BY PHILIPPE JOURDAN, CEO PROMISE CONSULTING, ASSOCIATE PROFESSOR, IAE GUSTAVE EIFFEL, UNIVERSITY EAST PARIS
The period for summer sales is over.
That’s the occasion for merchants to potentially compensate the disappointing first part of the year. Luxury ready-to-wear manufacturers also consider adopting that demarche. Still, at first, sales and luxury don’t look compatible. Besides the potential negative impact of systematic sold off prices, luxury brands are subject to several typical issues. Let’s select three of these to keep it simple.
Firstly, sales are meant to effuse products at the end of a season for a certain period.
The aim is to effuse in order to facilitate the start of the new collection and thus constantly renew trends in ready-to-wear. Marketing horizon is used to distinguish three cycles in accordance with their duration:
1: Trend is based on short-term and aims – through a muse or an event – to engender attraction for a haircut, a design, a look, a specific color for ready-to-wear items.
2: Fashion is based on longer cycles that are commended by the rhythm of fashion parades / collections.
3: Style (very important for Coco Chanel) is timeless, continuously revisited but timeless as independent from fashion/trends.
A real luxury brand is naturally attached to style or even fashion, but always refuses to follow ephemeral trends. Sales should logically avoid it. At the same time, luxury ready-to-wear consists in renewing collections and wardrobes… but above all, shouldn’t a luxury ready-to-wear item be timeless? Thus, we should logically think that a timeless clothes, i.e. the reflect of a style, shouldn’t be subject to sales. Hence for handbags, items like Kelly or Birkin by Hermès is not supposed to be sold off… especially considering the fact that its (more) expensive price is justified by the brand’s heritage and history. Some brands understand this and systematically refuse sales for that precise reason.
Secondly, sales lead to the threat of price control on the luxury worldwide market.
For several years, luxury brands try to control their selling prices by selling each product at the same price everywhere in the world. A real difficulty if we take into account the different exchange rates and duties that may justify consequent gaps on prices. Such gaps can hardly be justified when clients mostly consists in men or women who are used to travel and visit the same brands’ boutiques – even abroad. Today, that situation is better handled vs. the recent time when Japanese tourists were rushing in Louis Vuitton’s French boutiques to buy many handbags before redistributing these once back in Japan! Now, sales may not be compatible with harmonization efforts by recreating that price gap during limited but unavoidable periods. American specialists in ready-to-wear for instance propose discounts that can equal 50 or 60% while in Europe, private sales for last year’s collection don’t exceed -30%. That literally leads to real speculative bubbles: sales are expected somewhere in the world with the possibility to discreetly pre-reserve items that are displayed on fashion parades by privileged clients. Such gaps on prices wouldn’t matter if flows were marginal. That’s not always the case and many items are then available on EBay, which confirms that purchase is speculation.
Thirdly, the evolution of the profile of luxury brands’ clients leads to questions concerning the interest of sales.
Main department stores in Paris illustrate the deep evolution of main brands’ clients. The weight of touristic/temporary clients has significantly progressed to the detriment of national clients. For some part of the day, boutiques are mostly filled with tourists including a strong proportion of Asian visitors. Tour operators have understood the opportunity for themselves: nowadays, their catalogues and websites propose a selection of towns and dates in accordance with sales periods! That demarche is not likely to be benefic for luxury brands: on short-term, they may improve their turnover but on a longer term, their image may be eroded and may lose their historical national clients’ loyalty. Besides, sold off luxury clothes for tourists constitute a loss in opportunities: some would buy the items without sales, whether because they can’t find it in their country or because they just want it (after all, shopping is also a pleasure for touristic journeys).
Let’s end with that quote from François Gaston de Lévis: « past is sold, present escapes you, think about the future”. All marketers should be inspired.