As the high street continues to shrink in the face of extraordinary challenges, the place of the store within luxury retail is still very much cemented. Aspirational brand lifestyles prized by an affluent customer base tell us that luxury brands and their Bond Street stores are going nowhere when the pandemic finally ends. Yet, alongside the rest of the retail industry (grocery being the obvious omission), luxury too has seen revenue losses over the past 12 months and is experiencing a pressing need to shift surplus stock.
Historically, luxury shopping was viewed as being unaffordable for most people, and prior to the internet the second-hand or discount market was pretty much non-existent. The advent of online shopping opened up new opportunities for luxury retailers, and we are now witnessing how the perception of luxury, and specifically discounted luxury, has changed radically in recent times as fashion companies seek ways to clear excess inventory in brand-enhancing ways that create a new generation of brand devotees.
I recently participated in a webinar with the team at Internet Retailing to discuss its RetailX Sector Analyst Report on Luxury 2021and was interested to discover its findings reflected my own experience in the luxury clearance space. Luxury brands are finally stepping out of the store environment to find alternative and creative ways to drive growth that will serve them well across their entire operations, and this includes finding smarter ways to sell last season’s merchandise.
So, why is ‘discount’ no longer a dirty word in luxury and how can brands best leverage surplus stock in these new market conditions?
In an ideal world, retailers would never need to worry about clearing excess inventory. Of course, that is never going to happen, and with the pandemic, stock clearance has taken on a new urgency. For luxury brands and retailers, selling last season’s stock can be particularly troublesome. Luxury’s entire business model relies on communicating values around aspiration, so selling discount product is the antithesis.
Traditionally, clearance routes have been viewed solely in terms of cash recovery. Although off-price luxury has done reasonably well over the past few years in everyday online marketplaces and with multi-brand retailers on the high street, selling stock this way can be corrosive as brands lose all control over how their products are presented.
A better approach is to be discerning when selling discount stock - see the platform as an extension of your brand’s ecosystem and lavish the same amount of love on the customer as if they had walked into one of your stores. To do this, a brand needs to control how its image is presented, from stock selection and prices to photography and copy, plus have appropriate product and brand adjacencies. This way, the customer feels they are shopping with, say, Louis Vuitton or Dolce & Gabbana, in the way they would on their websites or in one of their stores.
The foremost question from luxury companies I speak with is “how do we create new customers and introduce them to full-price merchandise?”. New customers are the lifeblood of any brand, and clearance can be a powerful tool to create gateway customers - those who may already be familiar with the company but do not yet have a relationship with them.
By using clearance strategically, brands can introduce these gateway customers to their products in an environment they feel comfortable in and then nurture the relationship. By following up with relevant promotions and exclusive invitations to VIP experiences, brands can bring them into the ‘family’ by showing them that luxury is not just product ownership but a complete lifestyle they can be part of.
A distinct audience is emerging as a result of the pandemic. As surplus stock has come onto the off-price market, there has been an increase in popularity of ‘affordable luxury’ - where someone might buy a one-off piece, such as a last-season Chanel handbag. We have seen this trend grow massively over the past year, especially among younger customers opting to make select purchases. Although this has been in part because people are choosing to spend less on clothing during lockdown, the indicators are that this trend is likely to continue.
According to our internal customer surveys, buying a discounted luxury product is a critical touchpoint. People are attracted to buying discounted luxury brands initially because the price point is lower, then gain the confidence to get closer to the brand and buy into the experience. Going into a physical luxury store to buy a discounted product is something many wouldn’t choose as their first experience with a brand.
Post-pandemic, we are likely to see a ‘spending boom’ among consumers wanting to treat themselves, and the retail industry needs to be prepared for an uptick in luxury shopping. When luxury brands start seeing clearance as an intrinsic part of their overall operations, they will be well positioned for the challenges of the next 12 months and beyond.
Chris Griffin, CEO at Secret Sales