By all account 2008 & 2009 was probably the most challenging time in recent memory for retailers; especially in the luxury sector. However, Richemont’s acquisition of Net-a-Porter in April of this year and the recent sale of Harrods department store of Knightsbridge indicates that this sector of the market is resisting the downward slump felt by many mid-market retailers.
The trend towards buying expensive goods may seem peculiar in a recession but consumers are slowly waking up to the fact that buying ‘disposable fashion’ or cheap mass market clothing is a false economy. Paula Reeves, the CEO of the online luxury retailer Black, points to the fact that when buying luxury, although you pay a premium for the label you also get quality and timeless style. She goes on to explain that cheap clothing is great for one year but then it deteriorates and you end up buying the same item twice!
Black, along with many other luxury retailers have also had to work very hard and very smart in order to maintain growth levels. It is not simply a case of having a good product and a good service, it is important to take a step back and analyse where the opportunities are. For example, the UK at the moment is gearing its self for an ‘age of austerity’ with huge government spending cuts and tax rise imminent retailers have to be very price competitive to attract customers, while at the same time ensuring they don’t devalue their brand or products. This is where purely online operators such as Net-a-Porter and My Wardrobe have the advantage over traditional bricks and mortar business who pay for the privilege of having a presence in sought after urban shopping areas with high footfall.
In addition the spatial barriers lifted by the internet allow an online retailer to position itself in any country in the world that has a high demand for luxury goods and services whether it be through organic search engine marketing, PPC advertising or affiliate channels.
Having said this, the communication strategy, product, and the brand presentation are all central to a brands development. Luxury does not have to be over-expensive; it needs to have the cachet of exclusivity.
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