November 17, 2010
Luxury retailers should plan a more concerted ecommerce push this Thanksgiving weekend to capitalize on the expected major growth in holiday sales, according to consulting firm BDO.
This year, retailers can expect a projected 3.8 percent increase on Black Friday and 2.5 percent on Cyber Monday, in comparison to 2009s 1.8 percent. The luxury sector, which does not invest in the 5 a.m. “door buster” sales that are crucial revenue-drivers for other brands, should focus its attention in online sales.
“Luxury online sales are growing at a faster pace than store sales,” said Doug Hart, partner in the retail and consumer product practice at BDO, New York. “Some examples of this are Saks’ most recent earnings release and also the recent growth in private Sale Online Retailers such as Gilt Groupe.
“In addition, mcommerce is expected to grow this holiday season with the explosion of mobile devices,” he said. “Therefore, luxury goods companies should be taking steps to ensure that their mcommerce sites and apps are very user friendly, easy to navigate and shop.
“Also, it is expected that mobile shoppers will do much more price comparing using their devices this holiday season.”
This will require careful navigation by luxury retailers and brands, as the value proposition for luxury retailers is not strictly price.
Online retailer Gilt Groupe is doing just that, with careful plans for the holiday sales that include heavy sales and promotions on Cyber Monday (see story).
Discounts on the down
Given the lift in luxury sales and the economy, the amount of discounting is anticipated to be far less than it was in 2009. Sixty-four percent of chief marketing officers (CMOs) expect to see more promotions and discounts this holiday season, in comparison to last year’s 96 percent of planned discounts.
More than 36 percent do not anticipate an increase in offerings. Consumers can expect to see more balanced promotions, which plays to the economic recovery of luxury.
“The luxury market recovery is uneven by geography,” Mr. Hart said. “Neiman Marcus reported stronger October sales in the Northeast and Southeast regions as well as Texas, which suggests that certain markets seem to be recovering at a faster pace than others.
“While full price selling is returning to some extent, it is uneven by product category, brand and geography,” he said.
“Therefore, regional or local merchandising, pricing and promotion strategies may enable the luxury retailer to capitalize on these differences.”
Consumers this year can expect to see the most discounts placed on consumer electronics, according to the study. Despite the popularity of social media and mcommerce, only 17 percent of the CMOs surveyed planned to push online promotions over in-store.
Twenty-four percent of CMOs planned equal in-store and online promotions and 56 percent planned to rely on in-store promotions. Email campaigning is a major marketing tactic among retailers, with 45 percent of CMOs planning to use the channel to target consumers.
Tips for luxury retailers
Luxury retailers can play the season to their advantage by avoiding one size fits all merchandising strategies and ensuring sufficient mcommerce applications by testing ease of navigation, accessibility of promotions, merchandise selection and other features.
Luxury retailers should also consider their inventory carefully.
“Most luxury retailers reduced their product offerings in 2009 and into 2010, both in terms of breadth and depth of offerings,” Mr. Hart said.
“The gradual return of the luxury consumer warrants some reversal of that merchandising strategy, however that does present more inventory risk and must be managed carefully,” he said.