There’s a common belief that luxury retailers can weather rough economic storms with no pain. After all, their core clientele does not live paycheque to paycheque.
But talk to people running high-end optical stores across Canada and it is clear things are not so simple. “We have to work harder to ensure we are delivering the best product and real service to our customers,” says Steven Wilson, president of Vancouver-based Eyes on Optical. “Consumers are more careful how they spend.” That includes people in upper income brackets. “The rich are spending less and being more discerning with their purchases.”
Feeling the crunch
Wilson, a veteran luxury retailer who spent 17 years with high-end clothier Aquascutum before shifting to eyewear, says, “Our business has always tended to cycle with the stock market.” It’s not surprising then that his flagship store, Eyes on Burrard, where the majority of frames sell in the range of $400–$1,950, saw sales slow after the 2008 credit crisis sent stocks tumbling.
This was a familiar story in Canadian luxury retailing during the slowdown. In a Canadian Business article from April 2009, Larry Rosen, chairman and CEO of upscale men’s clothier Harry Rosen, was feeling the pain of deflated sales: “I sort of keep a brave face at work,” he said, “but then I’ll go home and pound the walls.”
Globally, the pain has been shared by many luxury goods companies. LVMH, one of the largest luxury goods conglomerates in the world and owners of the Louis Vuitton brand, saw profits in their watches and jewellery group drop by 47 percent in 2009. Richemont, a global luxury powerhouse that owns a huge portfolio of upscale brands, suffered badly too: heavy discounting within their jewellery maison, which includes Cartier, saw sales drop 14 percent between April and September.
It became painfully clear to everyone that even the wealthy were cutting back.
Beginning the recovery
In the wake of this turmoil, how will luxury eyewear, something that fits somewhere between being a fashion accessory and a necessary personal health item, fare going forward?
Recent numbers show that wealthy consumers around the world are already back. Richemont showed year-end sales increases of 2 percent across all brands, and Tiffany & Co. saw holiday sales jump 17 percent in November and December.
There is optimism in Canada too. Despite fears of a possible double-dip recession, stock markets are up over 50 percent from their lows, there have been big job gains since November and, in the last quarter of 2009, the GDP expanded by an annualized 5 percent. Canadians are feeding off the good numbers, with consumer confidence on the rise. From his west-coast store, Wilson lends credence to the statistics: “We have seen a return of existing customers.”
Thousands of kilometres to the east, another luxury eyewear retailer confirms the rebound. Thomas Ellis, general manager of Karir Eyewear’s flagship Toronto store, says things did slow down in early 2009, but now “sales have come back up to where they should be.”
Things are looking good in the short-term. “There are opportunities to grow for those left standing,” says Maureen Atkinson, senior partner at Toronto-based retail consultancy J.C. Williams Group. Some of those opportunities are among customers who stretch themselves to buy exclusive brands. Ellis says that Karir’s Yorkdale Mall location in Toronto caters to aspirational shoppers more than its Bay Street-area store that serves financiers and their big bonuses. Their Yorkdale store carries more product from heavily marketed designer brands like Dolce & Gabbana, Prada and Chanel—brands that unabashedly sell glam and are available at lower price points than ultra-luxury names like Cartier.
Aspirational shoppers
In the fashion world, retailers are fretting about the aspirational shoppers because of a lingering economic environment of tight credit and high unemployment. But high-end opticians should be reaching out to them now, especially “if you want the sale ahead of your competition,” says Wilson.
Reaching out to them is all about grabbing their attention and “yelling from the rooftops,” says Atkinson. And in this segment, high-end eyewear has an advantage over high-end clothing.
“Sometimes the aspirational shopper will see some frames, and because the eyeglasses are important to both functionality and image, they will get them no matter their income,” says Ellis. It’s easier to justify shelling out for expensive eyeglasses than for a pair of shoes.
This is a selling point that needs to be stressed by all opticians, says Amin Mamdani, a partner at Josephson Opticians and owner of Squint Eyewear, a boutique store in Oakville, Ont. He says it is about getting clients to understand the value of a pair of glasses on a face. “It’s not like a suit that you may wear once a month. Eyeglasses are the first things on in the morning and the last things off at night.” Luxury eyewear is about comfort and the ability of the product to last, he adds.
Selling to the wealthy
The value of top quality is something wealthy clients already understand. So targeting them is done differently altogether. There is no “yelling from the rooftops.” They demand subtlety, says Atkinson. Winning over the truly wealthy means “becoming important to them,” and thus involves more than “a one-off strategy.” Atkinson suggests becoming involved in things important to them, such as charity events. In the U.S., Sama Eyewear’s Sam Vance Foundation is a major player in fighting drug addiction among young people and has attracted support from Hollywood heavyweights.
Still, when it comes to selling luxury, the foundation of a strong relationship is service. This starts the moment a customer walks in the door and continues long after she leaves, says Ellis, who ensures everyone knows they can come back if they have problems.
That level of service isn't groundbreaking. But undiluted commitment is necessary in high-end retailing all the time. Moreover, it is top-notch service that Ellis believes drives sales growth. “Most of our new customers come from word of mouth.”
Interestingly, from his downtown Vancouver store, Steven Wilson says excellent service and positive word-of-mouth provides challenges too. “We are used as a showroom by cheap retailers. Customers have either been sent to us for our assistance to select the style that best suits their needs, or they are shopping around for the ‘best price.’ Our challenge is to convince them that we can support them better than the competition. Essentially we will do whatever it takes to retain good customers who do not deliberately try to abuse our efforts.”
Those good, quality-conscious customers are mostly urban professionals and fashion-forward consumers. Sama Eyewear has them in mind when designing its huge range of sunglasses and prescription eyeglass frames. “They understand luxury and appreciate it,” says Farnaz Meybodi, part of the company’s marketing team. In times like these, they may buy less, but “they never settle for inferior quality.” They share another trait too, says Meybodi: “They don’t want what everyone else has.”
A luxury item is a medium of self-expression, a way to project originality. Upscale retailers must offer products that are beautiful, rare, and innovative. In tough times, though, the frames shouldn’t be too bizarre, either. The luxury buyer wants to ensure their purchase has the legs to last two, maybe three years. Classic styles and colours are selling well these days.
Strategically tighten your offering
“We simplified inventory costs by investing more space with our strongest brands and attempted to minimise any product duplication between brands.” His team carefully monitors inventory turnover and works closely with suppliers to ensure fresh product. “We have split up our selection into four types: colour, techno, retro and luxury.”
Adjusting the product lineup doesn’t mean making drastic changes. It’s about fine-tuning, and understanding the customer’s psychology. “Canadians are self-conscious,” says Mamdani. It’s not that people don’t have the money, he explains. They are just hesitant to put new diamond-encrusted glasses on their face during hard times. Conspicuous consumption became distasteful when the economy in the States tanked, in part because many families were hit hard. According to Mamdani, small inventory tweaks may entail bringing in some slightly lower-priced inventory and reducing (but never eliminating) the number of ultra-luxury pieces in stock—like those solid gold, buffalo horn and stone-studded frames by Gold and Wood that can go north of $10,000. This upper segment is never the core of sales anyway. At his Squint store, Mamdani says 95 percent of sales come from items under $1,000.
The key, he says, is to be compassionate to the client’s predicament while not allowing your business to change course dramatically. Just as Cartier and Gold and Wood have spent decades establishing their brand identities, high-end opticians need to retain their focus and provide customers what they expect. “You need longevity.”
There is a feeling that those in the segment are going to need to work even harder from now on. Mamdani, a 20-year veteran in the industry, thinks we are in for a volatile recovery. “It’s not going to be straight up.” Consultancy Bain & Co. has projected only 1 percent growth in the global luxury goods market for 2010.
Back in Vancouver, Wilson feels good about his position in the market. He thinks the luxury segment has good stability. “The middle market is very competitive and is more sensitive to a soft economy as consumers are worried about job security, the cost of housing and living expenses generally.” He admits the upper bracket is smaller, but says the buying behaviour up there is totally different. “People with taste and a certain lifestyle will neither make dramatic changes nor compromise their living conditions and consumption unless they really have no choice. I am therefore cautiously optimistic about the future, and that includes planning for growth in my business.” •