Luxury Retailers Find Quality Never Goes Out of Style


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Luxury brands surveyed by the International Council of Shopping Centers reported an average 10.9 percent decline in September same store sales and the misery continues with the British luxury brand Mulberry, reporting a like-for-like sales decline of 12 percent in the period leading up to December 6. No surprise therefore, when Bain & Co. forecast a seven percent decline in global luxury sales in 2009, following growth of three percent in 2008. It’s the luxury market’s first downturn in six years. But it does not need to all doom and gloom.

The third annual Customer Experience Impact Report conducted by Harris Interactive, reveals that outstanding service remains the top reason consumers will recommend a company. 52 percent of consumers would feel encouraged to spend more with a company if it were to improve its overall customer experience and even in an economic down-turn, 50 percent of consumers will always/often pay more for a better customer experience.

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. If you offer customers a superior experience and better value (and that doesn’t mean the lowest price) then your brand can gain market share in this climate.

There is an old story about two explorers in the jungle coming face to face with a grizzly bear. One of the explorers quickly changed from hiking boots into trainers where upon his colleague remarked “I don’t know why you are doing that…you can’t outrun a bear.” His friend replied; “I don’t have to, I only have to outrun you.” The analogy is true for 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.

Even mediocre brands can make money in a growth market, but it takes those brands with strong and enduring relationships with consumers to sustain their position in a soft market. So what are some tips to creating a customer experience that wins share of wallet from competitors?

Be Brave

The tendency in a downturn is to slash prices to stimulate sales. But if you do that, it simply indicates that you do not have a clear view of your strategy. A true luxury brand is never going to win on price, no matter how deep the discount. You are just trading margin for volume and attracting consumers looking for a deal rather than long term relationship.

Instead, focus on your classic products like the pin-stripe suit or signature bag, for example, that provide enduring value for customers. Luxury customers are likely to become more discerning and less ready to buy the transient fashion accessories and brand extensions that so many organisations have moved into in an attempt to increase reach, so return to your roots and focus on the products that are closely identified with your brand.

The other knee-jerk reaction in a downturn is to cut costs and slash budgets across the board, but if you do that it indicates that you do not know how you create value. By all means be cost efficient and cut out the internal processes, stop the executive junkets and trim the expenses that do not create value for customers. But if you start slashing sales staff or reducing product quality you are cutting into the muscle of the business, not the fat. It is far better to close the 20 percent of poorer performing stores than to simply take 20 percent costs out of the whole operation, thereby de-motivating staff and offering poorer service to customers in those stores that are making money.

Be Different

Now is the time to be bold and focus on those things that differentiate your brand from the many “me-too” competitors. 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.

We recently conducted world-wide benchmark research for one of our luxury retail clients. Our consultants conducted detailed experience audits of four leading international luxury brands at stores in London, New York and Hong Kong. We assessed each on a ten point scale for the experience provided at each major touch-point and then overall. We concluded that these four competitors were more alike than distinctive and the greatest difference lay between stores of the same brand than between the brands themselves. In fact, we found if you were to take away the logos and signage you would be hard pressed to tell one from the other.

Figure 1. Customer Experience Benchmarking With 32 Luxury Stores. 2008. Smith+co

This was particularly true for the customer experience where to walk down Bond Street or 5th Avenue is to be viewed suspiciously by one black-suited security person after the other standing in similar entrance ways. If you look at the table above, with the exception of Brand A, you will see that whilst there are minor variations between the touch-points, the scores for the overall experience are remarkably similar.

We concluded that if you really want to benchmark best practice you are better off being greeted in a Lexus dealership or asking for advice in an Apple outlet or visiting the Build -A-Bear store or web site if you want to experience true customer engagement. These brands may not be luxury, but they are the new bench-mark for customer experience in our view.

Be Innovative

In the wake of the credit crunch and the dramatic failures of household names like Enron and major banks, consumers are increasingly cynical of big business and wary of traditional above the line marketing. In fact “above the line” is becoming “below the radar” for many consumers who are more likely to trust the posts from fellow customers on when planning their vacation than the expensive and glossy brochures put out by travel companies.

Share of mind is much more powerful than share of market when it comes to driving footfall and repeat purchase. Now is the time to leverage your marketing dollars through the word of mouth of highly satisfied customers, editorials and PR rather than slick and very expensive advertising and promotions. Now is the time to tell the story of your products and bring them bang up to date with clever innovations all of which are guaranteed to get feature editors falling over themselves to promote your brand. Kate Moss wearing your latest creation at the latest Batman premier is worth any amount of advertising.

Be Memorable

According to the Ogilvy’s analysis of the annual Millward Brown study of 28,000 worldwide brands (BrandZ™)—companies that are successful in creating both functional and emotional bonding have higher retention ratios (84 percent versus 30 percent) and cross/up sell ratios (82 percent versus 16 percent) compared to those that do not. The Ogilvy research confirms that the first “moment of truth” occurs when a customer’s expectations are compared to their initial, actual experience. At this point, the customer’s journey—or the CEM cycle—is shaped by two key elements:

  • Functional: what customers expect and experience of the operational aspects of the product or service.
  • Emotional: how the customer is made to feel by the purchasing experience.

The emotional is the stronger of the two. As Tom Ford said when he was with Gucci, “A brand is an indelible memory.” Memories are at their most powerful when associated with times, places and people rather than things. In other words it’s more about the experience than the product. Some years ago, Gucci allowed itself to drift down-market in an attempt to increase volumes. It took Tom Ford to stop the rot and put the shine back on the brand.

This is why your people are so important: they are your brand and the means to create an emotional connection with your customers. Our own smith+co research has found that there is roughly an 85 percent correlation between the way your people feel about the brand and the way your customers feel. So if you want to create a great customer experience pay attention to the employee experience first.

One person that understands this is Ho Kwon Ping, Chairman of Banyan Tree Hotels and Resorts the Conde´ Nast Traveller magazine award winning hotel brand. We all remember the Tsunami that hit Indonesia and Thailand in December 2004. One of the areas affected was Phuket and the Banyan Tree property located there was hit by the killer wave along with many other hotels. Almost overnight the tourist trade dried up and hotel brands were left with low revenues, high costs and damaged properties. Many responded by laying off staff and cutting costs whilst waiting for the better times to come back. KP Ho recognised that his people are his brand and delivering the Banyan Tree proposition of “sanctuary for the senses” cannot be done without them.

So, rather than lay off his people, he went to the community that he had so carefully built over many years, and sought their input. The result was to multiple share jobs to reduce costs whilst keeping employees on the payroll, involve the workforce in the rebuilding programme and in so doing protect the skilled employees so essential to delivering the customer experience. The result was that when the business came back the Banyan Tree was ready with people who were already trained and highly motivated and in a position to take market share from competitors.


The recession is likely to get worse before it gets better. Luxury brands will not be insulated from this; in fact they may find it gets even harder if the recent flight to low cost brands like Wal-Mart is sustained. However, the answer is not to attempt to emulate the discounters but to recognise the true value that a luxury brand provides and stay on strategy.

“Me too” is a short term fix, not a defensible position and the brands that survive will be those that deliver a distinctive experience though the quality of their people, processes and products so that the emotional bond between customers and the brand is strengthened. What is not an option, is to maintain high prices whilst continuing to provide mediocre service.

©Smith+co 2009.

Shaun Smith
Shaun Smith is the founder of Smith+Co the leading UK based Customer Experience consultancy. Shaun speaks and consults internationally on the subject of the brand purpose and customer experience. Shaun's latest book 'On Purpose- delivering a branded customer experience people love' was co-written with Andy Milligan.


  1. Yes, it’s for real – you can gain on the recession if you manage to keep delivering customer experiences that are consistent with the brand. Committed employees are the key element to it. So, beware of trading off the short-term cost slashes for the long-term experinces-generated value. Tom Ford is darn right when saying that the memory of a brand is indelible. The big differentiator here is how long will it last. Because, the amount of this “long” is your ultimate value over time.

    Andy Lorin
    Sr. Marketing Analyst
    Toronto, CANADA

  2. Luxury Retailers Find Quality Never Goes Out of Style
    Let me compare this with “Auto Industry and Recession” as I think the brand go hand in hand with the Quality and the Luxury. What is more I agree to this
    There was time when Japan led the auto industry by selling cars at the reduced prices, so we thought. In fact, the cars were marked high but we had the means to buy these and Japan and Germany with others, offered more luxury cars then the American that were once one colour and one type, standardized
    Ford tried to create the niche, however many consumers opted for the foreign cars as these were better in size and mileage. Was this the quality? Yes. They were better. This takes us to the names like Nissan, Toyota, BMW etc that are quality and luxury too. We do not want to get stuck with the old idea as we prosper or we look for the new models and we are always on lookout for the new even if these is the tale by the mouth.
    We turn the tables now and view the cars today. Do we still look for the style when the product is expensive? Yes. We are social animal that want to show the others that we have the new product and better then the other have. We compete.
    Firozali A Mulla MBA PhD
    P.O.Box 6044
    East Africa


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