The Challenges of the Luxury Market

The luxury fashion retail industry has seen significant changes in the last decade, and luxury brands struggle to identify their core clientele as their customer base and top tier clientele continues to change. With emerging new luxury designers and the constant changes in fashion trends, the luxury market is now over saturated making it more difficult than ever to retain repeat and loyal clientele. The US luxury retail market has a very different way of selling luxury product to consumers compared to the rest of the world—from the selling ceremony, the image of sales associates, and post-sale service.  Here are three questions each brand must ask themselves as consumer spending habits and brand loyalty continues to rapidly change.

CRM Data – To What Extent Does This Tool Help Engage Existing Clientele?

Luxury retailers invest a lot of time and money on CRM (customer relationship management). CRM is important because it helps the company identify new clients and maintain and improve relationships with existing clients. On a quarterly basis, companies can identify the growth of their loyal clients and any changes in their clients spending habits. This tool can also help a company identify markets for events, promotions, and make their product assortment decisions.

Since the goal of CRM is to retain loyalty and engage with existing customers, it is crucial that companies understand where the loyalty lies—whether it is with the brand (a customer purchasing a Louis Vuitton monogram handbag as it is an easily identifiable signature of the brand), the designer (a customer purchasing Celine because of Phoebe Philo or purchasing Gucci because of Tom Ford), the aesthetic (the customer does not mind what the brand is or who the designer is, but prefers a specific style in luxury goods), or the strong relationship with a sales associate (top sales associates and personal shoppers have a large influence in persuading top tier clientele on which brands or products to purchase). Due to the challenges in identifying the root cause of why a customer is a repeat customer, CRM is only as effective as its data quality given that the associate who entered the data did it accurately and is able to consistently follow up with a genuine human relationship. Without an actual sales associate engaging with an existing client on a consistent basis, brands are unable to maintain accurate data of their client base as most luxury clients own multiple homes, travel often, and are more hesitant in providing their phone numbers and email addresses unless they see a real benefit in maintaining contact with the brand.  In order to keep up with the rapidly growing digital presence of luxury brands, companies must invest in expanding their CRM database to capture more qualitative data in order to strengthen the identity of a customer profile. Many brands have invested in local CRM or VIC managers who oversee client relationships and focus on managing brand loyalty. This is highly beneficial to retail teams who may not have an effective strategy in place to reach out to clients with the appropriate message in order to continue brand loyalty and the client relationship.

Emerging BRIC Markets- To What Extent Are Our US Retail Employees Engaging With This Group of Customers?

Brazil, Russia, India and China are emerging markets with rapidly increasing consumer spending in the luxury sector. These markets value status and luxury more than any other demographics and areas of the world. For the Chinese, shopping is the main spend when they are traveling overseas as they see shopping abroad as a way to save a hefty amount in price differences compared to shopping luxury brands at home. The Chinese consumers tend to have low brand knowledge and tend to go for big brands versus new emerging luxury brands, especially those who do not have a strong presence in China. For the Brazilians, many customers apply for visas to come to the United States strictly for shopping due to much higher prices back home from taxes and import duties. The Brazilians’ spending in the US significantly boosts luxury sales in New York and Miami. Sales associates in US boutiques often witness these tourist customers coming into the store with empty luggages just to fill the entire luggage up by the end of their shopping spree. Compared to the Chinese shopper, Brazilians tend to be fashion forward and well aware of brands and their product offerings. As for Indian shoppers, they know what they want and are much more difficult to influence. For first time luxury purchases they will often go for the classic styles rather than a more fashion forward style.  Indian shoppers also tend to appreciate limited edition pieces more than others. Russian customers are the opposite of Indian customers, as they appreciate everything new and innovative. Russians tend to exhibit true brand loyalty and appreciate a strong product offering by brands. These shoppers also tend to purchase items for short term use as they shop to satisfy an immediate need.

In order to effectively close a sale with this group of shoppers, it is important that luxury brands hire a diverse retail team to help support these clients as there is often a need to speak their native language in order to close a sale or sell the dream of the brand.

Many retailers go through rapid store expansions which makes hiring a diverse, multicultural team very difficult. However, in certain markets the need for a Mandarin or Portuguese speaking sales associate is key in preventing missed opportunities from customers in this demographic. Hiring an in-store translator can also be beneficial for companies who simply cannot hire an associate with those language skills.  Education of the knowledge of economic factors and the different consumer behaviors from emerging markets is also fundamental in closing a sale with foreign customers. In other words, different strategies are needed in handling different demographics in order for brands to be successful.

Changes in Luxury Consumers Expectations- Do Your Stores Offer Emotional and Powerful Experiences for the Customers?

Luxury consumers in the US are now having higher expectations than ever. They are intelligent shoppers who study the brand and its product before going into a shop to purchase an item. The luxury market is over saturated as social media and eCommerce continues to be a focus for many brands while retail stores continue to expand all across the world. Brands must now offer a luxury experience in-store as well as online in order to capture clients and maintain its market share. Sales associates on the shop floor must be as knowledgeable as the information found on the web relevant to the brand in order to compete with eCommerce. Hosting events with the appropriate messages is a great way to engage with top tier clients of a brand as it provides intimacy, exclusivity, product and brand knowledge and full interaction between the customer and the brand itself.  Walk-in clients should have the ability to connect with the sales people and engage with the product and brand culture in a visceral and emotional way when they are inside a store as shoppers are becoming increasingly sophisticated and are coming into a shop with defined expectations.  In order to close a sale and retain repeat customers, brands must deliver powerful, educational and emotional experiences as the physical store experience is the most memorable form of media a brand can offer.  If the majority of retailers choose to remain focused on just the product and price offering itself, then they are lowering their competitive edge and can easily get blurred with the rest of the other retail players who may view their brick and mortar stores as just a point of distribution.

It will always be a challenge in retaining loyalty with top tier luxury consumers.  However, a lot can be improved if a brand has a dynamic team that is able to keep up with the constant changes on economic factors, fashion trends, competition amongst other retailers and talent retention. Often times, it is the disconnection between corporate and retail teams that creates a dysfunction in the workplace which ultimately creates missed opportunities in sales and the loss of important clients. Without a workplace dysfunction, sales associates are more likely to take ownership in their client development and store managers are more likely to provide useful feedback to headquarters regarding its unique market trends and adapt quickly to client needs.  By being quick to adapt to changes, brands should be able to remain strong in the market despite the over saturation of brands.


Article written by Crystal Yang.  Crystal is a luxury retail general manager who has worked for Miu Miu, Prada, Tory Burch, Michael Kors, LVMH, and Sephora.  She studied consumer science and fashion merchandising at the University of Houston and fast tracked her career in the retail industry in the last 10 years.

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