Photo: Nordstrom
Can luxury retail attract a new generation of shoppers?
Knowledge@Wharton staff
Presented here for discussion is a summary of a current article published with permission from Knowledge@Wharton, the online research and business analysis journal of the Wharton School of the University of Pennsylvania.
“I think the strategy for Millennials is actually not to have any strategy for Millennials, because they can smell it,” said Laurent Claquin, president of Kering Americas, the major European designer brand group, at the Baker Retailing Center CEO Summit in New York.
Authenticity is key with this demographic, especially since we live in a world of transparency and sharing, he noted.
Mr. Claquin cited Gucci, a Kering brand, as achieving success with Millennials and Gen Z by allowing consumers and new design trends to influence the brand, “opening the door of the retail stores, literally and also digitally.” He noted that Gucci has worked with a variety of artists on Instagram, for example.
Mr. Claquin also named sustainability as an important principle for Millennials. He said that companies need to not just issue statements about helping the environment, but actually practice those principles. Reducing fashion industry-related pollution has long been embedded into Kering’s business model, he said.
Supporting inspiration, discovery and experiences were behind Saks Fifth Avenue’s $250 million renovation, Nordstrom’s New York flagship and the Hudson Yards complex.
Saks president Marc Metrick at another session commented that Saks’ renovation was critical in repositioning the brand and entering into what he called “the new luxury.”
He emphasized the power of brick-and-mortar stores, especially when it comes to luxury items. He compared the luxury shopping experience to watching a top Broadway show like Hamilton — people want to be in the theater seeing it live rather than sitting home watching TV.
At the same time that new luxury consumers want an exciting, entertaining shopping experience, they also want to feel comfortable and “at home,” Mr. Metrick said. “A lot of what we’ve done is all about becoming less transactional, becoming a much more emotionally connected retailer for our customer.”
Like Mr. Metrick, Shea Jensen, a senior VP of customer experience at Nordstrom, shared in another talk that her goal was to serve customers where, when and how they want to shop, “across multiple touch points and through multiple channels,” she said. “We’re very aware that all of us are living in an increasingly digital world.”
Discussion Questions
DISCUSSION QUESTIONS: Which traditional approaches should luxury retailers keep the same and what adjustments should they make to attract Millennials? What are the most significant ways that luxury retailers need to change the in-store experience?
Poll
BrainTrust
Carol Spieckerman
President, Spieckerman Retail
Liz Crawford
VP Planning, TPN Retail
The most significant changes that luxury retailers/brands need to make are first, to create an open, democratized brick-and-mortar experience. The days of locked entries, intimidating security guards and cold, sparse displays should be over. Luxury brands have a real opportunity to lead in the digital rethinking of physical retail. Switching channels, luxury brands must also break down any remaining resistance to digital. Luxury brands were late to the digital party and some have catching up to do. Digital is critical to driving awareness and accessibility to less-ubiquitous brands. An accessible and exciting flagship experience backed up by an easy-to-navigate digital brand showcase is what’s needed.
“Democratized” luxury? Hmmm.
“I think the strategy for Millennials is actually not to have any strategy for Millennials, because they can smell it.” What does that even mean? And while Mr. Metrick may talk a good game about not being transactional, they can’t even help people who want to buy as I discovered on my recent visit. Brands seem to think store design is their ace in the hole along with technology. Retail has always been about being brilliant on the basics. The most basic is engaging a shopper as a person, not as a tracked object.
Millennials are plagued with debt and thrifty. They are more likely to buy second hand if they buy luxury at all. The best way to change the in-store experience is realize the store is the hub everything connects from. Get it right and they’ll go to your sites and social posts, get it wrong and you’re chasing an increasingly thrifty shopper. And that’s true of all generations.
Customer service and customer experience continue to be the differentiators. Does the level of in-store experience, concierge support and after sales service correspond to the price? Shoppers need to perceive value whether they are Millennials or Baby Boomers.
Emotional connections and authentic experiences are key to success in virtually every specialty retail category, including luxury. High-touch service delivered in an open, non-judgmental manner is the major difference for luxury. Younger generations despise pretension and can detect it a mile away.
For luxury brands to survive they will need to be more transparent in how they do things, as well as willing to introduce new ideas and designs. Luxury has traditionally been able to successfully weather economic downturns better than other brands, but there is an expectation now of sustainability and transparency that many haven’t offered. The challenge is in being more accessible and friendly without crossing into the mainstream.
Lets make it simple. All thing being equal customers like doing business with people they like. When things are not equal customers still like doing business with people they like.
To deal with the new generation at the luxury level it is going to take an exceptional customer experience.
As an aside, I was at a gathering where Laurent Claquin spoke. It was interesting as he explained the difference between “luxury brands” in the U.S. and Europe. For example, Coach, Burberry, Michael Kors, Tiffany and Kate Spade are considered luxury in the U.S. and don’t make the top 20 in Europe. Interesting.
To the question. MILLENNIALS ARE NOT TRADITIONAL! Shea Jensen answers this better than I would. “…serve customers where, when and how they want to shop, across multiple touch points and through multiple channels. We’re very aware that all of us are living in an increasingly digital world.”
Luxury is perennially appealing. The difference is how it is expressed. Audi’s Super Bowl ad did a great job of showcasing the differences.
A consideration luxury retailers need to address with regard to the in-store experience is the Millennial salesforce. While providing a shopping experience for Millennials that will encourage them to buy and come back for more is key, retailers must also recognize that demographic is the largest in today’s workforce. Not only are their shopping instincts different than prior generations that strode the aisles of high-end retailers, their orientation toward work is very different. In its thorough analysis of Millennials at Work, Gallup noted this generation is the least engaged, and they want quick recognition and advancement plus they want managers who understand their values and are willing to invest time to coach them along. After all, be it low- or high-end, the employee experience drives the customer experience.
I’m Millennial minded and I want to see myself and my values reflected in a brand. Luxury retailers would be well served to employ, connect and understand this mindset.
Millennials care more and more about whether the values of a brand align with their own. In luxury, this could include sustainability issues in product and prices, ethical treatment of animals, treatment of labor, social issues etc. More and more they research different brands before triggering purchases. The other element is how Millennials shop, which is more and more online. It’s more important that your digital store is appealing than potentially your in-store experience.
Authenticity matters, especially in the luxury space. Luxury retailers would be remiss if they only focus on the Millennial customer, as it’s the Boomer generation that has far more discretionary income than all other generations, including Gen X.
Inclusivity is hard to achieve in such an exclusive retail segment. However, while customer retention matters, luxury retailers, along with all retail segments, have to find creative ways in order to acquire new customers. Tiffany has done an outstanding job of extending its product offering and brand experiences with the next generation of customers. Their Tiffany’s cafe has become a destination for the Instagram crew, and there are lower price point silver-based products that offer the blue box experience without the heavy price tag.
The old adage is that the silver customer may one day be on the market for a diamond ring. However, don’t lose sight of the more established older-gen customer who has money to spend.
“…Allowing consumers and new design trends to influence the brand…” Haven’t they always done that by buying — or not buying — what is offered? Luxury retail has long been a strange beast, sometimes with people willing to pay huge sums for goods most of us wouldn’t want at one tenth the price; at other times the goods are expensive simply because they’re high quality. I don’t really buy the argument that there’s a “new luxury,” but I’m not going to criticize the comment: creating illusion has always been a big part of selling, particularly at high price points.
Sometimes … well … a lot of the time, we overthink things. First of all, Millennials are NOT the same. So don’t get trapped into that strategy. However, everyone likes nice things. Just like all products, you need to keep them fresh. Perhaps a Louis Vuitton classic Alma bag may not appeal to the younger crowd as much as it did in the ’60s, yet LVMH has done a fantastic job of updating their styles to keep the line fresh and compelling to all demographics. Brands and retailers need to look as successful examples and not be too proud to “emulate.”
Products have to be relevant and the brand and manufacturer values have to align with today’s socially conscious customers. However, customer service and a well-trained sales force are paramount for a luxury retailer.
Consumers can purchase the same items via a variety of channels and across different price points, but a well trained sales rep who listens, caters to, and anticipates consumer’s needs is a luxury.
It is really easy! First, execute and maximize e-commerce as most Millennials are there and NOT in-store.
Second, treat your customer with sincerity and respect. If they are in a store (Saks or Neiman’s for example) they KNOW where they are. Treat them with respect and honesty and be interested in their need and TRY to fill that need. Answer their requirement as best you can. Perhaps you will still be out of reach on that visit but if you treat them with sincerity and respect they will remember and return when they can.
This may be MUCH more difficult for Walmart where people are employed at minimum wage and trying to survive, but if you are high end you should have expert, friendly and, if possible, motivated staff.
Yes, I know this is Retailing 101 but I wonder these days how many retailers know this. This is BASIC but this is needed. BE A MERCHANT. Whoever can do this — be it Target or Hermes — will win.