In the past only traditional retailers had the burden of chasing sales and doing whatever is required to increase the size of their consumer base and drive loyalty. With the introduction of online shopping, ever-changing consumer behavior and decreasing brand loyalty, luxury retailers are getting up from their laurels and joining their traditional counterparts to stop the slow bleed of decreased sales across the market. Most recently, luxury retailers are taking action across three focus areas across the market:
Connecting with Consumers Digitally
As the retail marketplace becomes more digitally advanced, luxury and specialty retailers are reimagining unique ways to connect with their consumers in a way that consumers want to connect, yet still provide an elevated experience both online and in-store. Traditional retailers are figuring out ways to create a seamless experience for consumers in-store by adding digital interfaces for consumers to use directly as if they were online. Conversely, many luxury retailers are pushing to find ways to strengthen that personal 1:1 contact. Some luxury brands like Dior do not sell product online – encouraging their consumer to engage with a person instead. Most luxury retailers are placing the power of technology in the hands of the store associates, enabling an enhanced personal 1:1 interaction that is core to the foundation of luxury and specialty retail. Stores like Hermes have equipped their store associates with tablets to access product information, inventory placement and various selling point content. The selling content is even different in a luxury store because it provides information to help the consumer understand why the product/line/collection was created, not just why the consumer should purchase.
Leveraging Omni-Channel in Luxury
One of the biggest buzzwords in retail is “omni-channel” and traditional retailers have enabled their consumer to purchase and receive product any way they prefer (e.g. buy online, ship-to-store). While traditional retailers have taken this posture with full confidence, many luxury retailers are slow to adopt true omni-channel operations. Luxury retailers have yet to realize the full benefit of leveraging omni-channel and have found it difficult for many reasons:
- Small volume runs – luxury retailers are known for producing small volumes to provide a more exclusive product in the market. Retailers have found it easier to manage inventory separately for retail and e-commerce channels from a financial planning and merchandising perspective. Since the luxury consumer is willing to wait longer for a special product, retailers have trended towards producing a very small order initially and scaling production once market demand is present in-season.
- Increased loss prevention risk – margin for error is extremely small for luxury retailers and many have shied away from omni-channel due to the increased risk of consumer fraud and theft. Operational processes like buy online and pick-up in store are rare across luxury retailers to avoid just one instance of accidentally giving merchandise to a fraudulent consumer or even giving the wrong merchandise to a trusted consumer. Many luxury retailers will only ship an item to the consumer’s home if the shipping address matches the billing address on the credit card. For many luxury retailers, if a consumer wants to ship a product to their home after they make a purchase in-store, the shipping address must match the address on the license of the consumer.
Making the Cultural Connection
More luxury retailers are investing heavily in establishing a strong cultural connection with their consumer, laying the foundation work for acquiring a younger consumer base as the buying power shifts from the baby-boomers to millennials. Luxury retailers are well positioned to do this very easily and drive incremental revenue as well. One tactic retailers are using is hosting private events in-store for consumer groups that share specific cultural and social interests. Stores like Rebecca Minkoff in NYC’s SOHO district hosted a charity event for the NY Giants Wives Association. Some retailers have even targeted select neighborhood HOAs to encourage hosting private events in-store. Some luxury retailers like Tory Burch are known for hosting private events for men only as well – the store associates will collect their consumer information like birthdays and special anniversaries and personally invite the consumer’s spouse to the store for a men-only private event. The men-only private event will display a curated assortment for the consumer’s spouse to purchase while tasting the newest craft beer on the market.
It’s not enough for luxury retailers to replicate what traditional retailers do because their consumer is different and still requires an exclusive and differentiated shopping experience both online and in-store.