The US-based luxury retailer Nordstrom had a good holiday season, having delivered the best luxury consumer experience of all, according to the latest Luxury Customer Experience Index from the Luxury Institute, which reports luxury consumers' views of luxury retailers, goods, cars, real estate, and politics.
The Luxury Institute asked individuals with a minimum net worth of US$750,000 and minimum annual income of US$200,000 to use their own personal experiences to evaluate seven luxury retailers: Barney's, Bergdorf Goodman, Bloomingdale's, Brooks Brothers, Neiman Marcus, Nordstrom, and Saks Fifth Avenue.
The survey's findings in six key areas were as follows:
- Retail views
With a Luxury Customer Experience Index (LCEI) rating of 84, Nordstrom managed to gain a lead on the Bergdorf Goodman and Neiman Marcus ratings of 81 and 80 respectively. Nordstrom was the leader in all three aspects of customer experience:
· Customer retention,
· Price worthiness, and
· Customer referrals.
Nordstrom's high level of attention to the customer experience is one element in the formula that has enabled the merchant to produce earnings growth of 26% annually for the past five years. Bergdorf competes more closely with Nordstrom among consumers under age 50 and households with US$500,000 or more in annual income.
- Political views
Luxury consumers displayed a certain amount of displeasure with government, as was reflected in a general angst over the state of the country. More than half (57%) of wealthy Americans reported that they are completely (20%) or somewhat (37%) dissatisfied with the state of the country right now. Only 29% said they are somewhat satisfied, and only 6% reported complete satisfaction.
But, the institute says, a steady flow of cash seems to aid in finding happiness. Individuals with annual incomes of at least US$500,000 are far and away the most likely group to report complete satisfaction with the state of the country, which also correlated strongly with level of wealth. In a satisfaction gap, men are more than twice as likely as women (8.0% against 3.0%) to be completely happy with the state of the nation.
- Economic views
The economy was a bright spot in the survey. In fact, the wealthy expressed a great deal of optimism in their outlook for their own personal wealth. The Luxury Institute found that just over half (52%) of wealthy investors believe their personal net worth will grow in 2006, and almost half (47%) of wealthy Americans described current economic conditions as either "excellent" or "good".
Wealthy men, and all individuals aged 60+, were especially likely to have a favourable view of current conditions. Looking ahead, they also tended to be more optimistic. Overall, wealthy Americans are evenly divided in their economic outlooks: 36% say the economy is worsening and 34% say conditions are improving. Nearly half (46%) expect the US economy to grow in 2006.
- Real estate views
Among the wealthy, 32% believe that US housing prices will drop either "a little" or "a lot" in 2006 (interestingly, 38% of women thought so). On the flip side, more than 50% of men and investors 50 and up had a bullish view of real estate.
- Luxury goods views
The Italian luxury designer Salvatore Ferragamo was found to deliver the best customer experience. With a Luxury Consumer Experience Index score of 84, Ferragamo beat Armani, Burberry, Calvin Klein, Chanel, Christian Dior, Coach, Dolce & Gabbana, Gucci, Hermes, Hugo Boss, Louis Vuitton, Polo Ralph Lauren, Prada, Versace, and Yves St. Laurent.
Ferragamo also stood out as the luxury brand with loyal customers who are most likely to refer friends and to recommend they become customers. Women prefer Louis Vuitton's customer experience, while wealthy individuals aged 50+ favoured Hermes, agreeing that the Parisian designer was the brand most worthy of a price premium.
According to the institute, the clear message for fashion industry executives is that producing great products is expected as a norm, and that what luxury consumers really want are brands and experiences that make them feel special. Providing a great customer experience requires some technology infrastructure, but it has its roots in quality hiring and training of front-line employees who represent the company. The trustworthiness of the people representing the brand and a designer's core effectiveness in meeting the needs of wealthy customers and are the two experience drivers with the strongest correlations to price-worthiness, retention or referrals.
- Luxury vehicle views
Wealthy consumers said that the best customer experience in luxury automobiles comes from Lexus, which in 2005 was also the best-selling luxury brand in the USA for the sixth year running. With a LCEI score of 88, based on the experience ratings of wealthy customers, Toyota's luxury nameplate beat ten other luxury brands.
Lexus was cited as the brand most worthy of a price premium, and also leads the pack in the critical customer retention and customer referrals metrics, also earning top scores in "most enthusiastic, most polite and most trustworthy representatives". Porsche was a close second, with a score of 83, followed by Acura with 82.