The economy may have been in a slump these last few years, but that hasn’t quenched consumer demand for luxury goods. The continuing trend of shoppers “trading up” has driven competition in the luxury retail sector to an all-time high, posing significant challenges for the moderator and five panelists on the “Building a Brand and Making Your Mark in the Luxury and Retail Sectors” panel at the 25th Annual Wharton Women in Business (WWIB) Conference on November 5. The group discussed how to form a branding impression in a crowded market; the importance of creating a brand identity that resonates with customers; changing notions of beauty and luxury, and the difficulties involved in maintaining a luxury brand online.
From Saks to Target
“Consumers are increasingly fickle,” said moderator Robin Koval, kicking off the panel discussion. The chief marketing officer and general manager of The Kaplan Thaler Group, a leading advertising agency, framed the major challenge for luxury marketers within this dilemma of rising customer expectations. “Isaac Mizrahi used to be found in Saks Fifth Avenue; now he’s in Target. Customers increasingly are expecting what I call ‘masstige,’ or mass luxury, and they are not necessarily willing to pay more for luxury these days. So how do we do luxury right?”
For several of the panelists, the key lies in providing unique experiences – not just products – for their customers. Rather than seeing “masstige” as a problem, these executives view it as an enormous opportunity. Now, more so than in any previous generation, luxury is seen as an experience that is and should be attainable by anyone who wants to treat themselves well. “We have seen a dramatic change in what ‘beauty’ means to people,” said Beth Kaplan, executive vice president and general merchandise manager at Bath & Body Works. “It used to be all about the surface, what your face looked like. And if you asked people, ‘Who is beautiful?’ they would name models and movie stars. Now they will name their mom, their sister, their best friend. Beauty is all about the whole person.” So for Kaplan, luxury means providing a shopping experience that caters to this new definition of beauty, which is very possible to do on a mass consumer basis. “We have focused on creating luxury-style packaging but we have done it for products that approach beauty holistically, from aromatherapy to home care and hair care. And it’s helped us go from two stores to 1,600 stores in just nine years,” Kaplan said.
The team at Eileen Fisher had a similar approach, according to panelist Paula Bennett, chief operating officer of the women’s apparel company. For Eileen Fisher, the key was in spotting an overlooked niche in the crowded high-end apparel marketplace. “Eileen started out at a time when women were into power suits. They were trying to be a man with their clothes in order to compete at work. She decided to design clothes that focused on the woman, that were simple and comfortable and well-designed,” said Bennett. Today, that approach has been translated into a print marketing campaign that features real women who are employees of the clothing company. “The message was simply to be ourselves. That’s what Eileen Fisher stands for,” Bennett added. By creating a message customers can identify with, the apparel brand is able to reach a wide market. At the same time, focusing on excellent design and quality materials maintains the brand’s higher-end status.
The Big Bang
Koval, author of a book entitled BANG: Getting Your Message Heard in a Noisy World, also challenged the panel to answer the question, “How do we make noise in this crowded market of high expectations?” With the vast number of media choices available to consumers today, all bombarding consumers with thousands of messages on a daily basis, breaking through the noise in order to make a brand impression is no simple task.
For Susan Q. Hudson, a 14-year veteran of Kenneth Cole and now a senior vice president of the company’s wholesale division, the answer was simple: Be creative – extremely creative. “When Kenneth started his business in the early 1980s, the only way to sell shoes to the market was at the annual shoe buyers’ trade show in New York,” Hudson recalled. For a new designer, however, renting space at the show was far beyond the budget, “so Kenneth went to a friend who owned an 18-wheeler truck and asked to borrow it.” But how does one get permission to park an 18-wheeler on the streets of mid-town Manhattan? “Turns out the only way to do it is to get a movie permit, so Kenneth Cole changed the name of his company to ‘Kenneth Cole Productions, Inc.’ and shot a movie called ‘Birth of a Shoe Company’ so that he could park the truck outside the shoe show and sell out the back of the truck,” Hudson said.
The result: A new designer burst onto the market, selling 40,000 pairs of shoes in just two days. Though things have changed in the 20 years since Kenneth Cole made his daring entrance into the industry (and a mid-town truck-parking stunt would likely not work a second time), Hudson encouraged audience members to similarly think outside the box and look for creative ways to make noise in their chosen luxury segments.
On the other end of the spectrum, Michele Mandell, executive vice president of Talbots stores, suggested that the answer lies in creating intimate, direct relationships with customers so that they find value in being loyal to your brand. Talbots doesn’t rely simply on advertising to communicate with its customers, said Mandell. It also conducts regular focus groups and collects weekly regional customer questionnaires to stay on the pulse of its market. “The biggest customer request we received was ‘Be sensitive to fuller figured customers,'” Mandell said. The introduction of the Talbots Woman brand of plus-sized clothing was in direct response to this feedback. Now, the company runs 100 Talbots Woman stores and sees the full-figured line as its biggest opportunity for future growth. “Times change. You have to pay attention to how your customers’ lives are changing, how their views are changing,” Mandell said. “Customer loyalty is everything. They can always find something less or more expensive. So the question you have to answer is, why does she need to shop with you?”
Is There Such a Thing as Luxury Online?
If luxury is quickly becoming about experience over product, and brand awareness depends more on close customer relationships over flashy marketing stunts, is it possible for luxury brands to survive online? Isn’t “online luxury” an oxymoron? This was the challenge faced by Denise Incandela, senior vice president for Saks Direct, the online and catalog division of the tony New York-based department store Saks Fifth Avenue.
“The Saks brand promise has always been to ‘expertly deliver personalized style,'” said Incandela. “It was hard to imagine how to deliver on this promise and maintain the luxury experience online.” Then Incandela decided to look at the web differently: “We found out that most women are online at around 2 a.m. – after they have taken care of the kids, the house, the job, the pets. And we figured, what is more personal than providing customized shopping service on her schedule, when she’s available?”
Incandela’s team created an online shopping experience that features 24/7 live chat service with a knowledgeable personal shopper, editorial style advice, product suggestions to match choices that shoppers had already placed in their carts, large photos, and as much product detail as possible for each item. “We looked at it as the ultimate integrated shopping experience. In the actual store, it’s very hard to move from department to department with the same sales associate so that you can check out once and buy the shoes with the dress and the accessories. Online we can do all that, and as long as we have a very well-designed site, the experience still feels very high-end.”
Her success in developing the online business is integral to the success of the larger Saks Fifth Avenue brand. The company, which currently has 62 stores across the country, is in the process of closing 12 of them. Boutique and mall shopping have put pressure on the department store format from both ends – and with approximately 20% of the store’s sales driven by customers who live outside the “trading area,” or natural shopping distance, Incandela said the online and catalog arms of the business will be vital to the store’s future success: “Our online demographic is 20 years younger than the store demographic overall. So succeeding in creating luxury online really is our future.”