I have
always been fascinated by retail and its ability to make or break a product. I
had the fortune of spending a fair deal of time planning and executing retail
concepts at both Psion and while running the Windows Mobile activities, and witnessed some good successes, namely
around Psion Series 3 and Series 5 and with Pocket PC and Smartphone. I also learned that the
old saying that “retail is detail” holds true. All parameters have to work out,
the Four P’s have to be pumping in unison and the supply chain has to be
smooth, both the downstream and reverse supply chain. When backed up by strong demand generation, retail can work wonders for a brand, as we saw with Pocket PC, where we went above 50% global market share within four years, starting from a market position where our biggest competitor had 89% market share.
A large portion of the luxury industry is in the middle of a major shift from being a distribution business. Traditionally most goods were mainly being sold through distributors or to retailers. Now the shift is towards a model where the brand owners also own, or tightly franchise, their own monobrand stores. The brands can, through owning the total retail concept, control the experience tightly. The retail store is the most immersive branding opportunity for the brand owner. Only here can they own both context and content, and immerse the consumer in the brand. Furthermore, shopping is increasingly becoming Experience Space filler. Consequently, full end-to-end ownership of retail is crucial.
In some
cases, luxury goods manufacturers chose to own their own retail concept to
bring a number of brands through them. In the licensing space the best example
is probably Italian eyewear manufacturer Luxottica, who under license
manufacture eyewear under brands like Bulgari, Chanel, D&G, DKNY, Miu Miu,
Moschino, Prada and Versace. Luxottica owns Lenscrafters, Sunglass Hut and a
number of other retail outlets. Though that they control choice, selection,
margin and end-to-end experience for eyewear customers. In addition, Luxottica
is good at working with the brand owners’ old retail operations. Lately, Luxottica has sought to capitalize on the growing luxury market by creating a high-end spin-off called Lenscrafters Optique, high-end merchandized stores with more exclusive SKUs, more personal service and in more premium locations than Lenscrafters can normally be found.
So retail is strong, but where is online going? Well, judging on the current roadmap for the fashion companies I spoke to at the FT Business of Luxury Summit, most of them are simply putting their products up on the web, without the same care for merchandizing and experience management as that applied to retail. Maybe it is the case of “one thing at a time” meaning "they will get to it" or maybe we will see the emergence of micro segmented fashion brands coming up from below exploiting the Internet to compete effectively against the high cost incumbent luxury players.
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