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Luxury and Retail Face Evolution with Changing Consumer Tastes

Henri Bendel to Close After 123 Years. This Is the Beginning of the End for Lord & Taylor’s Flagship Store. Sears, KMart to Close More than 100 Additional Stores.

To anyone paying attention to the news recently, it would seem that the traditional retail industry is facing an apocalypse.

However, the members of NYU Stern’s Luxury and Retail Club feel as if the industry is not facing an apocalypse but is instead simply experiencing growing pains during its evolution. The theme of the 12th Annual NYU Stern Luxury and Retail Conference was “It’s Not an Apocalypse, It’s an Evolution” and the event highlighted how top companies are viewing the future of retail in order to to remain relevant in the competitive global landscape.

It is always important to look at the changes and advancements taking place in luxury and retail from a strategic business perspective, but this year’s conference was even more timely as Stern is investing more and more in curriculum and programming around the luxury and retail space. Moreover, this May the school welcomed the inaugural class of the Fashion and Luxury-focused MBA program.

With an increasing number of  students choosing careers in the luxury and retail industries, the Club’s role — of connecting students, alumni, and industry experts with the goal of achieving education and career advancement — has become increasingly important. The panels and speakers at the conference discussed that while the industry has faced headwinds due in part to e-commerce, major brands throughout the industry have shown how companies can flourish in the new retail environment.

The most pressing issue facing retail brands today is the impact of e-commerce on the industry. According to a study by Digital Commerce 360, e-commerce sales have grown from 5.1 percent of total retail sales to 13 percent over the last ten years alone. Moreover, Cowen and Company projects that over 400 malls may close in the next few years, with the majority of the closings being concentrated among Class C and D malls in low-income suburbs.

While the all consuming presence of Amazon and other major e-retailers is one reason for the downturn in brick-and-mortar spaces, e-commerce is only one of the factors disrupting traditional retail. In fact, highly curated and bespoke retail experiences, different from traditional retail, are a bigger engine of change in the space. This is true across industries, as brands from Starbucks to Hermès are leveraging their customers’ desire for curation and unique in-store experiences to revolutionize brick-and-mortar locations. For instance, Hermès has made clear distinctions amongst their products so only certain items can be bought online. Their famous Birkin Bag, for instance, can still only be bought in stores.

Starbucks has taken their traditional storefronts and created three separate offerings for different types of consumers. While the traditional Starbucks Cafe still exists, Reserve stores offer more unique drinks at a higher price point; Reserve Roastery and Tasting Rooms, on the other hand, are geared towards consumers who want a truly unique experience. Even traditional e-commerce brands are moving towards having a physical presence, as brick-and-mortar space occupied by retailers who started online have grown by approximately 1,000 percent since 2012, according to real-estate data company CoStar Group.

What does this all mean? While traditional department stores such as JC Penny and Lord & Taylor may indeed be facing turbulent times, the demand for brick-and-mortar retail does exist. It has, however, evolved into a desire for unique, curated experiences.

Curated experiences are only one way brands today are disrupting the retail landscape. Bluemercury, a leading luxury beauty retailer whose CEO and co-founder Marla Beck was the keynote speaker at the conference, has become a disrupter by rethinking the way firms classify their employees. Rather than being a part of the traditional, hourly retail workforce, Bluemercury employees are full-time workers with benefits. Beck believes that this has undoubtedly been a strategic advantage for her company, as it has enabled a truly customer-centric mindset to permeate company culture. By having employees be full-timers, Bluemercury has been able to maximize return on institutional knowledge, as employees remain with the company for longer. This enables employees at each location to build better long-term relationships with their customers, getting to know why they buy the products they buy, and creating a better overall experience for the customers. This then leads to more repeat customers, and better customer outcomes.

During the “Industry Disruptors” panel, social media was referenced time and time again by panelists as another way for brands to connect with customers. By partnering with social media influencers such as the Kardashians, emerging brands have been able to quickly and efficiently reach a large number of potential customers. Social media is also a way for brands to highlight their social and sustainable initiatives, which is becoming a more powerful way to differentiate themselves in today’s marketplace.

The Retail Industry Leaders Association defines sustainability as “creating financial value while protecting the environment and generating social value, both within operations and along supply chains.” While retailers’ sustainability programs vary widely, the “Social and Sustainable Initiatives” panel during the conference put the spotlight on companies such as The RealReal, Eileen Fisher, and Repeat Roses, who are all leading the way with their sustainable initiatives.

The RealReal, for instance, has built their business around a luxury consignment model, where consumers can find 100 percent authentic luxury products that are being resold. This not only opens up the world of luxury goods to new demographics, but also prolongs the lifespan of the luxury attire.

Eileen Fisher has taken another approach, focusing on reusing otherwise beyond repair fabrics and garments rather than throwing them away. Repeat Roses takes a similar idea and focuses on finding secondary homes for flowers used in weddings and other large-scale events rather than simply throwing them away.

These companies, and many others, have found that sustainable practices are not only good for society and the environment but that they offer new and innovative ways to strategically differentiate the brand while turning a profit. The retail space has undoubtedly undergone a turbulent few years, but that turbulence does not signal the industry’s deathknell. As the panelists, speakers, and attendees of the 12th Annual Luxury and Retail Conference showed, it is not an apocalypse but instead, an evolution in the way we think about and manage luxury and retail.

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