Store openings of big luxury brands are typically glitzy events reserved for celebrities and press. When Valentino, the Italian maker of cocktail dresses, A-line skirts and $445 espadrilles, opens its next boutique in New York, the company plans to invite regular people to rub elbows with the stars -- if they’re willing to pay for the experience.
Like many of its peers, Valentino has discovered that $2,195 handbags and to-die-for pumps are no longer enough to keep sales growing. Instead, these companies are starting to offer experiences alongside their wares, expecting that customers who have visited a workshop or met the designer will develop stronger ties to the brand and buy more goods.
“Everything has become more experiential,” said Dante D’Angelo, brand and consumer development director at Valentino, which Qatar’s Mayhoola for Investments Spc bought last year in a deal valuing the couture house at about 700 million euros ($936 million). “It’s a new way of providing exclusivity, making customers feel important, unique.”
Often what the brands offer is early access to products that non-VIPs wouldn’t otherwise be able to get. And these are sometimes available only in specific stores for a limited time, the thinking being that customers will regard a $2,110 Paul Smith trench coat from the designer’s store on Greene Street in New York more fondly than the same item bought near home.
Closely held Lanvin has made at least five black python handbags priced at 2,525 pounds ($4,000) available at its store on Mount Street in London before Feb. 28. Only 14 were produced in total. At the Macau store of Loewe, a 167-year-old leather-goods maker owned by LVMH Moet Hennessy Louis Vuitton SA, its Ana Hobo handbag will be available until Jan. 31, one month before it’s distributed worldwide.
Gucci, the maker of $8,200 mink fur jackets, is taking the idea a step further, inviting its biggest spenders to fashion shows, equestrian events and the Cannes Film Festival. And the company, owned by PPR SA, has started offering tours of its Florence workshop to a broader list of customers.
The initiatives “aim to engage the client in the values at the core of Gucci’s DNA,” said Chief Executive Officer Patrizio di Marco. “Getting our clients to understand how much history, tradition, quality and passion there is behind our work means winning their loyalty.”
After raising prices and using more expensive materials in their products to nudge their image upscale, luxury good makers are seeing sales soften. The $283 billion personal luxury goods market faces the weakest growth this year since the global financial crisis, according to Bain & Co.
Coach Inc. (COH:US) had a challenging holiday season amid economic pressure on consumers and increased competition, the largest U.S. luxury handbag maker said this week. The shares fell 16 percent on Jan. 23, knocking $2.8 billion off its market capitalization.
Cie. Financiere Richemont SA (CFR), which owns Cartier, Alfred Dunhill and 17 other brands, dropped 5.6 percent on Jan. 21 after reporting slowing jewelry sales and saying Asian revenue stopped growing in the last three months of 2012. Burberry Group Plc (BRBY) said fewer clients are visiting stores, and suitmaker Ermenegildo Zegna SpA said Chinese and Brazilians are becoming harder to please.
Shoppers these days “expect higher service,” said Luca Solca, head of luxury-goods research at Exane BNP Paribas. “This idea of more personalized services is certainly something that is going to become more and more common.”
Valentino, Loewe and a dozen other brands are working with a company called Luxup to give shoppers the VIP treatment. Introduced in September, the startup pitches itself as an online club for travelers with a love of luxury and fashion, offering tickets to fashion shows, exclusive collections, or the chance to get sought-after products before they hit stores.
Luxup “members” -- signing up is free -- select luxury products and affiliated events online that they pay for up front and redeem at stores. Subscribers who spend HK$50,000 ($6,450) at Valentino, Loewe or Dunhill’s stores in Hong Kong get a Luxup personal stylist for three hours and a photographer to document the shopping spree. Those who buy an 8,000-pound voucher for purchases at Roland Mouret’s store on Carlos Place in London will get a pair of front-row tickets to the brand’s fall-winter fashion show in Paris, including backstage access and a meeting with the designer.
“Offering the latest must-have isn’t the only basis on which brands can compete,” said Luxup co-founder James Corsellis, who is also an executive director of London asset management firm Marwyn Management Partners Plc. (MMP) “If you can engage with your customer and give him an experience that is exceptional, that gives you another angle.”
In seeking to build closer ties with consumers, luxury goods makers are extending to a wider audience perks that are normally reserved for the very wealthy. They’re also taking a leaf out of the playbook of tony department stores. Retailers such as New York-based Saks Inc. (SKS:US) and Le Printemps in Paris host events and offer concierge services for their best customers.
The push to offer experiences comes as luxury brands such as Gucci and LVMH’s Louis Vuitton, the world’s biggest, grapple with their own success. Selling thousands of logoed goods has generated billions in annual sales for large brands, yet it has also challenged their exclusivity, according to Boston Consulting Group senior partner Jean-Marc Bellaiche.
It’s also a response to changing consumer expectations of luxury. People in their 20s increasingly define themselves by what they’ve done rather than what they own, said Bellaiche, who leads the firm’s luxury practice. And affluent Europeans, North Americans and Japanese in their 60s, their closets crammed with luxury goods, are seeking new ways to treat themselves, he said.
That means PPR, LVMH and other luxury goods companies are sparring with resort and spa operators for consumer dollars as well as each other. Spending on exotic holidays, spas and other forms of personal pampering is rising about 9 percent annually, versus 6 percent for sales of luxury goods, Bellaiche estimates.
“In an era of over-consumption, people are realizing that there is more than just buying products,” Bellaiche said. “Buying experiences provides more pleasure and satisfaction.”
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