From Snooty to Friendly Luxury Service

DISCUSSION TOPIC

Snooty Attitude Tones Down at Luxe Boutiques - 2/27/09

TOPIC SUMMARY:

According to The New York Times, a quick glance at a man’s watch and shoes has been a common and effective tool for sizing up potential customers at designer boutiques. Working heavily on commission, a sales clerk gains invaluable insight into which shoppers to chase and which to ignore.

Such practices have also tagged clerks at high-end stores with a reputation for snootiness and all-out rudeness. But the Times notes that virtually overnight, the brutal recession has changed those attitudes to a “level of customer service rivaling that of Disney.”

MaxMara recently held employee seminars on enhancing the shopping experience “of anyone who walks through the front door,” and the article claims other stores “are making more effort to greet and engage.”

Putting the findings to a test, the Times reporter, Eric Wilson, went undercover. Donning an outfit described “if not poorly, then as plainly as possible in a sweatshirt, jeans and dog-walking shoes,” Mr. Wilson visited a string of boutiques along Madison Ave. in New York City.

For the most part, luxury boutiques passed the test with flying colors.

Discussion questions:  Do you think the snooty reputation at high-end stores has toned down given the recession or has it always been widely overblown? If there is a longstanding snooty attitude in high-end selling, is it in any way justified?

My post: 

Certainly many boutiques provide lousy service.  In the case of high-end stores, this is typically described as snooty and rude.  In lower-end stores it might be described as uncaring or non-existent.  Service in the past and present has more to do with the vision of the retailer and the people they hire to manager their stores and service their customers, than the current economics.

In today’s environment, retailers of all kinds are pushing like never before to go out of their way to be helpful, courteous, and welcoming.  This is particularly true in stores where the brand mission is service oriented to start with.   It is likely to be found where the brand typically stands for service and quality – a fairly common aspect of luxury brands.  The reporter’s example of lousy service in Gucci, however, proves that the people you hire to manage & staff your stores determine the service that will be offered.

Mike Osorio, your Dare to be Contagious! ^TM strategist

www.OsorioGroup.com

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Go to the full discussion at RetailWire.com:
http://www.retailwire.com/Discussions/Sngl_Discussion.cfm/13581

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Luxury Brands Fire Sale

DISCUSSION TOPIC

Luxury Hits the Sales Rack - 2/25/09

TOPIC SUMMARY:

Luxury-goods sales are expected to fall 15 percent this year, according to Bernstein Research, as even the well-to-do are trading down or cutting back on unnecessary expenditures. According to the Wall Street Journal, luxury brands must decide how much of the slump is cyclical and how much reflects a permanent change in consumer behavior.

The slowdown represents a sudden turnabout for a sector that some felt could be recession resistant. From 2003 to 2007, the global luxury market grew on average seven percent a year, and future growth was expected to be driven by “an ever-expanding minority of ultra-wealthy individuals.” Many of these individuals were expected to come from emerging markets.

But Saks began slashing prices by 70 percent on designer clothes before the holiday season even began, and soon Neiman Marcus and Barneys joined Saks in cutting prices and canceling orders. Smaller boutiques such as Scoop and Intermix in New York City were forced to sell their goods for less than they bought them.

According to the Journal, the steep discounts in the high-end channel ended up “toppling longstanding agreements on pricing and distribution, and destroying the very air of exclusivity that designers are trying to sell.”

Discussion questions:  Should luxury brands and designers be lowering prices? How risky is it for high-end brands to bring in lower prices or lower-priced extensions? What’s the best strategy to do so?

My post: 

Like so many of the economic “miracles” of the last 20 years the luxury segment grew beyond it’s natural state driven by easy credit and the top end of the middle market consumers reaching for aspirational symbols of wealth and status.  The luxury manufacturers and retailers who have avoided the excesses of many of their consumers by avoiding the lure of expansion through taking on enormous debt and who have remained true to their artisan heritage will survive and even thrive in what is sure to be a slower growth sector for many years to come.  The emerging market consumer will continue to drive growth for many but a new sense of sanity will likely pervade this category for many years to come.  The brands that choose to create lower price products for H&M and other value retailers will manage to continue growing for a time but will likely lose the luster of their true luxury heritage.  It the design of the product remains excellent they may find a new niche for their brand at lower price points.  Otherwise those brands will either wither and die, or become simply a moderate brand.  That may be fine for investors, but surely removes them from the pantheon of true luxury brands.  You’ll never see Hermes or Cartier in H&M and I wager brands like these will be here in 2109.

Mike Osorio, your Dare to be Contagious! ^TM strategist

www.OsorioGroup.com

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Go to the full discussion at RetailWire.com:
http://www.retailwire.com/Discussions/Sngl_Discussion.cfm/13575

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Apple stumbles

DISCUSSION TOPIC

Apple Goes Soft in Fourth Quarter - 2/4/09

TOPIC SUMMARY:

Apple Stores open at least a year saw customer traffic fall off 1.8 percent in the December quarter and sales drop 17.4 percent, according to Charlie Wolf, a hardware analyst with Needham.

Mr. Wolf said that visitors to Apple Stores during the holidays “were not in a spending mood.”

This has to be a concern to Apple, which a Barron’s article points out, sells computers and other gadgetry that tends to be more expensive than competitive products on the market.

A falloff by Apple has to be a concern to mall owners and managers since the chain has consistently attracted consumers and registered sales that Mr. Wolf said were “undoubtedly the highest among retail chains in the country.”

Discussion questions:  Is there cause for concern for Apple Store operations? Where do you see opportunities for Apple to benefit during the economic downturn?

My post: 

Despite the universal falloff in retail spending across all categories, including luxury retailers, it will shock many to see Apple participate in the malaise.  To this point their focused vision, gorgeous stores, innovative products and flawless execution have enabled them to deliver stunning results and to this point defy the economic downturn. 

I believe that this is not a major long term concern for Apple.  It is merely the reality that consumers are cutting back on all but the essentials, including iPods and other cool Apple products.  The relatively small drop in visits (-1.8%) shows that people still love the product but just can’t part with the money at the moment – but will be back to buy as their confidence in their financial situation improves.  Apple has the financial strength to weather this storm – which for them will be relatively brief compared to the majority of boring me-too retailers out there.

Mike Osorio, your Dare to be Contagious! ^TM strategist

www.OsorioGroup.com

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Go to the full discussion at RetailWire.com:
http://www.retailwire.com/Discussions/Sngl_Discussion.cfm/13529

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How the Downturn Will Affect High-End Retail

I was asked today to comment for a story on the impact of the economic downturn on the luxury market.  I focused my comments on luxury brands and retailers.

I view the current situation for luxury brands and retailers as a “pause” in the long term growth trend of the luxury segment domestically and worldwide.

• I am optimistic that the financial and housing markets will work through the current situation and we will see a return to confidence, but with a more reasonable expectation of growth.
• The consumer impact is likely to be mostly on the aspirational buyer segment in the short term.
• The high-end will continue to spend.  Their events, functions, etc., will continue and they will buy what they need to look the part.
• I think we’ll see a moderation of conspicuously wealthy looks as people feel less comfortable “looking wealthy” when so many are struggling.

Today’s situation calls for luxury brands and retailers to focus intensely on

• Talent:  acquisition, development and retention
• Product:  design and development
• Marketing:  refining the message and exploring web 2.0 options
• Customer Care:  building the relationship with every interaction

The danger is for companies focused on short term results.  They are likely to slash budgets for talent management, product development, marketing, and customer care.

Companies must, of course, plan for less growth in the short term, closely control inventory levels, and hold or reduce all non-essential spending.  However, the companies with a long-term view will continue to invest in the critical areas of talent, product, marketing, and customer care.  These companies will emerge from the current “pause” with fiercely loyal employees and customer champions.

Mike Osorio, your Dare to be Contagious! strategist   www.OsorioGroup.com  

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For the love of a Louis Vuitton bag…

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RETAILWIRE DISCUSSION TOPIC

Women Wear Their Wealth on Their Arms – 1/24/08
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TOPIC SUMMARY:

High tickets apparently indicate high fashion, at least where bags are concerned among the mega-rich on both sides of the Atlantic. Whether or not the fad has reached its peak, this season’s must-haves include a couple of bags that are ordered at select parties attended only by invitation. Heaven forbid retailers should expect customers prepared to spend five or more figures to just wander into a store for a browse.

The newest example of the expensive bag genre is one by Burberry, made of alligator skin and selling for £13,000 ($25,737). It’s not as expensive as the Chanel bag with the diamond studded clasp that costs in the region of £100,000 ($197,980) or last year’s Louis Vuitton version that sold out in spite of (or because of?) being priced at £23,484 ($46,494).

For all the show-offs who take pride in owning something that so few other people can afford, there are far more women who are happy to have a large wardrobe of bags that each cost a mere fraction of what their wealthy sisters are flaunting.

There is plenty going on at the less expensive end of the market, however. Whether it be copies sold for pence rather than pounds or eco-friendly bags like those designed by Anya Hindmarch and Stella McCartney, most women can decide what kind of a statement they want to make without taking out an additional mortgage to cover the cost.

Discussion questions: What do you think is driving the trend toward ultra-expensive handbags? Do aspirational purchases represent a bigger opportunity for retailers today than the past? Do you think consumers will back off these types of purchases in light of the current economic climate?

 My post:

Handbags and other accessories continue to shine as apparel makers fail to excite us – largely due to retailers over-saturating us with a few looks how many cropped, 3/4 sleeve cardigans does a woman really need?).  Until that changes, expect the accessories market to remain strong as women will continue to desire a great look.

The trend of wildly expensive 1-of or few-of-a-kind bags has been going on for some time now, driven by brilliant marketing from brands owned by the “big 3” luxury players: LVMH, Richemont, and PPR.  Their careful strategies of real and perceived scarcity, artisan craftsmanship, and celebrity buyers will continue to drive the top-end luxury bag market, as well as inspire the aspirational brands and consumers.   The current economic malaise will not last forever, but purchases of aspirational labels like Coach and Dooney & Burke will not be as robust as true luxury brands like Hermes and Louis Vuitton.  Any drop off from the aspirational buyers of these elite brands will be more than made up by the top end.  Further, unless there is a true and sustained worldwide downturn, I expect markets outside the US to keep these brands growing.

Finally, the nascent but growing luxury bag on-line rental services will ensure that anyone of at least moderate income means can sport a Chanel, a Prada, a Louis Vuitton…

 Mike Osorio, your Dare to be Contagious! strategist www.OsorioGroup.com

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GO TO THE FULL STORY AND DISCUSSION:
http://www.retailwire.com/Discussions/Sngl_Discussion.cfm/12710

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