return something, this barrier would cause many clients to mentally accept sub-par items, leading to items that would have been rejected in store still getting sold so long as they looked good online.

In tandem, these two factors made online shopping far more similar to in-person shopping than it was pre-pandemic, and as a result, sales were able to remain relatively high despite the fact that there were very few physical stores that were open.

LUX: Are there any other major factors that you feel were important?
Portia Antonia Alexis: I’d say that the influence of geographic variation cannot be overstated. While business in the United States was lacklustre, China and Japan, which are the second and third largest luxury markets by annual sales respectively, became especially influential after removing their COVID-19 restrictions earlier than most. That’s because there was a marked rise in ‘revenge buying’, which were shopping sprees driven by a feeling of having missed out during the lockdown, and ‘reunion dressing’, which were surges in demand driven by re-uniting with people after large periods of time in lockdown, and in tandem, this led to a massive growth in sales in these countries. In fact, mainland China was the only region on the planet to come out of the COVID-19 pandemic with higher local spending than it had in 2019, as it experienced a massive consumption growth rate of about 45%. When you further consider the increase in per capita wealth being generated in China, I’m confident that in the next few years, China may overtake the United States as the world’s leading hard luxury market.

LUX: What will hard luxury companies have to do to encourage growth post-pandemic?
Portia Antonia Alexis: I think that one of the single most important changes that hard luxury companies will have to undergo is the shifting of their focus from the American market to the Asia-Pacific one, with China being their primary long term target.

Research has shown that relative to American consumers, Chinese consumers tend to have very different responses to advertisements. More specifically, it seems that while American consumers respond well to brand awareness, which is created by, say, commercials at the Super Bowl, Chinese consumers tend to be far more concerned with intrinsic value, which derives from factors such as the quality of the materials used, how the goods are created, and what the brand’s story or ethos represents.

Chinese consumers also seem to respond poorly to discounted merchandise. Now, during the pandemic, many American brands dropped prices or released lower cost lines of products in order to make their goods more affordable to cash-strapped consumers. However, this often backfired in the Asia-Pacific, where consumers perceived this fall in prices to be a drop in intrinsic value, which therefore made the goods less desirable than they were before the prices were decreased!

In any case, I think that if American brands are to fully take advantage of the Chinese markets, they will have to focus more on building a long term story for their brand and less on simply creating a recognisable logo with flashy advertising. However, given that the Chinese and American markets are so large yet so different, the big challenge here will be to straddle the competing consumer mindsets in both regions. In my opinion, hard luxury brands can achieve this by applying different neuroeconomic principles to their marketing campaigns and brand building on a regional basis, and my hope is that in the coming years, more analysts with a neuroeconomic background will enter the consulting field so that this can be achieved!

Portia Antonia Alexis is a neuroeconomic consumer goods analyst and researcher who works with luxury brands such as L’Oreal, Estee Lauder, and Tiffany & Co. @portiaeconomics

Portia Antonia Alexis is a leading consumer business analyst, neuroeconomist and mathematician

Portia Antonia Alexis is a neuroeconomist and consumer goods analyst specialising in the luxury and beauty sector. Following the publication of a recent research paper entitled ‘The Global Elite,’ the McKinsey alumnus speaks to LUX about how populism is just another form of protection for ingrained elites, why more women will become entrepreneurs, and how self-made billionaires are not always what they seem

LUX: Recent elections in the US, UK and elsewhere have returned a populist message. Yet US President Donald Trump and UK PM Boris Johnson are part of the elite themselves, and their elections are benefitting the elite more than anyone else. How can this be?
Portia Antonia Alexis: Right-wing populism emerges when the political and economic status quo fails the majority of people. Populist politicians build their base by constructing an in-group – in this case, hardworking white Britons – and pitching themselves as the champions of this “oppressed” group. They then blame the out-group – Muslims, migrants and scroungers – for the hardships everyone else is suffering.

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In doing so, they channel widespread anger away from the powerful – the economic and political elites – and towards the powerless.  They may claim to be tearing up the status quo, but their fundamental objective is to protect capitalist institutions when they are at their most fragile.

This strategy extends into the realm of policy. Johnson’s electoral agenda – from clamping down on crime to ending freedom of movement within the EU – will polarise politics around an opposition between white, working-class Britons versus migrants and welfare scroungers. He will declare himself tough on crime and migration while casting his opponents as out-of-touch elites who don’t understand the concerns of ordinary people.

Right-wing populism must be seen for what I think it is: a symptom of a crumbling capitalist order that no longer promises a better future for most people.

LUX: An increasing number of super-wealthy are self-made. Is this good?
Portia Antonia Alexis: This question reminds me of the controversial Forbes cover story naming Kylie Jenner a “self-made” billionaire.

Critics cited that it was irresponsible for that magazine not to address how Jenner’s family fame helped her amass her fortune. And it’s true, in a way. Calling Jenner self-made connotes a sense of empowerment and a narrative that she lifted herself by her bootstraps. In contrast, her successful company is not so much the result of being self-made but rather an extension of the already successful empire that’s driven by her sisters.

Most bottomless pockets, not just Jenner, consider themselves entirely “self-made.” Rich people are very conflicted about their entitlement. To cope with this conflict, many simply pretend to be self-made. President Trump is a glaring example. Even though he grew up wealthy, he introduces himself as an entrepreneur.

The best evidence of this bias to claim “self-made” status? The annual September release of the Forbes magazine list of America’s 400 richest.

The necessary conclusion from these findings: Forbes is spinning “a misleading tale of what it takes to become wealthy in America.” Most of the Forbes 400 have benefited from a level of privilege unknown to the vast majority of Americans.

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LUX: When will women start to have a significant presence in the ranks of the super-wealthy?
Portia Antonia Alexis: While women still represent a relatively small part of the billionaire community, they are a continuously growing segment. Perhaps more interesting is that the percentage increase in self-made women was more significant than the rise in the number of billionaires overall, which could signal a change in who will create and control wealth moving forward.

Much of the increase in super-rich women is due to entrepreneurship. These women, like all self-made successes, exhibit several core characteristics. For example, they typically have high levels of self-efficacy, are adept at strategic networking, and are accomplished negotiators.

Women that have created their wealth are different from those that marry or inherit their wealth in several essential ways. They are more willing to take calculated business risks, and they are often motivated to take steps to enlarge and enhance their fortunes through new business ventures, sophisticated tax and investment strategies, and the creation of family offices.

There is unconscious bias in the system, though. I believe many men would like to see more women at the top. I don’t think they’re all actively trying to keep women out, but some discrimination still exists.

I am confident that we will achieve gender parity in top income generation over the next generation. The girl who can dominate a field of robots is a woman who can dominate a field of men.

LUX: As millennials mature, will the nature of consumption change?
Portia Antonia Alexis: Millennials are less wealthy than people were in the past, which makes them very price-sensitive for brands and products that are not differentiated from competitors. But while they have less money, they are very value-focused and are willing – thanks to their parents’ finances – to pay for quality or status.

And they are very tech-savvy, having grown up on the internet and with smartphones. They are well-informed and quick to adopt new technologies. Finally, they are into health and wellness, taking a more active role in physical fitness than keeping to an ideal weight or getting enough sleep.

LUX: Are millennials and Gen Z investing more into the ESG and impact investing sectors, or is it lip service?

Portia Antonia Alexis: When investing, millennials are committed to environmental, social and governance (ESG) practices. They want to be responsible investors.

In the early days, this mainly amounted to the exclusion of investments exposed to industries such as tobacco, alcohol or armaments. Still, it is now turning to broader ESG and sustainability policies. For example, we are increasingly asked about board diversity: millennials want to know how many women are on boards or in senior management.

Millennials are not the end of the generational transformation of consumption patterns. Some 77 million members of Generation Z, also known as centennials, have been born since 1997 – making them as large a cohort as the millennials. They are the most diverse generation, with almost half of them belonging to a minority group.

The potential for higher returns from companies that position themselves to benefit from the changing consumption patterns of millennials and centennials should make them especially attractive for investors.

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LUX: Can you invest ethically and get the same return as investing without regard for ethics?
Portia Antonia Alexis: A common assumption is that sustainable investment is about conscience rather than profit. Almost three out of 10 people avoid ethical funds because they believe the returns will not be as high as more conventional alternatives.

Very often, people assume you have to give up decent returns to do good with your money. But this isn’t philanthropy, and it’s about people, planet and profit. The research bears that out, showing that sustainable funds are often generating better returns than more traditional funds. Some still regard ethical investing as a fringe activity for do-gooders, but evidence shows how wrong this assumption is.

This year, the National Trust announced it was divesting its investment portfolio from fossil fuels. Meanwhile, equity research house Redburn recently removed buy ratings from the biggest oil companies, saying that demand for oil is set to decline as the focus moves to renewables.  Not only is it savvy to maintain a varied portfolio, but sustainable investing is also becoming increasingly mainstream, opening up more impact investing opportunities to all levels of the investment community.

Research shows this type of investment can provide equal, if not better, returns than more conventional funds. And also, the variety of companies financed by impact investment funds – those that score highly on ESG factors – perform better. These businesses typically have lower costs of capital and higher returns.

LUX: Is ethical investing being led by the West, and does the rest of the world need to catch up?
Portia Antonia Alexis: In most Western countries, between 40 to 80 per cent of investors want to invest “ethically”. They desire to make money and create a better society. However, the funds screening investments for ethical conduct usually make up less than 3 per cent of total mutual fund, unit trust, or ETF assets in those countries. These ‘ethically screened′ funds frequently focus on investments related to the environment and sustainability, social responsibility, or are faith-based, and so on.

Investing ethically, for some investors, is essential as they believe it also impacts their personal or spiritual development. They think they ultimately share in the responsibility for the activities of the company, companies or funds that they invest in.

In many Muslim countries, ethical investors invest in Islamic financial products such as Sukuk—Islamic bonds. These assets sometimes represent a significant proportion of total financial system assets in these countries, in contrast to the socially responsible investment (SRI) priorities of many Western investors such as mitigating climate change or regulating genetically modified foods. SRI in developing countries may need to address health care provision, poverty alleviation or food security. The SRI schedule tends to be shaped by a market dogma that can elevate or marginalise issues according to their perceived “financial materiality” to investors preoccupied with finding a business case for acting ethically.

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LUX: How are the children of the super-elite dealing with the wealth created by their parents?
Portia Antonia Alexis: I often describe elite kids as having “well-fed child syndrome.” The idea is simple enough: they’re not made aware of their limits, only of their capacities. They get a sense of the world not as rules and regulations, but instead as an open terrain to be negotiated. Whereas the experience for a lot of disadvantaged kids is that of “you can’t” — of the limits placed upon you, the rules you have to follow, and the punishments likely to be laid down on you, the experience at St. Paul’s is that “you can.” This is an empowering way to treat children. This ethic — this sense of potential and an open world before you — helps with success.

A lot of very wealthy people are not accountable to their community, they’re not responsible to the people they love, they show their power and control through the transaction, and they are unhappy, from what I can tell. The people I know who are very wealthy and are happy are all contributing something to society.

LUX: Are experiences replacing luxury goods as the purchasing focus of the wealthy?
Portia Antonia Alexis: At the end of November of last year, the Savigny Luxury Index, compiled on the stock values of 18 leading luxury companies, reported a drop in average stock prices to reach a lower level than at the beginning of the year.

In the past, luxury was associated with champagne, caviar and designer clothes. Nowadays, with increased affluence, luxury is no longer the preserve of the elite. More and more consumers have traded up as old values of tradition and nobility have become less critical. People are enjoying much more material comfort in comparison with previous generations, and this has resulted in a trend of a cultural shift for cultural fulfilment and aspiration through experience. Therefore, it could be argued that luxury is increasingly about experience and authenticity rather than monetary value.

The focus on aspiration and experience means there is an increasing emphasis on personal transformation through, for example, well-being and travel. Therefore, luxury is becoming more challenging to define because the language has changed. Luxury today is not necessarily expensive. It can be accessible to a mass market, not traditional; it can also be personal, authentic and experiential. However, the old-world luxury of consumption and elitism still prevails.

LUX: Does elite mean wealthy, or does it mean privileged in other ways? Can you be one of the elites without being wealthy?
Portia Antonia Alexis: Elite suggests by definition that it goes for both wealthy and privileged. An elite is a relatively small group of people with the highest status in a society, or in some domain of activity, who have more privileges or power than other people due to their condition. Elitism is believing in or promoting this sort of arrangement, whether that be in the academic world, politics, art, sports, or anywhere else. Almost all the national income gains over the last 40 years have gone to the wealthiest 5 per cent of Americans.

If you think that only the top 5 per cent of American earners have become more productive or been the sole producers of value, you don’t understand how an economy works. Elites have used their power to extract a greater and greater share of the national wealth. And that must be addressed.

I don’t know if you can be one of the elites and not wealthy. But I do know ones who can be against the elite and still be wealthy and privileged.

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LUX: So far, populism in the West has returned right-wing, free-market, nationalist political leaders in the UK, US, Poland, and elsewhere (see Q1). Will high tax/socialist politicians succeed?
Portia Antonia Alexis: The resurgence of populism has abruptly reshaped global politics over the past few years, but what it means for economic growth and financial assets has yet to become apparent.

Although markets are quick to respond to individual events—such as a populist party’s rise to power or the introduction of a tax cut or spending increase—they have not yet grasped how populism could affect the global economy over the long term.

This poses a challenge for investors, as they need to understand the economics of populism to position their portfolios over the years ahead effectively.

The early stages of the policy profile outlined above can be glimpsed in President Trump’s deficit financed tax cuts and the ruling Italian populist coalition’s battles with the European Union (EU) to push through an expansionary budget.

The fiscal accounts of Hungary and Poland have structurally deteriorated after the election of rightwing populist governments, and the market’s price in an economic deterioration in Mexico under the newly elected left-wing president Andrés Manuel López Obrador.

It is worrying that most of the populist governments that undertake these fiscal expansions lack the fiscal space to do so.

LUX: What is the most exciting trend you have observed among the elites?
Portia Antonia Alexis: The rise of populism has become a global obsession in the last year. Whether it’s Donald Trump or the Brexit movement, the rise of populism has helped crystallise the fact that there are two kinds of elites: those who like to bash populists for being foolish, and those who wish to bash other elites for failing to give populists enough of what they want.

What’s interesting is that the anti-elite elites don’t seem to have policy preferences that differ that considerably from other elites. Everybody thinks the status quo needs changing in one way or another. And I don’t think points based on skilled immigration systems and relocation vouchers aren’t what most anti-immigration protesters have in mind.

Nor do I think a vigorous points-based immigration system, relocation vouchers, or any policy ideas of anti-elites would have done much to stop the current global wave of populism that we’re seeing. Had anti-elite elites been handed the wheel 15 years ago, I think we’d pretty much be right where we are right now.

LUX: You initially trained to become an equestrian show jumper, today you are an economist, mathematician and business analyst. What changed?
Portia Antonia Alexis: I spent an extensive amount of time training to become an international equestrian. Ultimately, I found I loved mathematics more. When I was volunteering as a youth counsellor with the London Metropolitan Police, offering counselling and therapeutic care to youths who had been victims of crime, I witnessed a range of diverse socioeconomic issues. These issues concerned me, and I found it interesting to analyse the problems from an academic, investigative and human lens. I wanted to find a way to research the determinants relating to wealth, income, poverty using a range of the method. And to predict the probability of wealth distribution income inequality and social mobility in detail. The rise of the global elite and the rise of income inequality and the decline of the social movement.

The most important thing I learned as a mathematician is that I can’t explain it all on my models, I must get out and meet the world. I enjoyed the process, and it motivated me: the people and their stories. Economics studies the behaviour of people. There are a lot of variables that can’t be explained in the models. Even if they could, those models would be useless. When I started working as a researcher, I didn’t spend my time thinking about what Keynes or Hayek said, nor did I try to show how the mathematical models work. I just went to the data, applied some statistical analysis and applied them on the real world.

This is the kind of work that counts, the type of knowledge that is useful, because it’s not doomed to stay on a shelf for centuries, and it has a connection with the people out there.

I still love horses and ride and show jump for leisure these days. I take part in equine therapy once a week, which involves activities with horses and other equines to promote human physical and mental health. I also occasionally write research papers on trends within the horse racing industry and the global equine industry.

Follow Portia on Instagram: @portiaeconomics