Luxury retail thrives on the ability for top spenders to buy highly expensive goods at virtually any time. But what happens when even the most extravagant spenders in retail pull back spending, as they have since March?
In a recent webinar presented by the Retail Marketing Society (RMS), Jane Gundell, president and founder of research and marketing consultancy Gundell and Company, and Faye Landes, president of Landes Advisors, a firm that advises emerging retailers and brands on strategy, hiring, scaling and fundraising, shared qualitative results on how luxury brands can motivate their typical consumers to start shopping again. But regardless of these brands’ efforts, Gundell and Landes warned of the long road back to normalcy for all parties.
Landes noted that small luxury brands will continue to be hit hard and should be cautious of overextending their growth investments, particularly in subcategories such as handbags that haven’t been performing well during the pandemic.
“I think luxury is going to be very tough for a while because as an emerging brand, you still have the big conglomerates with lots of firepower, so they’re going to support their brands,” Landes said. “How are people going to find out about your brand? Think about all the ways they used to find out. They don’t find out about them in stores now. There’s no red carpet.”
To understand the mindset, attitudes and behavior of today’s luxury woman shopper and how brands have been affected, the two firms joined forces to conduct focus groups and in-depth interviews of women aged 40-to-59 across major metropolitan areas including New York City, East Hampton, N.Y., Dallas and Los Angeles in late May and early June.
These shoppers, averaging $500,000 in household income and annual spend on apparel and accessories of $50,000, and were interviewed largely with their own friend groups to courage candid dialogue.
“It’s so hard to express how avid these women were at shopping prior to the pandemic,” said Landes. “Not only did they buy a lot of goods, they spent a tremendous amount of time in stores, following designers on Instagram, reading fashion magazines and especially seeking out new designers. I think part of their credibility with their friends is finding the latest and greatest.’
And yet while this was described as “more than a hobby,” in May and June, the shoppers surveyed expressed a 180-degree shift, showing a total reluctance to go back to stores. Landes pointed out that alongside the obvious safety concerns of the pandemic, three factors influenced a lack of “need for new,” including the cancellation of social gatherings, the realization that they already have plenty of luxury goods anyway, as well as the sense that a display of wealth in the current economic conditions would come off as unseemly.
Landes cited two quotes culled from interviews that encapsulate these consumer sentiments. One woman said: “It’s abundantly clear to me that I don’t need anything. Now I’m more aware of it. I haven’t had a huge inclination to shop like I normally would.”
And another: “I don’t think the world will be the same. I don’t think I’ll buy 12 glasses because I want 12 new glasses.”
“I think people make it a conscious decision,” said Landes. “And again, money is not the issue here. This is a very rarified population…They talked about being discreet and not ostentatious, and about appropriateness and the desire not to appear tone deaf related to the enormous economic distress that many Americans were experiencing.
For luxury retailers to drive people back into stores, the simple fact is there is no margin for error allowed. Respondents were concerned most with health-related issues related to face masks and the disinfecting of merchandise and dressing rooms, many of which remain closed. So like their essential counterparts, luxury retailers must go out of their way to make the shopper as comfortable as possible through disinfecting and clear communication of safety protocols, which isn’t always conveyed in the most consumer-friendly tone.
The sales associate also plays a crucial role, in line with traditional luxury expectations of high service. But now, beyond the service, these associates are critical in mitigating any of the safety concerns.
“[Respondents] talked about the idea of potentially having a Zoom call with their sales associates and creating almost a virtual dressing room in their home, where the store could message her or ship a bunch of clothes and they could try it on with their sales associate giving the reaction,” said Gundell, who noted that this was still more of an idea than anything that luxury retailers have tried to put into practice yet.
As more shoppers move online, they are going to have to replicate the luxury experience in ways such as delivering a robust chat function, with Landes crediting Peloton’s chat capability serving as a major accelerator in getting wealthy consumers up to speed on the function.
And as more shoppers rely on essential retailers like Amazon, Walmart and Target to survive the pandemic, luxury retailers have to find ways to stack up via services like easy package tracking online or same-day delivery and pickup, which are two functions not typically associated with luxury retailing despite their obvious customer service benefits.
Despite the intense e-commerce demands on Amazon throughout the pandemic, driving an usually high volume of delayed shipments, Gundell noted that the online giant still set a high bar for everyone else, particularly in luxury. Additionally, luxury brands are going to have to include more explanatory product information related to apparel sizing if they have any chance of bringing shoppers back through the channel.
“That high bar is something that women are accustomed to in terms of shopping online—knowing when their delivery is going to take place and making it easier to shop and find things they’re interested in,” Gundell said. “They are theoretically amenable to buying clothing online but it becomes more challenging because size is such an issue. The only times they have talked about considering making those purchases is when they’re familiar with a brand and they know what size they are because they want to avoid the hassle of the post office visits.”
While retailers can continue to put in all these efforts both in and out of the store to ensure their shoppers not only feel safe, but also will continue to go back to their old way of life, the return to high spending on a large scale from these consumers might not reach pre-Covid levels, at least for a while.
“We know everybody I’m sure has read about this pent-up demand, and how once the gates open everyone is going to have all this money and they are going to spend it,” Gundell said. “We did not find any evidence of that in this study, but we are prepared to be proven wrong. It just didn’t seem like there was a great eagerness to go back and spend heavily. Again, it is well documented that home is much more than home base. All of a sudden, all these women, who were out and about, as they discussed, are now at home 24/7 sheltering in place.”