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Booz & Company’s 2010 Retail Perspective

By: Karen Alberg Grossman

February 04, 2010

It was not a rosy forecast that Karla Martin and Marcelo Tau presented this morning at ‘21’ Club, but members of The Luxury Marketing Council clearly appreciated the dose of reality. “Even if sustainable growth returns to key markets, retailers are not assured success,” was one strong message. “Survivors count themselves among the fortunate, yet survival does not guarantee much.”

But according to Booz & Co VP Karla Martin, luxury never really disappeared; it’s just been in the closet for awhile. She believes the trend to less conspicuous consumption and more private shopping will continue, and that the stores that “own their customers” stand a good chance of surviving. “The aspirational customers might be gone, but core luxury customers are loyal to where they’re treated royally.”

Booz & Co principal Marcelo Tau spoke about a retrenchment back to basics: right-sizing, consolidating, managing inventory. He also discussed a shift in how luxury brands are positioned: BMW changing from pure luxury to “the joy of driving”, Hilton hotels from silver tray service to family vacations.

In terms of inventory management, Tau confided that recent analysis among his clients revealed that 25 percent of their assortments don’t make money. “So how much of that 25% do they really need?” he asks rhetorically. “In some cases, they need to reduce or eliminate entire categories and concentrate instead on the total in-store experience.”

Martin mentioned Tiffany as a good example of tweaking the in-store experience. “They were doing significant volume in sterling silver but this was a younger, louder customer that might have detracted from the luxury experience. So they cut back on silver in their regular stores and launched stand-alone silver boutiques.” She also cited Jimmy Choo’s collaboration with H&M as a good way to broaden the audience while maintaining purity of the core brand.

Of all the ideas presented at the seminar, this is my favorite: To create a “genuine” personal shopping experience for your luxury customers, call and tell them you’ve pulled a selection of wonderful fashion just for them, some of which is even on sale. When they come in, make sure that among the beautiful fashion on the rack is at least one ugly (or sure-to-be-unflattering) outfit. In this way, the seller can say in a most sincere voice: “I’m so sorry, I just cannot let you buy this outfit…” Voila: instant credibility, trust, confidence and hopefully, a loyal customer. (Not a new trick but they say it works…)

 

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