We have spent the past few weeks talking about the “HOW” of a potential luxury strategy with a focus on buying. Today, I want to go back and reinforce “WHY” luxury is so important. Here are some recent quotes from articles in The New York Times, Women’s Wear Daily, and Vision Monday – a good cross section of publications and viewpoints.
The New York Times – Wednesday February 22, “High End Retailers Report Strong Profits, but Walmart Shoppers Still Struggle.”
- The holidays turned out to be a lot brighter on the high end judged by the results of four major retailers. While Walmart had to lower prices so aggressively that it hurt its profit, retailers focusing on higher-income customers crowed about the solid prices those shoppers paid.
- “I think there is generally more confidence today than there was at this time last year” – Terry Lundgren, Macy’s Chairman and CEO. He added: “Bloomingdale’s business was particularly strong. The Bloomgdale’s customer is categorized as one who’s buying more luxury product and that business was very good, and you’ve seen that from the other luxury retailers.”
- Price cuts meant Walmart’s margin decreased by .4%
- Saks Fifth Avenue has historically high gross margin rate performance. Reduced promotional activity and increased full price sales led to a .7% increase in margin. Net income in Q4 rose 48% while sales rose 7.7%.
Women’s Wear Daily – Friday February 16: “Nordstrom Gains With Rack, E-Commerce.“
- Nordstrom sales rose 7.2% for their current fiscal year. Net income rose 11.4%. This year, Nordstrom expects sales to increase between 4% and 6%.
- “Regular price selling remains at historically high levels” – Blake Nordstrom, President.
Vision Monday – Friday February 17, 2012: “2012 ‘Off to Stronger Start,’ Says Optical Business Barometer from Jobson Research.“
- “With the January 2012 Jobson Optical Business Barometer Rating, the new year appears to be off to a strong start, and continues a strong showing that began in November of 2011,” In December, the index saw a significant improvement when the Barometer rose 0.3 from November’s index of 3.5. The January 2012 and December 2011 ratings for overall optical business are the highest since March of 2011 and higher than any month in 2010.
- The U.S. economy isn’t the only thing that seems to be strengthening and stabilizing. Numbers for the vision care industry are on an upward trajectory as well with total U.S. revenue at retail of all vision care products and services generated during the 2011 calendar year growing to $32.8 billion, representing an increase of almost 3% from 2010 when revenue hit $31.9 billion, according to VisionWatch, a research study conducted by The Vision Council.
- Overall units for complete eyeglasses (frames and lenses) sold increased marginally, with less than 1% gains in both frame and lens sales during the year-ending period December 2011. In dollar revenue terms, there was a healthy growth of 3% for frames and 1% in the lens market. Approximately 67.1 million pairs of frames were sold during the year-ending period December 2011, worth $8.4 billion at the retail level. During the same period, approximately 75 million pairs of Rx lenses were sold, worth $9.6 billion at the retail level.
- Dollar sales of plano (non Rx) sunglasses increased almost 5% in the year-ending period December 2011—the highest growth rate since the recession started, to close out the year at $3.4 billion for 92.2 million pairs sold. The increase is attributed entirely to rising prices in the sunglass market as the number of units sold did not change from 2010.
What does all this mean for you? A strategy that includes luxury product will lead to increased sales, increased margins and an overall unique point of view at retail that can help you stand out from the crowded sameness of our market and retail in general. See the Top Reasons I had printed weeks ago. It rings very true in light of the recent news articles:
7 key reasons luxury product should be part of your overall retail strategy
- Luxury sales are growing at a faster pace than other price point categories.
- Luxury attracts affluent consumers – they are more loyal, they are wealthy, they are networked and thus they tell friends about you if they like you.
- Luxury usually means local and NOT chain stores. Americans like to shop. They like to spend money (despite the current crisis). And they like to do it locally and not in chains. They want something special and they want it locally. Don’t give the business away to a chain.
- Luxury means generally higher margins on all sales
- Luxury means higher retail price points which means greater sales volume.
- Luxury means higher sales per patient visit/transaction –All of this means you can increase your sales without even increasing your patient base or the amount of people coming through your door. You can increase sales without increasing any marketing or outreach expenses. (we will discuss this in more detail in a future post)
- Luxury product is the best way to stand out from the competition. It’s the best way to stand out from the chain stores that all look the same. And it’s the best way to fight the ever present internet and all the discounts you can find there. In short, luxury product is the means to creating your own point of view at retail.