June 16, 2011
Upscale department stores Barneys New York, Nordstrom and Bergdorf Goodman are rated as luxury consumers' favorite retailers, but even these big brands are having trouble catching the target market, according to a study by Unity Marketing.
Other contenders such as Neiman Marcus, Bloomingdale's and Lord & Taylor are also showing stagnant interest from luxury consumers this quarter. In fact, the study showed that these department stores peaked in the third quarter of 2010.
“While the top shopping destinations for the wealthiest shoppers vary from quarter to quarter, the big news is that their patronage of this class of luxury brand department stores, which includes Neiman Marcus, Lord & Taylor, Bloomingdales among the others, is off after having peaked in third-quarter 2010,” said Pam Danziger, president of Stephens, PA-based Unity Marketing.
“Our research with affluents strongly suggests that the pent-up demand created and built up over the recession is now ebbing, so growth in this sector is likely to slow,” she said.
Even the most popular department stores Barneys, Nordstrom and Bergdorf saw slowed growth in the first quarter.
Barneys currently attracts 22 percent of the ultra-affluent consumers and is the most popular department store among the 2 percent of the United States' most wealthy.
However, Barneys has weathered two quarters in the past year when patronage dipped as low as 16 percent.
Nordstrom ranks as the second-most popular destination. Its share of purchase among the ultra-affluent dropped by more than 5 percent from fourth-quarter 2010 to first-quarter 2011.
Of all the department stores in the study, the only department store that saw an increase in patronage was Saks Fifth Avenue from the fourth quarter to the first quarter.
The percentage of ultra-affluent consumers shopping in the luxury department stores overall declined, which is one of the most striking statistics found, per Unity Marketing.
Relatively small declines in patronage on a percentage basis translate into big drops across the market, per Ms. Danziger.
Therefore, regardless of which department stores are the favorites of the wealthy, nearly one-third of this demographic are not visiting them each quarter.
Customer service is a must
Even more alarming, the popularity of each store is waning from quarter to quarter.
If the downward trend among ultra-affluents continues, each of these stores may have to rethink their approach if they are to remain an attractive destination for the wealthy, per Ms. Danziger.
Customer service has always been a cornerstone of luxury department stores.
Earlier this year, New York-based Luxury Institute released a study where it enlisted undercover shoppers who rated retailers on store personnel, the shopping environment and whether the overall experience resulted in complete satisfaction in department stores (see story).
The results, consistent with those just released by Unity Marketing, ranked Bergdorf Goodman, Nordstrom and Barneys as first, second and fourth-best in customer service, respectively.
Therefore, in order to stay relevant in an ever-changing economy, luxury department stores will most likely fare much better if they have personable staff to whom luxury consumers enjoy returning.
“Brands must keep working on improving the shopping experience,” Ms. Danziger said. “They must keep on bringing in new brands with a good value proposition as affluents are now looking at their luxury purchases as investments in their lifestyle, and they want to maximize the return on that investment.”
Rachel Lamb, editorial assistant on Luxury Daily, New York