High-end retailers open discount stores and outlets to capture more of the market
By Arlene Satchell, Sun Sentinel, July 19, 2010
On this trip, Guzzi bought a $100 Lily dress for $46, while Picarello snagged a $300 pair of Gucci glasses for $149.
Luxury sales matter because increased spending at these retail stores are a boost to the local economy and job creation. South Florida’s concentration of wealth means it supports more luxury retail than many other parts of the country.
A recent Gallup poll found self-reported spending by upper-income Americans rose roughly 16 percent to an average of $126 a day for the week ending June 20, up from $109 a day when surveyed the same week a year earlier.
By contrast, middle- and lower-income Americans spent an average of $59 a day that week, which was unchanged from last year, the survey noted.
At Nordstrom, year-over-year sales were up 14 percent in the five weeks ending July 3, in stores that had been open a year or more.
“Overall, we’re encouraged,” said Nordstrom spokesman Colin Johnson. “But we’re mindful of the fact that customers remain cautious and are mindful of how and where they shop.”
While some luxury retailers have fared better this year, experts say growth is tepid given last year’s dismal sales.
In the first quarter of 2009, luxury retailers Saks, Nordstrom and others had double-digit monthly sales declines – as high as 31 percent for some.
“The real test will be if luxury [spending] can show growth as we enter into the early fall period,” said Marshal Cohen, chief industry analyst with the NDP Group, a market research firm in New York.
A significant rebound in the segment is unlikely until the national unemployment rate falls to 6 percent or 7 percent, said Milton Pedraza, chief executive of the Luxury Institute in New York. Unemployment was 9.5 percent in June. That’s when so-called “aspirationals” – middle-class shoppers with an affinity for luxury goods – are likely to return.
To combat the recession’s lingering effects and attract affluent buyers who have turned frugal, some retailers have had to reduce prices.
“There’s a lot more affordability in the luxury sector today,” Pedraza said. A pair of shoes or handbag that cost $1,200 two years ago is now selling for $800 or $900, he said.
Luxury retailers have reduced the number of apparel brands they carry to the most popular, newest and most innovative, said Cynthia Cohen, president of Miami-based Strategic Mindshare, a national retail consulting firm.
“Anything that’s not selling, they’re getting rid of,” she said.
Another result of luxury retailers’ adapting to the marketplace is more off-price and clearance outlet stores.
Nordstrom, for example is opening more Nordstrom Rack stores, which sells its goods at a 50 percent to 60 percent discount.
Bloomingdale’s also plans four outlet stores this year, signaling its foray into the luxury discount market. Two of the outlet stores will be in South Florida.
Experts say it’s an effort to capture business from stores like Macy’s and Dillard’s.
“It’s an attempt to go down market, without saying so,” Pedraza said.