High Touch Required Across Channels as Belt Tightening Hits The Luxury Market

With the retail industry taking a hit due to the economic downturn, the luxury sector is also feeling the effects of belt tightening. And as they struggle to drive demand without tarnishing the upscale image of their brands, higher end retailers are forced to look at new strategies to keep customers coming in the door.

Industry analysts suggest that retailers need to focus on a values-driven marketing approach as well as an expanded high touch approach to maintain success in the luxury market.

Affluent consumers are making more thoughtful purchases and cutting back, just as middle class consumers are. According to the recent The Affluent Market Tracking Study conducted by The American Affluence Research Center, 55% of respondents indicated a conscious past and/or future effort to reduce expenditures, the largest portion citing “increased cost of every day goods and services.” 40% cited devaluation of investment portfolio, increased taxes, job/compensation uncertainty, stock market volatility, and increased insurance costs as their reasons for reducing expenditures.

Industry experts weighed in with the following suggestions on what it takes to be successful today in the luxury marketplace:


Focus on marketing. While marketing was formerly seen as a cost quick to be cut in times of need, some experts say it may be the only way to stay afloat. “Luxury products and margins are driven by emotion,” says Chris Ramey, chairman, The Luxury Marketing Council Florida. “Cutting marketing erodes both.”

Ramey also believes that one of the biggest challenges for luxury retailers is to create products that affluent customers desire to buy. “Luxury trickles down, and in a transparent environment, it is easily knocked-off,” he says. “Luxury marketers will continue to innovate and excite their customers.”

Nuture aspirational customers. “You do need to nurture aspirational customers, but a lot of luxury firms make the mistake of downgrading market with products to bring in those aspirational consumers, and that actually tends to cheapen the brand over time,” says Milton Pedraza, CEO of The Luxury Institute. “What you want when you’re aspirational may differ from when you’ve actually made it. Companies make the mistake of being schizophrenic about whether they’re really luxury.”

Appeal to the richest of the rich. “Start going to the higher levels,” says Alf Nucifora, chairman of The Luxury Marketing Council of San Francisco. “There are approximately four million households in the U.S. that have liquid portfolios of at least $1 million. These people are going to be less affected by economic downturn; they will buy, so you need to appeal to them.”

Moreover, Nucifora says retailers should also focus on non-U.S. citizens, who want to make the most of their currency by purchasing luxury brands in the U.S. “Retailers are picking up some of the slack with the European and Asian buyers who are capitalizing on the value of their currency versus the dollar in the U.S,” he says. “If you’re a high-end retailer, you need to look very seriously at that category. Those are opportunistic dollars. Your marketing strategy has got to be very geared towards identifying when those visitors come to town, how they’re coming to town, and what you’ve got to do to attract them once they are in town.”

Coaxing with concierge and web presence
Because affluent customers are increasingly time poor, experts say concierge services are essential to catering to the needs of these consumers. In addition, a strong web site with easy-to-use features will gratify affluent customers’ desire for personalization and brief shopping.

“Provide personal shoppers in the store, but even web sites now have to we re-tooled,” says Nucifora. “More and more, the upper-end consumers are doing their preliminary shopping online, so the Web sites have to be very user-friendly. They’ve got to be information rich and architected in such a way that the consumer can get information quickly and buy easily — or having seen what they like, pick up the phone and call.”

“If you’re looking at concierge services, you ought to be equally looking so that the Internet provides significant service to a very busy, ultra affluent consumer, and recognize that there are ways to enhance that service level over the Internet, in terms of convenience and time-saving,” adds Pam Danziger, president of Unity Marketing. “People-to-people services can really make a difference.”

“It’s all about creating an extraordinary customer experience,” says Pedraza. “When you’re paying a premium for a luxury product, it’s not enough these days to just get a mundane experience. There’s a real lack of differentiation among retailers.” Pedraza says a concierge service injecting people to curate an experience is becoming essential.


“It is critical for luxury retailers to ensure the shopping experiences are consistent throughout all shopping channels,” says Dave Bruno, director of product marketing for Escalate Retail. “Every touch point must be armed with customer history, their shopping preferences and affinities, to not only enrich every interaction, but to respect the time-starved nature of the luxury shopper.”

“One of the mistakes retailers make is to introduce a lot of flash and they create tunnels which customers have to go through,” Pedraza says. “What you need is tremendous relevance of the content and product; the ability to transact has to be there, as well as ease of use — this is critical.”

“Well-informed channels can present merchandise, content, and offers that are relevant to each shopper and maximize the time spent during every shopping activity,” says Bruno. “In addition, a personalized, relevant experience is also best able to earn the most revenue from each interaction and inspire repeat visits.”

Value over image
Although affluent consumers will continue to purchase luxury products, more are seeking long-term value.“You can justify buying a Chanel handbag because it is a classic — that bag will be with you, wearable, and usable, for the rest of your life,” says Danziger. “There’s value in that because there’s a heritage that Chanel offers, versus something else that may be a cooler brand, but not have that kind of value.”

Danziger, author of Shopping: Why We Love It and How Retailers Can Create the Ultimate Customer Experience, cites a “sense of shopping related morality” acquired by Carrie Bradshaw, the once-splurging favorite character of Sex and the City, who made Manolo Blahnik and Jimmy Choo household names with the HBO series that ended in 2003.

“The Sex and the City Movie mirrors the emerging luxury drought facing marketers today,” says Danziger. “Ironically, just as Carrie Bradshaw has reached her moment of greatest affluence, she is turning away for the conspicuous consumption for its own sake.”

Though Bradshaw is a fictional character, Danziger says the character’s outlook holds true in the current real-life U.S. economy as well. “The number of affluent households is growing, but their inhabitants are exhibiting an increasing disinterest in letting luxury define their lives, which is a real challenge for marketers competing for the affluent shoppers’ luxury dollar.”

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