Is overexpansion cheapening luxury brands?
Through a special arrangement, what follows is a summary of an article from Retail Paradox, RSR Research’s weekly analysis on emerging issues facing retailers, presented here for discussion.
In Miami, "The Design District" — rising out of the ashes of the old Design District — is the new home of the highest of high-end luxury retailers: Louis Vuitton, Christian Louboutin, Lanvin, Hermes, Tom Ford, Bvlgari and others.
The surrounding area, while up-and-coming, in no way holds the target demographic for these stores. In fact, it’s not clear exactly where those people live or visit from. And 8.3 miles away sits Bal Harbour Shops, notable for having the highest sales per square foot of any mall in the world. Still, the Design District construction marches on.
I thought this clustering of high-end stores was something of a singularity until I visited Barcelona. PÃ sseig de Gracia is the home of many of the very same shops.
Source: Miami Design District
And then there’s the model of saturation: Michael Kors. Of course the brand has a presence on the Design District and PÃ sseig de Gracia. It also has a store in the Miami airport and unveiled a brand new shop on Carnival Cruise Lines’ ship Allure of the Seas (to name just two).
The ride through Barcelona left me in complete befuddlement. How can you have commoditized luxury?
The luxury shopper isn’t thinking about convenience wherever he or she may be.
"Our international customers are incredibly discerning and clued-up on product," Shadi Halliwell, group marketing and creative director of Harvey Nichols, told the Business of Fashion blog. "They are looking for one-off pieces, limited editions or bespoke items, and are prepared to pay a higher price point for this level of exclusivity."
The highest-end customer really doesn’t want a sea of sameness. They have the resources to buy the best. They want unique items. And, apparently, they want unique stores. There’s only one Harrod’s. Selfridge’s flagship location is unique, and it only has a handful of satellite locations. Harvey Nichols has a few more stores, but seems to mostly cater to Middle Eastern clientele in those few outlets.
So when does luxury expand to a point where it’s no longer interesting? After all, the brands mentioned at the start of this article are also available in high-end department stores like Saks, Neiman’s and others.
Discussion Questions
Do you see many luxury brands reaching market saturation with their retail expansion efforts? Do you think luxury shoppers are seeking more convenience at the expense of exclusivity?
Poll
BrainTrust
Bob Phibbs
President/CEO, The Retail Doctor
Cathy Hotka
Principal, Cathy Hotka & Associates
It’s easy to rent retail real estate, design a store and show investors you are expanding. It’s quite another to match demand with that investment.
Many luxury brands are running on fumes. They’ve had a long run on a name brand generations took great care to nurture and cultivate. Now they are missing the very thing that defines luxury — service and culture.
I’m not surprised by the sameness and commoditization of many of these retailers after all, you’ll walk in one and get bad service and pretty much get the same down the street.
Luxury stores are not like hardware stores though many are treating them as such.
As I just wrote in my post The 5 Stupidest Questions To Ask Retail Shoppers, most trips to a store are not like a trip to a hardware store where, “Can I help you find something?” leads to, “Yes, I’m looking for #2 screws.” Most trips are based on a customer trying to solve a larger problem.
The sooner retailers start treating their customers coming into their store — wherever it is — like they are not a commodity, the sooner they’ll truly live up to the brand promise these brand managers have inherited.
The luxury brands that will survive are the ones that pair high-end merchandise with thoughtful and attentive service. It’s not by accident that Neiman Marcus has armed its commissioned sales force with phones with which they can photograph and text merchandise for customers.
That said, certain luxury brands are courting commoditization by making their products available at discount outlets like Marshall’s and T.J. Maxx. Big mistake.
Luxury brands are moving deeper into the lower income level shoppers more than ever before. Middle income consumers are investing in luxury brands before they secure budgets for more critical expenses. The proliferation of these brands in television programs helps drive the “need” for less-than-wealthy shoppers to crave them. Do more shoppers per capita in developed regions buy more $400+ handbags than they did 20 years ago? My guess is yes. Does this mean that more will buy $4,000 and $40,000 bags? Eventually, yes. Does this cheapen the brands? I say no. It increases awareness and ubiquity of the brands, and that is a great thing.
Luxury brands may be looking for a means to make those with the interest and ability to purchase aware of their premium products and services. Over the past decade many members of their customer base have departed as members of the affluent or mankind. The risk of market saturation is a small when compared to unawareness or oversight by their market segment and its current active membership.
Some luxury brands are making themselves more accessible by securing retail spaces inside Macy’s Herald Square (top 3 tourist site in NYC) and some have realized that they have become too accessible to the mass consumer, and therefore have “cheapened” their brand, so they are releasing more high-ticket items.
All the while, I don’t see the majority of luxury brands really focusing on customer service. Sales reps working for luxury brands like Saks Fifth Avenue and Burberry do not focus on developing long-term relationships with customers and are really only focused on in-the-moment commissionable sales opportunities. If I am not treated with special care, then the allure of luxury shopping and exclusivity no longer exists.
Along with the European examples, one could cite Bergdorf Goodman in this country as well. But debating whether two or three stores is less exclusive than one rather misses the point: the seeker of true exclusivity cringes at the very idea of a store. They seek out the craftsperson him(her)self for a (literally) unique creation.
So we’re talking about a somewhat, uhm, lower tier of luxury here (the one- or two-percenters rather than the ultra wealthy) where there is a tradeoff between price and volume. I’m not sure where the profit-maximizing point is. Indeed I doubt there is a single point for all brands, but once there exists more than one outlet per city, then yes, it has become commoditized.
Yes, I believe luxury shoppers are looking for convenience. Additionally, the fact that a luxury brand has a few stores in a specific geographic area does not preclude exclusivity. A luxury brand is exclusive by means of its one-off pieces, limited editions, bespoke items and, clearly, price point.
Miami is a perfect example. The fact high end luxury retailers are opening in the Design District tells me they’ve done their research and are preparing for the tremendous growth that will be taking place in Miami over the next few years. Over 20 condo towers are planned for the financial district, and the Brickell City Centre and Miami Worldcenter projects are huge and in the works.
Miami looks to be more pedestrian friendly as driving is, in my opinion, challenging at times. If I can park and walk in Miami, as I do in New York City, it would be awesome. The Design District, in particular, is becoming a terrific destination experience, and high end luxury shopping, especially in Miami, is status quo.