The Customer is Always Wrong
The customer is always wrong. They are indecisive, commitment phobic, unconfident and desperate for the the approval of their peers. However, luxury retailers have only exacerbated this behavior. After the financial crisis retailers welcomed anyone through their doors. Instead of focusing on their target audience, and how they would shape their behavior and develop them, stores focused on their competitor and keeping up. Well the client has taken notice, and is milking it for all that retailers have.
Walk into any store, and see how easy it will be to knock the shipping fee off your purchase. See what store is not willing to price match, or throw in major deal days like ‘Power Points’, and inundate us with ‘Triple Points’. The results? Neiman Marcus in store sales decreased 5.6% during the first quarter of 2016, Saks in store sales decreased 3.6% during the same period, and as the Business of Fashion notes, “even Nordstrom, which has consistently outperformed its peers on the stock market, only saw comparable store sales inch up by 0.9 percent in its last quarter.” Barneys New York was the only among the luxury retailers to report an increase from last year.
Exclusively Ours, is Exclusively Everywhere
So what exactly are luxury retailers to do? To wow clients, a retailer's unique take on the most exquisite pieces of the season must be matched by showcasing these pieces in a space that is just as unique.
Robert Burke, chief executive of advisory firm Robert Burke Associates argues that for department stores to differentiate themselves and remain competitive they must assert their point of view. A point view that is depicted through a highly edited array of product and merchandising, and by controlling the experience. As CEO of Barneys Mark Lee offers, “customers are gravitating more and more toward rare, less distributed items. They want more exclusivity. There are too many points of [sale].” This sense of exclusivity is something that Barneys has always excelled in, having for example in 2010 launched the careers of creative geniuses Lazaro Hernandez and Jack McCollough, of Proenza Schouler.
However as research shows, people are over things. Spending money on experiences provides us with longer lasting happiness than spending it on material goods, and nowhere does this apply more than the luxury retailer. You may have the most exclusive pieces in the world but even that won’t seal the deal. Department stores must control the atmosphere. One of the reasons why there is such a homogeneity that rules over luxury department stores is the tradition to lease space to brands like CHANEL, Dior, Gucci, and Louis Vuitton. Once again Barneys has taken a stance by not following this strategy, exiting Prada from its offering in 2011 when the brand wanted to lease its own space. But as Lee offers “one of our defining characteristics is that we’ve resisted becoming a landlord.” Those who go to Barneys go there for the Barneys point of view.
And Now Brief Presentation on the Safety Features of this Aircraft
This school of thought has definitely benefited Barneys, whose store interiors always stand out from the rest. But there is another key facet that impacts the atmosphere and feel of a store; and this is who and how they shop there. I am talking about the shopping behavior that is taking place in the selling floors, and how luxury stores should be molding this behavior and not the other way around. The consumer is not always right. Luxury department stores not only need to have a point of view when it comes to their merchandise, but also about who their customer is. Who is it that is welcome at store ‘X’ and how is it that we expect for them to carry themselves within these quarters?
Think Abercrombie and Fitch in the early 2000s. In an interview with Salon Magazine then CEO of the brand, Mike Jeffries, was quoted saying “candidly, we go after the cool kids. We go after the attractive all-American kid with a great attitude and a lot of friends. A lot of people don’t belong [in our clothes], and they can’t belong. Are we exclusionary? Absolutely. Those companies that are in trouble are trying to target everybody: young, old, fat, skinny. But then you become totally vanilla. You don’t alienate anybody, but you don’t excite anybody, either.”
I am not suggesting to completely follow Jeffries' strategy, which was often criticized for being blatantly racist, sexist, and body shaming. However, luxury should never feel vanilla. In The Abercrombie Effect Lee Bailey and Jessica Pallay note that “not since Ralph Lauren's ascent in the 1980s has a single brand perfected a lifestyle-based look so often alluded to and imitated.” And while to many Abercrombie now may seem as the biggest train reck in the retail world, there was a time when it was unimaginable for A&F earnings to ever fall. At the time the Salon Magazine interview had taken place, A&F’s earnings had increased for 52 straight quarters excluding a one-time charge in 2004; leading A.G. Edwards analyst Roberts Buchanan to declare: “to me it’s the most amazing record that exists in U.S. retailing, period.”
Jeffries had a point. He knew that Abercrombie wasn't for everyone, the brand needed not mold itself for shoppers, shoppers were to mold themselves and immerse themselves in Abercrombie’s culture. Luxury retailers must ask themselves what are the initiatives that must be implemented to alter consumer behavior? How are clients going to mold themselves to be part of store ‘X’? Luxury retailers need to implement strategies that take on the challenge of a consumer that is now less confident, less committed, less decisive, and more desperate for peer approval than ever before. This means re-thinking return policies, price adjustments and discounts, and the uncouth behaviors of window shopping and social media use in store.
The First Rule of Fight Club is…
A stricter return policy not only shuns impulse purchases. It also asks for something that is slated to have the largest impact in molding consumer behavior and that is rarely asked of consumers—commitment. When discussing the fitness and wellness industry and the launch of their new campaign ‘Commit to Something,’ Equinox CMO Carlos Cecil shares their insight into the mindset of millennials, which he describes as an 'anti-commitment' culture. But as he continues, “the concept of commitment is bold, incredibly powerful, and it's real, especially in a world today where commitment is lacking.” Commitment, like in any other relationship strengthens the relationship between retailer and shopper. It ensures predictable business, allowing for long term strategy.
Clearance and price adjustments must also be revised. Extensive clearance is a sign that a store is buying too much of something, and should use this information to correct future buy. Furthermore, “when prices are slashed prematurely, profits shrink for both the retailer and the designer, and consumers become accustomed to buying things on sale.” Flagrant discounts delegitimizes the value of the goods you sell in the eye of the consumer. Clearance should be a rare phenomenon and retailers need to find a different strategy to lower inventory levels.
Foremost, retailers need to reevaluate the role of a store, admit when technology becomes a hindrance to the shopping experience, and limit its use along with that of social media within their quarters. These two initiatives will target the indecisiveness and need of approval from others. There is no need to share your next potential purchase with your followers on Instagram or Snapchat, the only opinion that matters is that of the client and the sales advisor. Oversharing makes luxury lose its luster, and as Ana Andjelic offers in Luxury’s Emerging Identity Crisis, “a true luxury today is about experiences that fill us with pleasure with our own life, spiritually, mentally and physically enrich us, and which are best enjoyed in private or with a few selected others.”
FOMO
However, the reason why most stores aren’t taking this form of risks and setting new tones for the luxury experience is fear. Fear that clients will just go next door. But this just ain’t so, because they will be using the line of least expectation. In a recent Adage article Being Customer Oriented Isn't the Best Marketing Strategy, Al Ries offers that “focusing on customers in marketing is like focusing on territory in warfare. If your enemy knows your territorial objective in advance, it greatly simplifies its defensive strategy.” Instead, Ries argues that brands must take the line of least expectation, a strategy coined by the military thinker B.H Liddell Hart.
Ries explains:
“On June 22, 1941, Adolf Hitler launched the German invasion of the Soviet Union. The objective: Moscow in the north. Six months and millions of casualties later, the German offensive was halted short of its objective. So Hitler changed his strategy and launch a second major offensive on July 17, 1942. The new objective: Stalingrad in the south. History repeated itself. Six months and millions of casualties later, the German offensive was halted short of its objective. What should Hitler have done? He should have launched his attack in the middle of the country so his ultimate objective was in doubt.”
The Line of Least Expectation: Experiences
The line of least expectation within the realm of luxury is about experiences. But in order to provide a breathtaking experience, retailers need to deeply understand what it is that clients are looking to gain from an experience; and understand the nuances between customer satisfaction, sacrifice, surprise, and suspense. So, what is it that clients want from an experience? A memory? Sure. But beyond this customers want to transform themselves. In The Experience Economy B. Joseph Pine II and James H Gilmore note that while experiences may leave a long lasting memory, a transformation changes the client, by “realizing some aspiration and then help them sustain that change through time. There is no earthly value more concrete, more palpable, or more worthwhile than achieving an aspiration.” Customer satisfaction alone will not allow for these transformations.
Customer satisfaction as Pine II and Gilmore offer, solely concerns itself with the variance between what a customer expected (not wanted) from an interaction or contact with the brand and what the customer perceives he received. However customer sacrifice concerns itself with the variance between what a customer accepted and what he really needed from that interaction, “even if the customer doesn’t know what that is or can’t articulate it.” And there lies the room for opportunity in offering an experience, by reducing customer sacrifice and offering a customer with a surprise that can change the client. Through customer surprise, brands “deliberately attempt to transcend expectations, to go off in new (and unexpected) directions entirely.”
Consider retail credit card loyalty programs which differ very little from one another. These card programs do not foster loyalty, as often clients are members to multiple card programs. But in addition as previously noted, people are over things! A retailer may give people points, notes, or gift cards to come back and shop, but so did the other store down the block. What do they or the client have to show for it? CRM databases have the potential to collect a plethora of data about the inner workings of client’s minds and their aspirations. So what if instead of offering in-store cash back, retailers used this opportunity to curate amazing experiences that can transform their patrons? What about getting them a reservation to their favorite restaurant with a four week waitlist? What about getting them tickets to their favorite band or music festival, that will surely sell out upon release? Or what about planning a trip to that country the client has been wanting to visit for the last year? The memories generated through these experience will linger in their minds forever, and will always connect them back to the brand. Furthermore the client will share these experiences with their friends and loved ones, or just brag about them to strangers. Word of mouth is always the best advertising. And finally think about all the social media exposure this will generate.
Customer surprises however are only special the first couple times before reaching fatigue, which is why for surprises to be successful they must be accompanied by customer suspense. Customer suspense is the variance between what a customer does not know and what a customer remembers from the past. And this is the reason why no matter how many rules you set, customers will not dare go to any other store. This sense of anticipation is what leads for customers to actively look forward to doing more business with a brand, just to find out what will happen next.
The Luxury Museum: Let Our Knowledge Transform You
As one can imagine, using the elements of surprise and suspense will not be cheap. But as Pine and Gilmore note we are moving away from a goods and services economy; “customers now want experiences, and they are willing to pay admission for them.” Luxury retailers, like museums, transform their visitors by generating knowledge value (an economic offering resulting from accumulated wisdom), and as so they should charge entrance fees. In The Knowledge-Value Revolution, Taichi Sakaiya envisions that there will be a shift in the paradigm of consumerism, were approval and admiration from our peers will be earned through our display of products that manifest our level of wisdom. These products will affirm that we are ‘in the know’ by having access to best information and knowledge that money can buy. Think, your ivy league diploma but draped on your body.
The value attached to knowledge in my opinion is already a fortifier to our social fabric. Within the realm of luxury goods, this knowledge is acquired throughout the interactions with highly trained sales advisors in luxury stores. This knowledge is then shared on social media, at dinner with your friends, and through the clothes you wear. In between the time a client enters and leaves the luxury store, a client has been transformed. They are ‘in the know’ about the what’s going on in the world of luxury.
Transformations are the new source of profit for luxury retailers. Charging an entrance fee might seem a little far-fetch, and it should as it’s the line of least of expectation. But as we move away from a goods and services economy and into the experience economy, “much that which was previously obtained through non economic activity will increasingly be found in the domain of commerce. That represents a significant change. It means that to obtain what we once sought for free, we now pay a fee.” However this strategy must be anchored in once again taking control of the experience, setting the rules of shopping, understanding the client, surprising them, and transforming them.
You Want To Be on Top?
So where and how will clients spend their hard earned money? Not a place that is vanilla. The’ll go to a place deserving of their time and money. A place where sales advisors understand them, will aid and guide them on a path to realize their their aspirations, and be transformed by the time they depart. A place where they can gain knowledge on the most exquisite assortment of product in the market, and a place where they can improve their image, and thus how others perceive them. A place that is civilized, and where people aren’t just chasing the deal. If you commit to them, they’ll commit to you.
Disclaimer: The views and opinions expressed in this post are those of the author and do not necessarily reflect those of the parties quoted