During the past week, our study tour has visited 10 companies in the retail sector. They are mostly in the luxury industry but ranging from very different categories. I have noticed a few key trends and challenges they are facing as retailers and thought it would be interesting to share with you.
First of all, branding is the key to success for luxury retailers. Customers are looking for a story and special heritage from them. The Director of Savoir Beds called it “a touch of magic”. There must to be some kind of exclusivity and bespoke aspects to make products luxurious. A good example of this would be the fine jewelry collection at Vancleef. Every piece of jewelry is unique and only available to its VIPs. Pricing is not even allowed to be disclosed at the boutiques, making it the ultimate luxury for its clients.
Another trend in the luxury industry is to go online. In 2017, e-tail accounted for 10% of global luxury goods consumption, and it is forecast to continue to grow. Luxury brands are slow to the game because it is difficult to replicate the luxury shopping experience you get from stores when shopping online. It is also buying higher price point items; therefore, consumers might not be willing to spend that much buying goods online without seeing in person. There are certainly solutions to address these issues but can be costly for smaller players. A large amount of money will need to be spent to create a great website experience. They have to make sure that delivery is done seamlessly in a short period of time and have to leave room for a higher rate of return. Brands are hiring dedicated digital and social media team to engage the growing numbers of online shoppers and this would definitely be a competitive advantage if done right.
Multiple companies we visited mentioned that they have started to put extra attention on Chinese customers who have large spending power. New payment methods, such as WeChat Pay and AliPay are installed for the ease of payments. Sales associates are becoming more diverse and have to know how to speak Mandarin. Tailored holiday products and store decorations are done to welcome Chinese customers to stores and websites. There are lots to be done to manage the rise of shoppers in Asia but brands are seeing the importance of tailoring to shoppers from around the world.
Lastly, fashion industry is moving fast. Consumers change taste quickly and are expecting new designs and products coming out every season. As mentioned at the Vancleef presentation, fine jewelry has always been a slow process but they now notice that customers are asking for more and more. Brands must know how to balance creating new products versus maintaining the value of products to maintain the luxurious image.
Margaret Hung (CBS ’19) is an MBA student at Columbia Business School