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NRF: Win Wallet Spend With Price Promotions, Create Loyal Customers With In-Store Experiences

Think discount devotees shop in the sales because they don’t have a lot of disposable cash to splash? Think again.

According to Andrew Mantis, executive vice president of checkout tracking at The NPD Group, luxury buyers are actually spending a larger percentage of their apparel dollars in off-price and fast-fashion stores than people who aren’t buying high-end goods.

During a talk on Tuesday titled, “The Race to the Bottom and How to Win in the World of Insane Price Promoting” at the National Retail Federation’s (NRF) 2016 Big Show at the Jacob K. Javits Convention Center in New York, Mantis presented some slides that proved bargains don’t discriminate.

Seventy-one percent of luxury buyers shop at off-price chains such as T.J. Maxx, Marshalls and Ross. Meanwhile, 30 percent spend at the likes of H&M, Zara and Topshop and 23 percent choose to shop at luxury retail outlets, such as Nordstrom Rack, Saks Off 5th or Coach Factory stores.

“Bargain addiction isn’t just for the poor,” Robin Lewis, CEO and founder of The Robin Report, declared to the room of retailers present. Mantis agreed. “Your luxury apparel buyer may be more valuable to you,” he said.

“In the last century, we had markdowns, we had orderly and civilized promotions to clear out seasonal excess. Today we have so much stuff out there it’s almost like we’re creating a new deal gimmick a day,” Lewis continued.

Not to mention, the U.S. has 20 square feet of retail space for every man, woman and child living in the country.

“For anybody to win and grow they need to steal a larger share of the consumer’s wallet,” he said, adding, “We’ve moved from pricing being a weapon of choice to a weapon of necessity because everybody is doing it.”

But as Mantis said, discounts might be drawing shoppers in, but it’s what the retailers are doing or offering in-store that will drive return visits and incremental dollar spend.

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“Those retailers who have a greater understanding of their customers’ overall spend with them and with competitors are in a better position to create the strategies that will resonate,” he said, citing Lululemon, REI and Nike as three retailers offering experiences that create loyalty.

NPD data showed Lululemon leading the charge, with 1.1 percent wallet share and a $208 average spend per buyer. So what’s the Canadian athleisure giant doing that’s different to its peers’ approach? Take its recently opened flagship store in Manhattan’s Flatiron neighborhood, for instance. Not only does the 11,500-square-foot space sell activewear and accessories, it also features a community-gathering place that offers yoga workshops as well as a concierge service that helps book classes at nearby gyms for guests.

Don’t pooh-pooh it: Lululemon is expecting its fourth-quarter net revenue to be in the range of $690 million to $695 million, up around 15 percent compared with the year-ago period, and a total comparable sales increase in the high-single digits—despite selling 90 percent of its goods at full price during the period spanning Cyber Monday to Christmas.

“When you make that connection, it shows in the numbers,” Mantis said.