With the world slowly recovering from the devastating effects of the GFC, luxury brands are now in a position to really start investigating what it means to be a high end brand in the new age of retail. Not that this sector’s shoppers really slowed down during the GFC, mind you, with the sector experiencing significant growth for the last decade, especially in the booming Asian markets. Worldwide, luxury retail experienced an estimated double digit growth of 10 per cent in 2012, and it’s lik
kely to keep growing at this rate as several markets, including China and Brazil, develop more expensive tastes.
While the Australia is still a small market in comparison to the US, Japan, or China, locally appetites for luxury are definitely increasing as the dollar booms and overseas brands, such as Dior, open local flagships in 2013.
Australian retailers are in a good position to take advantage of this trend going forward, as long as they first take into consideration these five key trends for the luxury sector right now.
The changing face of luxury shoppers
There’s something decidedly misleading about the bejeweled young socialites, bloggers, and models who grace the crowds of luxury fashion shows: they’re not really the market’s target audience.
At least, they shouldn’t be for a smart luxury retailer in 2013, when the changing face and demographics of this sector’s shopper is taken into consideration.
Speaking at global luxury brand forum, deLux13, in Sydney, Tory Frame, partner at Bain & Company UK and Ireland Consumer Goods Practice, said “the big luxury spenders are changing”.
A smaller and smaller group is accounting for the lion’s share of the world’s riches, Frame says, with 80 per cent of the world’s wealthiest today older, married men who mostly work in finance.
While men have always been the world’s moneybags, this consolidation trend is now becoming so significant that many luxury brands are taking major steps to target gentlemen in ways not seen before.
The trend has also witnessed the success of male-specific luxury online retailers, like Mr. Porter, as well as the recent expansion of local male luxury department store, Harrolds, into Sydney Westfield.
Despite this, chasing the dollar of Australia’s notoriously laidback man isn’t easy, with global French company, Hermès, saying it’s still a difficult sector to crack.
“Male customers, to be frank, are our most challenging customer in this market, even though 50 per cent of our offer is for them,” said Karin Upton Baker, MD of Hermès Australia.
While the male skew is a trend that luxury retailers should take into consideration, they definitely should not stop stocking nine inch stilettos or crocodile skin handbags anytime soon.
Overwhelmingly, women are still a very powerful and resilient ally for the sector. In fact, while male categories, like luxury watches, fared badly during the GFC, sales of female handbags didn’t even flinch during the downturn.
One interesting trend relevant for those in the female luxury sector, said Frame, is that the average woman with a sizeable disposable income is getting noticeably older.
This is a trend so significant that it has helped drive the metamorphosis of androgynous, provocative luxury label, Alexander McQueen, into targeting slightly more curvaceous, womanly consumers in the last five years.
According to retail legend, the late l’enfant terrible designer threw a tantrum when consultants asked him to target the sector, before finally introducing subtle design features, like capped sleeves, for sensitive older women.
The sector is moving east
While age and gender considerations mightn’t be noticeable to all in the luxury market, another overarching consumer trend should by now be familiar to all in the sector: the Asian economic age. It’s no secret that the economies of China and India are booming, with Asia today accounting for half of all luxury spend worldwide, according to Bain & Company.
China is especially important for luxury retail going forward. While the US is still the world’s largest individual market in terms of luxury sales, China has now surpassed all others to become number one in terms of growth.
This reality is being reflected in the strategies of smart luxury retailers worldwide, such as British design house, Burberry, which now produces a separate range of clothes tailored to the slimmer Asian physique. Another British luxury superpower, Net-A-Porter, is opening a distribution centre in Hong Kong for the Asian and Australian markets: a very clear indication of its strategy going forward.
The pureplay has also just allowed a selection of Asian countries to shop online in their own currencies, and has made its weekly digital magazine, The Edit, available in Mandarin.
“We’ve continued to experience strong growth, particularly internationally, and place an ever increasing importance on speaking to our visitors in their own language,” said Alison Loehnis, MD, Net-A-Porter.
This trend doesn’t just apply to luxury brands looking to expand into Asia. Local retailers should by now be considering how to capture rich tourists increasingly coming to Australia to shop for luxury products.
“We have found that [tourists] are becoming an important sector for us and we’ve seen an increase of them in the marketplace,” says John Poulakis, founder and director, Harrolds.
This Australian luxury men’s department store chain, which has three sites in Melbourne and Sydney, has numerous Asian speakers as part of its staff: a strategy also employed by French house, Louis Vuitton, in Australia.
Luxury is not just handbags
Speaking at the deLux13 forum, Philip Corne, Oceania CEO of Louis Vuitton, noted some surprising competitors for a global fashion and leather goods retailer: Samsung and Apple.
That this fashion superpower could be wary of smartphone and laptop manufacturers is very indicative of a trend affecting the sector. Luxury retail is no longer defined by handbags, shoes, and expensive Swiss watches.
In fact, just a few minute’s walk from Louis Vuitton’s Sydney flagship in Martin Place, another international retailer has relaunched a store completely indicative of this trend: Lindt. The Swiss chocolate company may sell blocks of chocolate in your local supermarket aisle but, in terms of confectionary, it places itself firmly in the luxury market, and now has the local store look to suit.
It’s large Maitre Station format features chandeliers, plush carpet, wooden design features, and even a chocolate tap, in what is essentially the high-end version of Willy Wonka’s chocolate factory.
“Consumers like to align themselves with a luxurious brand,” says Alistair Keep, director of retail, Lindt Australia, adding that this strategy means everything from elegant packaging through to “blemish free” chocolate.
Melinda O’Rourke, who has worked with luxury brands including Chanel and Prada and is now the director of consultancy firm, MO Luxury, says certain elements of the Australian food sector are becoming more luxurious. “If iconic French house, Laduree, the famous makers of macarons, can open a store in Sydney and soon in another location, then the appetite for premium and rare food is on the rise,” she says.
Phil Schoutrop, director of retail architecture and design firm, The Buchan Group, has also noticed the ongoing diversification of luxury retail both in Australia and worldwide.
“With luxury retail comes luxury food,” he says, citing the local example of Westfield Sydney’s luxe food court, which features one Michelin star restaurant, Din Tai Fung.
“Luxury doesn’t have to mean going to Prada and dropping $2000 on a handbag. It could mean going to Tetsuya’s in the food court and spending $20 and saying that’s where you ate lunch.”
He says this same logic applies to the electronics sector, where Apple has introduced an element of luxury with its customer service, which is comparable to the attention you’ll receive instore at Tiffany & Co or Louis Vuitton.
Moving online away from bargains
It could be argued that the luxury sector – something more focused on customer service than value – is the arch enemy of the bargain-heavy, sometimes faceless world of e-commerce.
But while we’re more likely to associate online shopping with fast fashion pureplays like The Iconic or Asos, there are also some major luxury retailers making inroads in the digital age.
Net-A-Porter and Mr. Porter are still often referenced case studies in this sector, however, other traditional bricks and mortar brands such as Burberry, are starting to garner more mentions.
Burberry has just launched a major digital strategy, Runway Made To Order, allowing consumers to purchase tailored goods directly after seeing them on the runway via digital technology.
As part of its collection launch in February, fans were able to watch a live catwalk stream from the company’s website, which was linked to an online basket letting them order featured goods as soon as the show ended.
All orders are fitted with personalised tags that unlock digital content and will be shipped to the customer within nine weeks from the catwalk, meaning customers actually get their product before it’s available instore.
Locally, niche high end retailers are also doing exciting things online, such as Sydney-based site, The Gentlemen’s Supply Co, which launched online in February this year.
The site, which is associated with bricks and mortar men’s store, Claude Sebastian, was inspired by German website, Modomoto, to produce an innovative crate-based idea for the Australian market.
The site works by assigning individual shoppers to a stylist, who assess a male shopper’s needs before sending him a large crate of clothing. The customer then tries on items for size, before sending back any items that don’t suit.
“We noticed quite a few ventures, like The Iconic, doing well in the Australian online space, but none of them were offering higher end brands, like Hugo Boss or Valentino,” says Jerome Bowman, co-founder, The Gentlemen’s Supply Co. Hermès Australia has also been focusing on its online offer. Upton Baker says success for a luxury brand online means being “truly fair” to a brand’s artistic heritage.
“Elements like ‘shop now’ are the total antithesis of what Hermès represents,” she said, adding that Hermès.com is currently the brand’s smallest store in terms of revenue but that it has a “huge” growth rate.
Design is evolving but still collaborating
Most will be more than aware of ongoing collaborations between mass market and luxury designers which has seen fast fashion retailers including H&M, Target, and Topshop release collections by names like Karl Lagerfeld and Versace.
MO Luxury’s Melinda O’Rourke says this trend hasn’t yet “run its full course at this stage, as it provides opportunity for brands to have a wider reach and more noise, albeit momentarily”.
“It was recently rumoured that high end shoe maker, Manolo Blahnik, is looking to do a collaboration with a high street brand, so there’s more of this to come,” she says. There are signs the trend is evolving, however, as high to low end collaborations become a little bit more unusual and in sectors outside the fashion space. Notable examples includes bargain supermarket chain, Aldi, teaming up with upmarket competitor, Rewe, or London’s uber chic Dover Street Market opening a store with mass market Uniqlo. “All [of these brands] see the benefit of appealing to diverse customer bases,” say Chris Sanderson and Martin Raymond, co-founders of British forecasting agency, The Future Laboratory.
“It also means they can reduce rent costs, pool logistics, and, more importantly, offer the customer a unique and new experience. And for 2013 experience is the thing.”
This ongoing focus on experience means it’s business as usual for luxury retailers, with luxurious, innovative, and forward-thinking interiors and spaces as important as ever in 2013.
Ben Edwards, co-founder of local design firm, Edwards Moore, expects interiors “with an attention to detail” and “bespoke, hand crafted” elements to be an ongoing focus for luxury retailers. Edwards also says international luxury store design is beckoning in “a return to the art of fabrication to create a closer relationship with the consumer”, along with a bigger focus on tactility and interaction instore.
When it comes to local luxury, Edwards says he still can’t go past Melbourne boutique, Assin, “for the experience of travelling below ground in the lift and emerging into a cave like space”.
“I enjoy the feeling of being in a completely different world. The clothes are displayed like artworks and each piece is worthy of attention. Not that I ever have the cash to buy anything, but it’s fun to look.”
This story originally appeared in Inside Retail Magazine. The August/September issue, featuring exclusive coverage of the 2013 Westfield World Retail Study Tour is available from this week. For more information, click here.