Luxury Retail Bounces Back
Luxury Retail Earnings to Double
2016 wasn’t a terribly strong year for global luxury retail growth at just 4% overall, but 2017 is already shaping up to nearly double that growth to 7% by the end of the year. This is definitely welcome news as the greater retail industry continues to grapple with waves of changes in consumer behavior and the encroachment of e-commerce.
It also signals that the luxury retail niche isn’t likely to experience a decline or full slump, which had been cautiously predicted by business trend watchers after the 2016 results were announced. A big jump in luxury retail’s growth rate happened in 2015, fed by the influx of new Chinese buyers to the luxury market from 2013-2015. While we’re not likely to see another jump of that growth magnitude this year, experts are projecting that growth may reach those levels again by the year 2020.
Luxury E-Commerce & Omnichannel: Next Few Years are Crucial
Though the growth numbers are going back up globally, that’s no reason for individual luxury retail brands to slack—the new online and in-store shopping trends are here to stay, and finding a way to successfully navigate that within a customer niche will be critical to the success of these brands.
Even though the year to date has been strong for luxury retailers, there have been moments that paint a more complex picture for the industry. As the traditional American mall and the department stores that held them up have begun to falter, luxury brands have responded by pulling their merchandise out of department stores, eliminating a sales channel that once was booming. Other brands are reassessing their share of the brick-and-mortar market and closing stores in oversaturated or underperforming areas. Michael Kors, for example, will be closing 125 stores after poor performance in its last fiscal quarter, where same-store sales had declined 14% year-over-year.
And yet, few luxury retailers have found a way to reach their prestige customer base with a seamless online / offline, or “omnichannel,” experience. Online options to fill the gap have so far met with mixed success. The Net-a-Porter website does well with its magazine-like format, but Conde Nast shuttered style.com in June, which had been designed to follow in Net-a-Porter footsteps for the very-high-fashion set. Clearly, the one-size-fits-all solution has yet to be found for building online sales alongside brick-and-mortar for luxury retail.
Like luxury items themselves, the solution just may need to be one-of-a-kind.
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