- By Shaun Smith
- Mar 02 2009
How to avoid your luxury brand becoming ‘an expensive commodity’
With London Fashion Week finishing last week and the Luxury Interactive Conference taking place in London in a couple of weeks, it’s timely to take a look at what luxury brands should be doing to combat the downturn.
The Luxury Board reported in its February edition of the ‘Wealth Report’ that like-for-like sales at the luxury US retailer Saks, posted a 23.7 percent decline despite heavily discounting its merchandise to clear away inventory. Meanwhile, Nordstrom, long admired for its excellent customer experience, reported a somewhat less dramatic 11.4% decline in same-store sales.
Here’s another fact: The Luxury Institute found that firms have homogenized to the point that 63 percent of wealthy consumers feel that luxury is rapidly becoming an expensive commodity.
Put these two facts together and you realize that luxury brands have to look to how they differentiate if they are to counter the double gravitational pull of consumer perception that they are becoming ‘me too’ plus shrinkage in the overall luxury market.
The answer lies in differentiating the customer experience. I’ve attached an article ‘How to ride out the recession: differentiate or discount’ that cites recent Harris research showing that…
i. 52 percent of consumers would feel encouraged to spend more with a company if it were to improve its overall customer experience, and…
ii. even in an economic down-turn, 50percent of consumers will always/often pay more for a better customer experience.
Branding is all about countering the slide to commoditization. The economists tell us commoditization is a relentless economic force like gravity: the tendency is for everything to be pulled towards commodity status. You would therefore expect luxury brands to be as far from commodity status as possible, by definition.
So what are some tips to creating a customer experience that wins share of wallet from competitors? The fact is that the market is shrinking but that doesn’t mean that consumers have stopped buying; just that they are spending less and are therefore much more choosy about where they shop.
That means that if you offer customers a superior customer experience and better value (and that doesn’t mean the lowest price) then your brand can gain market share in this climate.
There is the old story about two explorers coming face to face with a grizzly bear. One of the explorers starts to run. “You can’t outrun a bear!” shouts his friend. “I don’t have to. I only have to out run you!” shouts the other, over his shoulder.
The analogy is true for luxury retailers too; you can’t beat the recession but you can beat your competitors and in so doing you will emerge from the recession stronger and more clearly differentiated.
Read more: The attached article (click to download it) gives you a series of tips on how to do it: luxury-article-mycustomer