Wednesday, May 15, 2013

LUXURY EQUALS VALUE: THE CHANGING EQUATION FOR LUXE SHOPPERS

European luxury shoppers are shifting to a value mindset, and global megabrands are getting left behind. Sales at top European luxury brands are down, as chic Parisians and Milanese can no longer afford to shop with them. At the same time, the much-beloved free-spending international shoppers (especially those from China, Russia and the Middle East) are no longer filling brands’ glittering flagships.

Over half of the 23 brands (such as Gucci, Herm├Ęs and Dior) recently surveyed by Reuters reported lower footfall from tourists (particularly Asian shoppers) in their European flagships. These stores have grown to rely on wealthy luxury travelers to stay afloat, but now the well-shod shopper is going elsewhere. Outlet stores are increasingly enticing those who love a label as well as those who love a deal.

After all, just because consumers have less cash to flash, it doesn’t mean they’re willing to give up on the finer things. Luxe-for-less offers a new opportunity for brands: According to industry analysts FSP Ltd., revenue from Europe’s outlet malls has grown 60% since 2007, to €10.8 billion in 2012. Meanwhile, major European luxe outlet operator Value Retail reports that spend per visit rose 9.4% in 2012. New luxe outlet malls are opening in Russia, while a rising number of designer brands are opening their own discount stores to get in on the act.

The convergence of value-focused spending and a sense of democratic luxury is creating a demanding new luxury consumer. Across the board, consumers are less willing or able to spend as freely as in the past, and they’re applying a complex value equation to all purchases, whether they live in a penthouse or the projects. The luxury establishment may feel unsettled about the rise of the value-luxe shopper, but like consumers themselves, it will soon learn that offering high-value, high-quality goods is always a win-win.

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