The State of the Luxury Retail Market,
Excerpts from a speech to The Retail Marketing Society by Greg Furman, The Luxury Marketing Council
The best customer is still where this market is. What we've seen from a
Council's standpoint across all industry groups is the exodus of what
the media called the aspirational or symbolic luxury buyer, folks with
household incomes of $250 to $500k that audience has vanished.
I'm a trout fisherman. and if you put the fly down on the river in the
wrong way they spook. That's what happened to the aspirational luxury
buyer. They're gone and nobody knows when they're coming back.
I thought, I have three sisters and they have always been practical,
strong and intelligent women. One of the trends we've seen a long time
coming that has radically enhanced the old wisdom, "she must be obeyed,"
where women accounted for somewhere from 70% to 80% of the purchase
decision making. I think this is now approaching 90%. I recently heard
someone call it the "gimlet's eyed" shopper and I thought what a great
phrase because it explains how women look at the luxury experience, the
luxury marketplace, the feeling of engagement in which brands court
them, and the value equation. She must feel more courted by luxury
brands than ever before. Not Frugality, but a Quest for value
This sense of the new frugality, I see it as a quest for value, a quest
for the unique, the ability to tell the story about a great product or
experience. I think hiding products in brown bags is ridiculous. Last
year Cap-Gemini said there were 3.2 million people in the US with
investable assets of a $1 million or more. That community will be never
be browbeaten by luxury shame. They will be extremely influenced by the
fluctuations of the market. When I was at Bergdorf Goodman, you could
literally set your watch by an uptick or downtick in the market.
Conscience would set in for half a day, this is a much longer
correction, but it will track the market.
Stanley Marcus, who was a mentor, used to talk about the impact of the
hand. His definition of luxury was the "best that the mind of man can
imagine and the best that the hand of man create." What is bespoke, what
is special, what is couture, will always remain of value. Even in a
rough market, people that have money.
Time to "Court" the Consumer
Robert Frank's book talks about lower Richistan, with and liquid
portfolios of $10 million. Middle Richistan, of $30 million and Upper
Richistan of $100 million and up. Those people are still there and have
discretionary ability. But they need to given a reason to shop. They
need to be engaged, to be courted, almost in a traditional, medieval,
courtier sense. Marketing initiatives need to be directed to court them.
That's a key part of the strategy for luxury brands.
All the academic literature says they're totally price insensitive, they
have the depth of pocket. They refer more if asked and when rewarded for
referral. Very few companies still reward best customers in some
symbolic way for coming into the store. They're willing to partner with
you. However, few luxury brands still have customer councils where they
will take the top 15 people off site.
I don't care whether you are a boutique jeweler. Neiman Marcus has a
council that meets once or twice a year, at a nice lunch around a
comfortable table, where they ask what can we do to accelerate our
service, to heighten the value of service, etc. Retailers that do get an
earful. They're starting to employ that tactic more and use it to engage
and to get referrals. Customer councils are examples of best customers'
willingness to partner.
Forget the conventionalism wisdom that you can't get people because
they're too busy. It's not true. They will come if asked. They want you
to succeed because they love you and the brand. They'll forgive you any
mistake if you fix it correctly. They can deliver better word of mouth
by a country mile before they are not price sensitive. If you look at
the metrics of investment and cost of acquisition per customer, it's
cheaper to keep them, and the longer you have them, the more profitable.
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