RESEARCH
Surprise and impress with personalised and exclusive off erings... starting small, with a few initiatives off ering high-impact pampering, is often best
In-store experience – the growing fre-
quency of buying on impulse or after only a short consideration propels the in-store experience into a priority. McKinsey found that over half of survey respondents cited some aspect of the in-store experience as important in their purchase decision and “the longer consumers shop for luxury, the more they care about the stores they patronise”. Operators have responded by increasing the size of outlets, in some cases signifi cantly – “for some brands, a three to fi ve-fold expan- sion of space in the average outlet since 2007”. Given annual rent and wage rises, this is an expensive investment. McKinsey advises that “striking the right balance between store numbers and qual- ity” is becoming increasingly important. “It’s advisable to… ensure that sites are promi- nent and stores globally consistent in terms of look and feel. Expanding selectively in a few untapped lower-tier cities may be desir- able”. The researchers believe that opening outlets in non-exclusive locations “can hurt brand image”. Brands should also focus on airport duty-free outlets as the Chinese travel to more overseas destinations. CRM and pampering to the ultra-
wealthy – in the pursuit of customers, McKinsey suggest luxury brands “should fi t their CRM programmes to surprise and impress their customers with personalised and exclusive offerings… starting small, with a few initiatives offering high-impact pam- pering, is often the best way to go”. The researchers found that ultra-wealthy con- sumers seek a VIP, individualised shopping experience – private rooms or fl oors and dedicated (Chinese speaking) salespeople. “In China, some brands have fl own their best customers on all-expense-paid trips to enjoy fashion shows, art shows, and cruises; for VVIPs, these excursions can involve desti- nations as far away as Paris”. McKinsey also suggest “customising brand and product portfolios, using limited-edition offerings
Customer dilemma – tenured consumers want understated luxury, while new customers want widely-recognisable brands that show off their status
to create an aura of exclusivity… Super-rich Chinese consumers love, and count upon, ‘over-the-top’ VIP treatment”. Embracing the online opportunity –
while online purchases in the luxury sector in China are still in their infancy, “and not about to displace in-store shopping any- time in the foreseeable future”, this channel should not be ignored according to the researchers. Three-quarters of respondents to the survey cited worries about counter- feiting as a reason for not buying online. As elsewhere, consumers are increasingly using the internet to gain information – price comparisons, viewing editorial comments by other users. Those who did buy online reported price savings on websites such as
Taobao.com and
ihaveu.com. Offi cial man- ufacturer’s websites only derived 4 per cent of online purchases. McKinsey advises “tai- loring e-commerce operations to be ready if and when the channel takes off… through password-protected websites for select groups of registered customers” in order to confront fears of counterfeiting and pay- ment security. Implementing these strategies is unlikely
to be cheap or easy, but essential to keep-up with the ever-changing sophistication of the largest luxury consuming market globally.
86 Read Spa Business online
spabusiness.com / digital
LUXURY 2.0 Interestingly, a May 2013 study by global business consulting fi rm Bain & Company confi rms many of the McKinsey fi ndings. Luxury Goods Worldwide Market Study, Spring 2013 Update, which analyses the mar- ket and fi nancial performance of more than 230 of the world’s leading luxury goods com- panies, reports that the key for winning in the luxury market over the next 10-15 years is “to get ready for Luxury 2.0, where suc- cess will be defi ned by a relentless focus on three luxury goods management principles”. Those principles are:
1. Superior customer service; 2. Flawless retail management; and 3. People excellence
“We’re entering a new phase in the evolution of the luxury market”, says Claudia D’Arpizio, a Bain partner in Milan and lead author of the study. “More markets, more segments, and more diversity of tastes all combine to cre- ate more variables to solve when pursuing the right strategy for growth.” ●
Leonor Stanton is an independent hospitality and spa consultant. Email:
lstanton@spabusiness.com
Spa Business 3 2013 ©Cybertrek 2013
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