(20 Dec 2019) FOR CLEAN VERSION SEE STORY NUMBER: apus128445 For high-end department stores that had long been the playground for the well-heeled, new entrants into the luxury sector have forced them to reimagine their approach.
They now offer services as well as food and champagne to lure back customers who were once exclusively theirs.
At Nordstrom's new women's flagship in Manhattan, for instance, customers sip champagne while shopping for shoes.
Neiman Marcus is rolling out shops where customers can sell their designer belongings as part of a partnership with Fashionphile, an online resale accessories company.
Meanwhile, brands like Gucci and Louis Vuitton are opening more of their own stores and expanding online.
Robert Burke, a luxury consultant, says they are trying to control their future as they watch their products get discounted on resale sites.
"The consumer is king. And they can buy luxury brands in different places," say Steve Sadove, former CEO and chairman of Saks and now senior adviser for MasterCard.
To be sure, traditional luxury stores are feeling the same pressures as other brick-and-mortar retailers that must now compete with online rivals.
But the exclusivity they once enjoyed by catering to the wealthy is beginning to erode, especially among a generation of shoppers in their 20s through their 40s who can afford high-end merchandise but may still be looking for a deal.
Millennials and Generation Z accounted for 47% of luxury consumers in 2018 and for 33% of all luxury sales worldwide in 2018, according to a study by Bain & Co., a consulting firm. Together, however, they contributed virtually all of the market's growth, compared with 85% in 2017.
Bain predicts they will account for about 44% of the luxury business by 2025 and should offset the declines in spending among older generations.
These hard-fought efforts by traditional luxury retailers are happening even in one of the strongest U.S. economies and a booming stock market.
Overall, the global market for personal luxury goods reached a record high of $286.53 billion (260 billion euros) in 2018 — a 6% increase from the year before, according to Bain. J
ewelry in particular has been one of the top luxury growth categories. But U.S. luxury sales excluding jewelry have fallen 2.7% through October compared to a 3.1% increase in overall retail sales excluding gas, says MasterCard SpendingPulse, which tracks sales across all types of payments. Neiman Marcus and Nordstrom have seen slower sales.Neiman Marcus decided to invest in a minority stake in Fashionphile earlier this year after its own survey showed half its customers buy or sell pre-owned luxury items.
Geoffroy Van Raemdonck, CEO of Neiman Marcus, says the luxury business used to be about the product; now, it's more about the services. "We are looking at travel services and art," said Raemdonck, declining to offer any specifics.
Saks Fifth Avenue has been a bright spot, though sales at stores open at least a year fell for the first time in the latest quarter.
That reversed nine straight quarters of growth.
Saks is finishing up a $250 million renovation at its Fifth Avenue flagship store.
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