The holiday shopping season may have been fairly dismal for most retailers, but those courting the wealthiest luxury consumers managed to fare slightly better, according to the latest figures from the Luxury Institute's Wealth Report.
Saks, with its sharpened focus on luxury, defied initial expectations of a -2.5% decline during the 2007 holiday shopping season, actually posting a 0.8% gain over 2006. And Neiman Marcus/Bergdorf Goodman reported comparable sales rising 2.9% from December 2006.
Exclusivity protected luxury retailers
Generally, the more exclusive the retailer's clientele, the better the holiday shopping season was. This, according to Luxury Institute CEO, Milton Pedraza, is mainly because truly rich consumers are different from the rest in that they don't need to hold back on personal spending during economic downturns.
Looking at the problem from the other direction, this means that in boom times, luxury retailers can tap into a wider pool of potential customers and enjoy spectacular sales growth. But these new (and often less wealthy) customers can leave as quickly as they arrived when the macro-economic environment becomes less favourable. But, Pedraza asserts, a deep bond with the wealthiest consumers strengthens brands and helps to fend of any potential economic weakness. As a result, the need to maintain or acquire bona fide luxury brand status should take on a new sense of urgency in today's unstable economic environment.
Wealthy consumer engagement
Wealthier consumers will continue to be more resilient in their spending on brands that connect with them on an emotional level for their quality, associated prestige, and outstanding customer service. Particularly during challenging times, luxury firms need to reinforce their message of providing customers with a premium product with flawless service and consistently delivering the luxury experience. Failure to do so could begin a sometimes irreversible decline in brand image if firms give in to the temptation to try to make up in volume what they lose in the way of price premium and go down-market.
At the same time, discretion and security with customer data and a consistent experience across all sales channels will go a long way toward building trust and loyalty with wealthy consumers. Making refunds and returns speedy and easy is also helpful, and so is quickly resolving customer problems to their complete satisfaction. In fact, 91% of wealthy consumers surveyed said that a positive problem resolution would increase their loyalty to the company, and 82% said they would be more inclined to recommend the brand to people they care about as a result.
Problem resolution for loyalty
Luxury brands should always should take care of problems quickly, and free of charge. With an importance rating of 9.21 for women and 8.88 for men (on a ten point scale), resolving problems without asking the customer to dip back into his pocket was cited as a vital quality for any luxury firm. Quick and easy resolution (9.00) rates almost as highly, and particularly so with women (9.22).
But forget the rigid rules and policies so often associated with these procedures. Wealthy customers demand individual attention and are not interested in hearing how company policies and procedures get in the way of their satisfaction. In fact, problems present luxury firms with great opportunities to develop closer relationships with their customers, and thus the human elements of problem resolution should not be overlooked. (We aren't, however, suggesting that problems should be artificially induced just to build greater loyalty!)
Nordstrom stands out as a luxury firm that excels at solving problems. In an unprompted mention, 34 of the 832 survey respondents named the Seattle-based retailer as the business providing them with the best problem resolution experience in the luxury goods industry. Rolex earned 18 unprompted mentions, while Hilton, Neiman Marcus, and Ritz Carlton each earned 9 mentions.
Nordstrom also stood out far ahead of its rivals for having customer-friendly return policies. More than 8.1% of wealthy respondents (68 out of 832) named Nordstrom as the brand with the best return/refund experience in the luxury goods space. Macy's came a distant second with 10 mentions.