The rich keep getting richer. And you need to cash in.
It’s no secret that luxury brands are the high-performance fuel that drives the retail sector, and the impact of luxury brands continues to grow as affluent consumers continue to spend. According to a study from Business Insider, the top ten percent of households in the US (those making over $120,000 per year) are responsible for half of all consumer spending. And that’s expected to rise 6.6% to $406 billion in 2016. Meanwhile the top 1% (those making over $250,000) are expected to up their spending 10% this year, all while average consumer spending actually dropped 1% from 2014-2015.
If you’re in the retail business, you want a big slice of that luxury pie. But attracting consumers interested in luxury products isn’t as simple as setting up a mahogany-paneled showroom and serving champagne all afternoon. It’s a much more complex business now. With everything from your in-store experience to customer loyalty to social media, making your retail business appealing to luxury shoppers requires a lot of work. Here are some ways you can do it.
Establish an Online Presence
Luxury consumers aren’t flocking to the Internet, mostly because when people make such expensive purchases they usually want to assess the quality in-person. But that doesn’t mean you can ignore online retailing either. As the omnichannel retailing trend continues to grow, the ability to operate across multiple platforms is just as essential when you’re selling $2000 handbags as it is when you’re selling $10 T-shirts.
After the great recession, luxury consumers are much more value-focused. So while they might still be willing to spend top dollar for top quality, they’re also influenced by things offered for free. For example, offering free delivery and free returns has been shown to be a major factor that affects luxury spending online. In an interview with Entrepreneur.com, Laura Morroll, a Managing Consultant of LCP Consulting, said that offering free returns exuded an aura of confidence in one’s products. And when free delivery and returns were offered, items were actually returned LESS frequently than when companies charged for it.
Develop Your Social Media Channels
Simply posting pictures of the new line of Louboutin pumps on your Instagram isn’t enough. Because luxury consumers crave a more-personalized experience, engaging them on social media is even more important. Following your retail business’s customers on social media is the obvious first step so you can research what they like while simultaneously building a relationship. These are people who will spend money with people they trust, and if you have an ongoing online relationship, they’ll be more likely to come to you.
The platforms you choose to promote on are also important. Facebook now slants towards an older and typically more affluent audience and may be worthy of more effort than Instagram or Twitter. However, the king of online shopping influence is Pinterest, where 33% of online shoppers said they bought something after seeing it on the site. And as online sales continue to eat into in-store sales, having a presence on Pinterest and other social media channels will be essential.
Improve Your In-Store Experience
Of course, the backbone of luxury retail is still the in-store experience. And designing a store that displays both relaxation and refinement is a tough balance to strike. The eco-friendly movement is the prevailing trend in retail store design, and using features like extensive natural light and bright, natural tones have replaced the dark, plush decors of the past. Large, open spaces with sleek technology and sharp lines will create an atmosphere conducive to luxury shopping.
But your store isn’t just your décor and your merchandise; it’s your people and the service they provide. Again, luxury shoppers want to feel that they’re getting a personal touch, and your retail store can use technology to achieve that. Equip your staff with iPads that can keep customer information. As we suggested above, ask your customers for their social media accounts and have them readily available on the iPads. Then your staff can talk to customers about pictures they’ve posted or interests they might have, creating that in-store relationship they won’t get on-line. Or, worse, at your competition.
Bring in Millennials
Millennials, for the most part, aren’t luxury consumers. Yet. Give it a decade and you may find they’re your new core customer, so you need to start building relationships with them now. Even if most of your inventory is priced too highly for younger consumers, carry some smaller items that aren’t. Luxury brand items like socks, ties or athletic apparel will still allow younger consumers to carry something with the prestige of the name, without dropping hundreds of dollars.
And once they can afford an Armani suit to go with their Armani tie, you’ll already have built a relationship. The key is to treat them just like you do your big-spending older customers, and consider it an investment in your future.
Be Sure to Build Loyalty
Beyond building an online relationship with luxury consumers, you also need to give them something back. The model was exemplified by Hermes, who only gave their best and oldest customers access to their super-exclusive line of handbags. But let’s be honest: You’re not Hermes. And unless you’ve got a product that’s literally impossible to find elsewhere, opting for that kind of loyalty program isn’t going to work.
Consumers now have been reared on loyalty programs, whether it’s elite frequent flier and hotel status, or simply getting a free beer after you spend $100 at the local sports bar. Again, luxury consumers are still value-conscious, meaning you will lose business if you’re not offering some kind of loyalty reward. It can be something as small as a special, members-only sale or a cocktail party … or something as grand as a free pair of shoes.
The luxury segment is a tough place to navigate, and with so much money up for grabs the competition is fierce. But by focusing on building relationships and leveraging technology, you can make yourself a dependable name in luxury shopping.