Saks Upgrades Merchandise as Wealthy Spend More
While those in the middle and lower rungs of the economic
ladder have had to continue economizing with the high price of fuel and other
commodities, the nation’s
wealthiest consumers, while not wholly immune, have pressed on with their spending.
As
Ryan Mathews, founder and chief executive of Black Monk Consulting and RetailWire BrainTrust
member, pointed out in an earlier discussion on this site, "The rich are different
from the rest of us — they have money. And, people with money often go shopping.
Retailers catering to higher end clients will probably see a contraction in
aspirational shopping by the almost (or hoping to be) rich, but the real rich
should keep on spending."
Saks Fifth Avenue was among
the luxury chains that saw sales swoon when its clientele cut back during the
Great Recession. The chain ran deep discounts and broadened its product selection
to offer lower, entry-level merchandise prices to attract aspirational shoppers
who defected in the greatest numbers when the economy went south.
Now that the
good times are back for many of its shoppers, Saks saw comparable sales increase
10.2 percent in the most recent quarter, the company is adjusting its merchandise
selection from its "good, better, best" mix, as
The Wall Street Journal described it, to include more items in the "best" category.
Saks said it expected comparable store inventory levels to "be up in
in the mid-single digit range throughout the year."
Stephen Sadove, chairman
and chief executive officer of Saks Incorporated, said in a statement, "With
the rebound in the financial markets, the luxury sector has rebounded as well.
We are increasingly optimistic about the future and are pleased that our customers
have responded to our differentiated merchandising, service, and marketing
initiatives."
Discussion Questions
Discussion Questions: Do you expect other luxury retailers to increase comparable store inventory levels along the likes of Saks? Will the mix be skewed to more items in the “best” category, as well?
When your customer audience is affluent and demonstrates that it is in a buying mood, you cater to them by increasing the inventory of upgraded, most expensive and “best” merchandise. Thus other similar retailers will follow Saks. And they will also modify their inventory if the upscale clientele slow their tempo.
Such retailers will, of course, try to intellectually identify with the economic plights of less well-off consumers but only as they pass in front of their stores.
The luxury market actually tends to be relatively recession-proof. A lot of stalled sales were more a result of fear and embarrassment about “conspicuous consumption” than anything else.
Inflationary trends notwithstanding, I think the luxury market is back at full steam.
The same trend is already happening at Nordstrom, although it is more of a “near luxury” retailer than Saks. At least in the men’s area, there is much less inventory at opening prices (by Nordstrom standards) and more “reach” price points. I would expect Saks’ true competitors, such as Neiman Marcus, to follow suit.
I agree with the other comments. Luxury never fully goes away and the near luxury market seems to be experiencing a mini-renaissance which parallels the economic uptick.
The really rich have continued to spend so an increase in items for them is probably not a good strategy. However, if the aspirational rich are spending more then an increase in “better” and “best” products is a good decision.
I agree with Paula that the truly rich were not hurt by the recession for the type of items that they might buy at Saks–$20M yacht perhaps, but a $400 sweater, no. What preventing them from buying more is they did not want to be seen as spending money when many others could not. This would tend support Camille position the real bump in sales may come from the aspirational consumers rather than the truly rich.
Yes.
(Gilded monkey see, gilded monkey do…)
Studies have shown that presented with a range of price points, most people typically buy in the mid-range. I have witnessed the ability for retail merchants to use this to move their shoppers up the price point ladder. So I can’t help but wonder, are the Saks merchants thinking that adding more items to the “best” category will push more people from the “good” to the “better” and thus improve their revenue via price point? (This might apply to those aspirational shoppers). Or are they thinking that rich people are very different from most people (in more ways than the obvious) and they buy the “best” because they can, so if we add more “best” they will buy more?