By: Paul Luke
September 13, 2015
Upscale merchants are going to war to push Metro Vancouver deeper into the lap of luxury.
When Nordstrom’s flagship outlet in downtown Vancouver opens its doors this Friday, it will intensify a battle of the bling between high-end department stores keen to tap the high-income spending power pulsing across the region.
The region’s surging shopping wealth has been fuelled by growth in affluent tourists, deep-pocketed immigrants from Asia and “aspirational consumers” who selectively splurge on luxury goods. The global luxury goods market will expand two to four per cent this year, according to U.S. consulting firm Bain & Co.
Metro Vancouver has been getting more than its share of that increase, says retail analyst Craig Patterson.
Toronto has more wealthy consumers than Vancouver but Vancouver’s luxury retail merchants often out-perform their Ontario counterparts. One Vancouver luxury boutique insider told Patterson that his Vancouver store routinely out-sells the same brand’s larger Toronto location.
“That holds true for a lot of luxury brands in Vancouver,” says Patterson, editor-in-chief of online publication Retail Insider.
“It is a fact of retail that Vancouver punches far above its weight. The Vancouver retail luxury pie will grow in both the number of shoppers as well as stores.”
A desire for retail luxury is about more than just an appetite for Saint Laurent Paris jeans that cost $1,070 at Nordstrom, observers say. Retail analyst David Ian Gray, founder of DIG360 Consulting, says the world of retail has been polarizing into a desire for “utility or delight.”
Utility means cheap prices and easy shopping at dollar stores or online retail sites.
At the “delightful” end of the spectrum is careful service in an attractive retail environment, he says. Gray’s argument is supported by findings from research firm Luxury Institute, which reported that 47 per cent of luxury consumers say customer services defines an upscale brand.
Few affluent shoppers do online research before going out to make on-the-spot purchases, according to the institute. But they also want informed guidance from staff before deciding to buy.
One of Nordstrom’s strengths is the money it invests in ensuring that customers of all incomes are well cared for, Gray says.
“All of the processes Nordstrom has built converge on creating the ability for their people to offer great service,” he says. “Their product knowledge is outstanding.”
Battle-hardened retailers in the U.S. and Europe are used to scrapping for upscale consumers but the intensity of the retail fight will be new to Vancouver, Gray says.
Nordstrom co-president Erik Nordstrom says Nordstrom’s product range will overlap with those of Hudson’s Bay and Holt Renfrew. But Nordstrom’s range of prices is greater than any of its competitors, according to Nordstrom.
Jolt Jeans at Nordstrom cost a modest $58. Watches start at $26 and range up to $5,000 for a Montblanc time piece.
The Vancouver store that bears his family name should by no means be called a luxury retailer, Nordstrom insists.
“Luxury implies exclusivity,” Nordstrom says. “We want to be an inclusive store.”
Nordstrom’s arrival in Vancouver has prompted rivals Holt Renfrew and Hudson’s Bay to expand their stores, renovate and introduce new lines of merchandise, experts say.
Hudson’s Bay already offers Nordstrom-like service in its luxury womenswear department “The Room,” which is located on the second floor of its downtown store, Patterson says. But there’s room for improvement in the store as a whole, he says.
“If Hudson’s Bay wants to keep up with Nordstrom and an expanded Holt Renfrew, it will need to hire more staff and ensure they are motivated enough to provide customer service comparable to the competition,” Patterson says.
Despite local consumers’ robust appetite for luxury, the number of glitz merchants washing into Metro may bring too many high-end stores, making the retail dogfight even more ferocious, observers say.
“We will be a little over-supplied and that means people will be slugging it out,” Gray says.
“There are only so many dollars to go around. Nordstrom, by definition, will have to take from the others. It’s not like there’s unmet demand with money sitting there waiting to be spent.”
But Nordstrom isn’t the only new luxury kid on the block. Several high-end brands opened their doors in July at the McArthurGlen designer outlet centre in Richmond.
Hudson’s Bay-owned luxury merchant Saks is expected to land in Vancouver in the near future — and Saks will compete nose to nose with Holt Renfrew, analysts say.
Not to be overlooked is the swelling high-end retail parade centred on Vancouver’s Alberni Street — what Patterson calls “the luxury zone.” Among the brands Patterson says are coming to the luxury zone over the next few months are Brunello Cucinelli, Moncler, Versace, Stefano Ricci, Prada, Jaeger-LeCoultre, Lao Feng Xiang and Strellson.
“It’s not just the department stores. It’s all the boutiques, the chains, the global luxury brands with their own stores — you’ve got to throw it all into mix,” says Gray of the luxury retail onslaught.
“There is a sense that Vancouver is a location where you want to have your luxury brand, whether or not it’s a rational economic decision. You don’t want to be seen as the one who has been left behind. Vancouver has become a focal point of luxury.”
And in the case of luxuries, retailers don’t need to sell many of their highest end products to have a good year, Gray says.
Darren Dahl, a marketing professor at University of B.C., says department stores and boutiques can’t afford to rely just on purely affluent shoppers.
They also need aspirational consumers, the mid-tier or mainstream shoppers who sacrifice and scrimp so they can enjoy the perceived status of owning a certain luxury good.
These opulence aspirants, however, may not immediately know how much luxury they can afford — and that’s where good service comes in. “There is a luxury pyramid and a store will give you an opportunity to figure out where you fit,” he says.
The democratizing of retail means these occasional luxury buyers may shop in Holt Renfrew one day and Wal-Mart or Costco the next, Dahl says.
There is another a group of affluent B.C. residents who will never set foot in a Nordstrom or a Holt Renfrew. These are the folks who prefer quiet wealth, rejecting the notion of flaunted affluence, Dahl says.
Unlike Target, whose Canadian venture burned out when it opened too many stores too quickly, Nordstrom is carefully opening one store at a time in Canada. But it won’t be a slam dunk for Nordstrom, analysts say.
If Nordstrom disappoints or is unable to create manageable expectations, “the buzz” among consumers could quickly turn against it, Gray says.
Even in bling-hungry Vancouver, luxury will not guarantee success, whether it’s a department store or a boutique.
“Vancouver has a history of luxury brand openings and closures, though these stores were typically franchised,” Patterson says.
“I’m referring to Nina Ricci, Istante, Versus, Furla, Goldpfeil, Valentino Boutique, Celine, Alfred Dunhill, Hugo Boss Woman and a few others which have opened and closed in downtown Vancouver over the years.
“It will be interesting to see if incoming brands survive.”
Luxury department stores and boutiques can be dangerously attractive places for people who can’t afford them.
“There will be people who really should not be in there and they know they should not be there,” says Scott Hannah, CEO of the non-profit Credit Counselling Society.
“They should not be allocating funds for that purpose and they know it. Yet they’ll still make a purchase and some will worry afterwards about how they’re going to make ends meet.”
High-end stores are good at appealing to “those who are up and coming in their own minds, especially young professionals,” Hannah says.
Over the years, the counselling society has helped many people in debt who have maintained a lifestyle beyond their means because they acquire things to look successful, Hannah says.
“We have difficulty saying, ‘Look, I’m not prepared to go into debt to look a certain way and impress people.’”
Millennials, the generation born between the early 1980s and the early 2000s, often think of short-term wants rather than long-term needs, he says.
“They have a perspective that ‘I’ll never own a home but, darn it, I’m going to look nice,’” Hannah says.
Hannah worries that some of those who flock to Nordstrom when it opens won’t find the discipline to keep their credit cards in their wallet. People who go with friends who buy high-end items may feel pressured to do so themselves, he says.