World Retail Congress: consumer shopping habits and luxury retail trends

Luxury retail trends

It's time for a new "scorecard"

Luxury markets face considerable future challenges, according to Dr Concetta Lanciaux, LVMH advisor to Group Arnault, who highlighted how the luxury customer base is expanding to include almost everybody. She explained: "The luxury market is segmentalising into a triangle shape. 'Grand Luxury' is being pushed up to the apex of the triangle and is a small but massively wealthy customer. The lower segment of the triangle is poorer, but getting richer and appreciating luxury more."

Lanciaux clarified the need for a new "scorecard" for luxury and lists heritage, quality, artisanal skills, selective distribution and creative people as being key value elements. "The luxury market knows how to create value and we must continue to innovate through creativity" she stated. "Sameness is the enemy of luxury".

Attracting a new consumer

Saks

Stephen Sadove, CEO of Saks Incorporated, explained how Saks had developed a "Good, Better, Best" buying policy, now widely copied by luxury brands, where a number of different entry price points to the luxury brand allowed a younger and less-experienced luxury customer to try the market. He states: "Luxury is now a much broader market and Saks is thinking broadly here."

Restructuring the business model

Within Asia, luxury brands are reconsidering and restructuring their business models. Local franchise partners were once an established route into market across the region, but examples including Bally and Dunhill show that these agreements are now evolving.

"Previously, local partners were used because they had the knowledge," says Massimo Piombini, vice president global sales at luxury footwear group Bally. "But luxury brands are now guided by a need to take back control of both their own image and also critical sales. Although this means changes to the operations, it should be noted that we are continuing to work with our local partners and developing a new business model of management and brand management instead."

Innovation in the supply chain

Harvey Nichols, Istanbul

Joseph Wan, CEO of Harvey Nichols, was keen to see luxury brands improve product deliveries. He stated: "In fast fashion, the supply chain has been really improved and we've not seen that in the luxury market. Instead brands have spent time and money on market expansion at the expense of the supply chain and this has been a handicap to 'best practice' for Harvey Nichols."

To improve distribution to customers, Wan explained that Harvey Nichols intends to launch a "handbags only" website in the autumn. "The product is easy to sell online as it is non-sized inventory and there are fewer returns, and handbag sales are still really hot."

It's a view shared by Stephen Sadove, who said: "Handbag sales are actually getting hotter, the product is getting more expensive and there's no upper limit to the price and we're still seeing huge sales". Both executives claimed high-end jewellery was showing signs of being the next big area for growth.

Global expansion

According to Dr Concetta Lanciaux, India and China will be the most important luxury markets by 2014, but brands need to appreciate the cultural needs and sophistication of this consumer.

Developing markets still love the "bling" factor of obvious brand consumption, which may go against the development of luxury in other markets.

For Harvey Nichols - which has opened stores in Istanbul, Hong Kong and Dubai with joint partners - identifying the brand's DNA and clearly writing it in the licensing arrangements was essential. Wan said: "It is very important not to dilute the brand equity at the expense of brand awareness."