We are almost through another summer since the economy slipped and luxury spending remains muted. How do luxury retailers fight back to stay in business? Typically, luxury brands do not like to discount their regular merchandise because it may ‘cheapen’ the brand, but with this economy their business cannot pull through relying on those few who continue to spend big. In a recent Wall Street Journal article, “Tony Retailers Hope Outlets Fuel Sales,” it seems like big name retailers are combating this economic downturn and expanding their business not by heavily discounting but by opening outlet stores like, Nordstrom Rack, which recently opened in new York city.
This is great for big Department stores that can do so, but how do the smaller retailers who carry luxury goods deal with the continued recession? Especially when “75% of people earning more than $100,000 a year say they are shopping at outlets more than they used to prior to the recession,” according to WSL Strategic Retail. And when, like mentioned before, luxury wholesalers do not allow retailers discount their product. How do we help the regular stores from going out of business?
I think marketers, more than ever, need to appeal to customer’s emotions. We need to get people excited about fashion, home decorating, what-have-you, again. Right now people feel guilty about buying high-end products. We need to position luxury products as necessary, as an improvement to their life, as an investment, as a true unique luxury…
Retailers, also more than ever, need to look at their demographic, their potential customers, and then look at what products or services will drive in these customers. Focus! Let’s take the tabletop industry for example. Not many people are spending the extra money to buy nice china or new dinnerware, they think of it as an expendable luxury. Except for maybe, a new bride. This would be a great market for this industry to target. Despite the economy, people are continuing to get married, and their wedding guests still find it necessary to purchase them a gift from their registry. With the economy still down, we must target our focus on people we know will buy and our influencers to change perspectives.
Luxury retail sales experienced an 8% drop last year and are expected to rise this year, but has not made it back to the pre-recession level yet. The luxury department stores and big brands may have found a way to increase their business during this time, but small luxury retailers still need to find ways to wean customers off wanting discounts and encourage them to start buying again.