What Small Businesses Can Learn From The Luxury Market

If you’ve been following business news lately, you might be pleasantly surprised that the stock market reached a post-recession record high yesterday, the highest since October 2007.  Investors who have been “stocking” up on equities will probably see some great rewards from the risky moves they’ve made over the past few years.  Many experts say that the strength of the stock market follows positive corporate earnings and profitability, a strengthening housing market, and the continued perception of the US as the best place to park money compared to global markets.

While the stock market has shown major signs of improvement, the economy still seems to be plugging along at a sluggish pace.  Despite the recent good news, small businesses and large companies are still finding it difficult to navigate the challenging economic environment.  Even the mighty retail giant Wal-Mart has seen its profits decline, thanks to lackluster consumer spending.  A flurry of recent articles indicates that Wal Mart has been struggling to keep sales up and its shelves adequately stocked since the beginning of the year.  Experts link the weakness in consumer spending to various factors, like the expiration of the payroll tax holiday and tax refunds arriving later in February this year than in prior years; hence less disposable income for consumers to shop with.

On the other hand, the luxury market has been pretty resilient during the recession and is still  charging ahead for the most part.  While consumer reports indicate that 2012 was a turning point for many luxury retailers that saw a decline in sales for the first time in many years (such as Burberry, Gucci and Tiffany), other high-end retailers implemented various strategies to maintain and even increase their market share.  Companies like Prada, Hermes and LVMH  focused on ultra-luxury rather than expansion, improved their technology and online presence, entered various emerging marketplaces –and saw sales continue to soar.

Small business owners and entrepreneurs who want to develop and expand their brands would be wise to adapt some of the successful practices of the luxury market.  Simone Esposito is an expert and  consultant who works with luxury and ultra-luxury international companies on branding and business development.  He has worked with companies such as Thomas Pink, Loro Piana and Asprey of London, and has built a reputation as a forward-thinking consultant who anticipates market movements and trends and helps clients develop strategies to take advantage of industry shifts.

Simone Esposito

Simone Esposito

“The time is right for luxury brands to re-engage their customers, making sure to build a long-term loyalty,” urges Simone. “Companies must place the customer experience at the heart of their enterprise.”

Simone also insists that while some companies are doing a good job of adapting to new technologies which helps move sales along, they must continue to reinforce their offline presence as well– and this could ring true as well for small business owners and entrepreneurs. “I think that developing personal relationships with customers is something that all brands should aim for, ” he says. “Many prime brands (I am not only talking luxury here) have invested in upgrading their online presence in recent years forgetting to upgrade their offline, personal relationships. Unfortunately, according to the Luxury Institute, this translates only to 10-15% of luxury customers having a first-name relationship with a sales professional. It has been proven that customers who have a true human relationship with a brand generally buy way more from that brand, and loyalty is a direct and logic consequence.”

Simone insists that luxury companies emphasize customer service, and in today’s challenging economy, all companies would benefit from providing a positive and memorable customer experience. “A luxury brand offers luxury products, of course, but to attract and retain discriminating buyers, it must also offer luxury customer service. In fact, what sets a luxury brand apart from the crowd isn’t only price—it’s also the quality of the overall customer experience.”

Wal-mart and other large companies may find it more cumbersome to increase sales and swiftly take advantage of market upturns, but small companies and entrepreneurs are in a good position to follow the lead of the luxury market, and to innovate and implement smart strategies that can lead to growth.

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55 responses

  1. Always enjoy reading your articles! Is Simone a consultant based in NYC? Does he work with smaller businesses wanting to get into the luxury end of things?

    1. I believe he is a consultant for luxury companies but I will try to put you guys in touch! Thanks Toni!

    2. hello Toni, happy to ‘meet’ you. Would you please ask Lena to give you my private email address and I will be happy to have a chat so we can talk about what you have in mind. Kind Regards, Simone

  2. Adnan Z. Manjal | Reply

    Very insightful article Simine. Always great to learn new stuff about the industry.
    Keep these articles coming.

    1. It would be very interesting to create a CRM program for Athr Gallery in Saudi. PLease let me know what you think as I would like to explore this path with you. Thanks.

  3. YEs, we must balance online presence with good old=fashioned face to face customer service and relationship!

    1. It’s the same concept of going back to the roots. Look at what the big luxury groups like LVMH are doing with their strategic communication…

  4. Camesia Fearon | Reply

    Well said Simone. Please keep these articles coming!

    1. Thank you Camesia, new article coming up on http://www.justluxe.com/, stay tuned…

  5. Simone is the best. Great guy to work with!!!

    1. I appreciate Ken and I do hope the prospect I sent to your team answered the questions related to CRM for the media consulting project you started with Germany last month.

  6. Simone really knows his way around the luxury industry….had a great time working with him.

  7. A very interesting article . The importance of customer relations is a modern definition of luxury in itself , so luxury brands must emphasise both fafe to face and online experience.

    1. It would be a very interesting exercise to further explore the feedback after the launch of your new website Alvise. Your business (high end interiors projects) is certainly based on one-on-one relationship, very interpersonal and direct. But being more present on social media as you are doing now will certainly open new horizons for you. Time will tell.

  8. Simone has been my go-to person for years regarding insight into the luxury consumer’s spending habits, their buying power and how to maintain customer loyalty. I’ve used him as a consultant at every publication I’ve worked with from ID to Surface and now at the Financial Times.

    Simone has also procured significant donations for the non-profit organization I’m involved with, recuse.org a group that targets celebrities and individuals of high net worth in order to provide aid to refugees around the world.

    1. I will never forget working on the FT Summit in Montecarlo 2 years ago. Thank you for giving me that opportunity Karen.

  9. I agree with the idea of building good customer relationships, but for a small business owner who wants to deliver great customer service but doesn’t have a high-end product or service to sell, or just isn’t established yet, what would be the bare-bone essentials for which they should strive? In other words, what service provision is the most important if you can’t deliver everything you’d like?

    1. I’m not sure how Simone would respond to this but I think the most important goal for a small business is to establish and develop a brand that creates a consistent and memorable client experience–whether it’s a face-to-face connection or online or in marketing or all. In this way, products and services can evolve but the brand and message is established and clients can count on to remain the same.

      1. I agree on this and I am also a firm believer in moving forward in a consistent way. A small business can certainly aim to what well established brands do adopting new technologies in social media and online marketing. But as you said, being consistent with their reality and their current image is key.

  10. I think the author’s insight is spot on. I have been known to shop at both WalMart and ultra high luxury clothing stores. At Walmart I want speed, anonymity, and low cost. But at the high end store I want the opposite: personal attention from sales people I know who remember what I’ve purchased in the past and already know my taste, fashion sense, and most importantly, my measurements!! And I purchase way way more goods because of this personal attention.

    1. That is a great point Mr Royall and very true. This is exactly what I meant during my interview for this article. The main difference between mass market and luxury is the experience and how this is interpreted by the consumer. It is indeed a different meaning that the consumer wants to get from the experience.
      Very well said. Thank you.

  11. Had a great experience working with you and collaborating on integrated marketing strategies for a ” luxury brand”, there is always not enough to learn. Keep this articles coming !!!

  12. “Engagement” was once a dirty word among luxury brands – left to relm of CPG brands. Your article rightly points out that the most successful luxury brands are immersing their constituents in what their brand of luxury really means. I hope that more will follow suit.

    1. how about ‘loyalty’? it is interesting as your observation brings up another issue which is what is represented by department stores Loyalty Programs and luxury brands. A never ending conflict…

  13. jkg41@columbia.edu | Reply

    Great article, Its good to hear small business is alive and thriving.

    1. small businesses are having a hard time but the market is re-inventing the meaning of ‘small’. many are aiming at creating something new and original and eventually selling to big groups…big groups are aiming at re-discovering small/old/traditional brands and make them huge….look at LVMH buying Moynat in Paris.

  14. Great piece, and as somebody who is trying to develop herself into a ‘luxury brand’ it’s re-assuring to hear that I am not wasting my time with above and beyond customer care. Thanks for sharing!

  15. Another well written piece! So true that a good customer experience is essential to building positive brand and a subsequent uplift in revenue. I’ve been working in media for over a decade, and SImone is hands down one of my favorite consultants in the luxury sector. HIs advice, experience and forward thinking have helped me capture the targeted luxury audience needed to meet digital acquisition targets – an increasingly difficult task given the current state of the economy.

    1. brands need to come up with new ideas, sometime outside the box, in order to engage with existing customers and create new connections with that slice of customers/new generations that hasn’t been in touch with the brand yet. I am a firm believer of experimenting without being afraid of making mistakes. we live in a very fast system where new techniques become obsolete in no time. thank you Jillian, I appreciate your note.

  16. Very through analysis of the high end luxury market. Having followed the markets on a daily basis, I agree with Simone’s accurate review and his strategy suggestion seems to be a winning one.

    1. thank you Andrea. I believe in financial products this must be extremely relevant too, although under a different prospective.

  17. I definitely agree that along with a strong online presence, small business owners involved in premium and luxury goods really do need to keep relationships going on a personal level. The pleasure of buying happens because of personal relationships and the intimate experience that comes at point of sale – and just one such experience can keep a buyer coming back over and over again, either online or in person. That’s always been my experience.

  18. Online business is the new darling of marketing and it will for sure be a great source of income for luxury brands – in the future. But consumer centric thinking and creating unique experiences based on human relationships are the base of every luxury brand and need to evolve since consumers get more and more sophisticated.
    As head of Global Brand development for la prairie, I am constantly in search of ways to staying ahead of competition and to create that special bonding and experience for our consumers. Simones’s wealth of experience and insights are always a great source of inspiration for me

    1. Absolutely well said Mr Gladel. human relationships, especially for uber luxury brands like La Prairie, are absolutely essential. It is also true that also super traditional/luxury brands need nowadays to be present online and with the latest technology solutions (see: Apps and social media).
      Prioritizing is key in this process.

  19. I found this very interesting, especially since I’m in advertising. What you write about companies not making that personal, offline connection is very true. As a writer, I’m always looking for that nugget of information that can help me reach the consumer and strike a chord. I am convinced that there are new and interesting ways to reach our to consumers and secure the bond. This is a great conversation you’ve started.

    1. of course we are living in a transactional moment where we are all testing, experimenting…time will tell and will filter what will stay. but timings are changed. this is a very fast process and also new technologies need to adapt themselves to fast pace. or they will run the risk to be obsolete in no time.

  20. Luxury companies, including Vanessa Bruno – company I work for – have also improved features of their sites. They are very aware now of the importance of e-commerce, many companies invested heavily in their online sites, aiming at recreating their in-store shopping experience. Catwalk shows, social networking features, product rotations, virtual personal shoppers, and a high level of service are common features

  21. Digital sales are a powerful growth engine for luxury good companies. Although the growth in luxury over the past two decades has been propelled by the expansion of specific regions— first the United States and Japan, then, since the turn of the century, the U.S. and Asia – digital growth is now crucial. Its growth rate is 3 times higher than the total luxury market, with online sales reaching €6.2 billion in 2011.

  22. Simone: While you present the opportunity to further enhance and develop the off-line customer relationships of both luxury and small business, there is a big difference in how each can afford, delivery and maintain these enhanced relationships. The ability to spend time and money on customers will vary dramatically; in addition what the customer requires will also vary significantly. In a needs based customer service model, how do you see those differences manifesting themselves in ways that both can achieve a more satisfied customer?

  23. And there’s ample opportunity to enhance the digital shopping experience. What luxury shoppers miss most about being online, it seems, is the ability to have human interaction and to appreciate the physicality of the product.
    Only in a store can customers seek advice from a real assistant, be sure the item will fit, and know what it really looks like and what it feels like to hold or wear. Companies that can do anything to compensate for these missing experiences online will find themselves at a considerable advantage

  24. “I agree with Simone, although we’ve seen considerable advancement in the last 5 years, there is much more work to be done. Branded goods companies need to accompany their consumers as they cruise effortlessly between blogs, search engines, retailers’ sites, social media, and branded mobile applications. But some are lagging”.

  25. The industry’s growth in the next five years, increasing digital sales, is something that luxury goods companies have to get right. The Altagamma-McKinsey report shows that when they do, they not only improve consumers’ online experience of the brand, but also transform that experience into sales. bingo!”

  26. One of the most intriguing insights to emerge is the speed with which consumers make luxury purchases. More than one-third of people interviewed by a survey I read about said that if they want to make a purchase, they would do so on the same day they conducted an online search. About one-third of these speedy shoppers went to a store to buy the item, while the remainder purchased online.
    In order to meet the needs of these shoppers, online stores must be easy to use, display a wide range of products (wider than many companies have offered to date), and effectively emphasise the value of those products, be it the craftsmanship, lifestyle appeal, or quality.

  27. I work for a luxury brand and exceptional customer service is one of our best selling points. This is a great article, Lena. As a small business, we are always looking for new ways to grow. Simone are you available in NY?… Would love to set up a time to talk.

    1. Thanks Mandy! I agree–just in reading these comments from other people in the luxury brands industry, it’s clear that small business can learn so much from this industry, even if it seems unrelated. At the end of the day, it’s all about creating and maintaining a consistent, memorable client experience. Of course a great product and awesome customer service are key too!

  28. Very insightful overview. Thanks for sharing your strategic vision. I had the pleasure of working with Simone recently and his ideas and suggestions were extremely relevant and helped our client grow client base and strengthen client relationships.

  29. S. Amfitheatrof | Reply

    Luxury applies to all aspects of a company’s business – be it product, service or customer related. I agree with Simone – companies shouldn’t loose sight of their roots and how that defines their business in terms of luxury. Simone and I worked together at Loro Piana and on a number of projects for emerging talents. As the article and his comments eloquently state, a coherent vision and understanding of the economy, in terms of consumer dynamics is essential to sustain and nurture growth. Simone, let me know when we can touch base as I would like to run a couple of projects by you. Tks.

  30. Simone has his pulse on the luxury market. I am very impressed with his knowledge of business development in the luxury sector.

  31. I’ve just come across this article and it certainly has resonance in an increasingly depressed economy where smaller businesses can struggle to achieve growth. Thanks Simone!

  32. “A company’s online abilities are crucial, no matter what the category. Even in a sector that does not lend itself to a particularly high level of online sales, such as design and furniture, the difference between poor and excellent online skills can affect those sales by as much as 10 %, according to our research. In the hotel sector, being online-friendly can boost sales by as much as 30 %.
    For luxury goods manufacturers, the real-life shopping experience has always been considered an essential component of a brand’s equity, so making online connections with consumers can be particularly challenging”

  33. Well-stated, and absolutely true true – it’s all about service. Whilst online service is critical to every industry, luxury brands need to go further and in person.

  34. David sciascia | Reply

    Couldn’t agree more with Simone’s comment regarding the importance of quality customer service, so many brands are so hungry for new customers they forget about looking after the ones they already have. Luxury brands especially can’t afford unhappy customers as in a relatively smaller consumer base, word travels fast.

  35. Dear Simone,
    as usual you are never trivial in your considerations and analysis. The way our clients reads our products and services are constantly changing and I believe that one of the biggest challenge we are facing is to understand how to better use the different distribution opportunities and how to proper use the so called social networking. What do we mean by customer service nowadays? Fast answers? Competitive prices? Competent sales associates in our stores? Maybe all of these and then we go online. Global visibility with no glamor. Very tricky, please SImone lighten us.

  36. dc@downingstgroup.com | Reply

    Simon, you have always brought new insights, thinking and a fresh approach to the category. It makes you a valuable and very appreciated member of the teams you have worked with. I so look forward to more of your wisdom and approach in the future

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