A major shift means old business models must be overhauled

It always is a pleasant experience to go into a store that sells expensive goods.

The sales personnel usually are very attentive, the ambience is delightful and there is no difficulty attracting the attention of a clerk. Too, some stores present extremely attractive and interesting merchandise and we are lured by clever advertising. Those stores’ labels serve as enviable status symbols.

That is in sharp contrast to other retail outlets where sales people are nowhere to be seen, merchandise is displayed rather haphazardly and the atmosphere is musty, rather uninviting.

These days, customers are becoming unusually conscious of price. Much of the rapid growth of stores offering only expensive goods is diminishing.

Except for those who are very rich, others are much less willing to spend freely. Middle-class people often frequented stores offering luxury goods, perhaps buying on credit or by capitalizing on rising house prices. A certain percentage of the luxury market has been based on demand from “aspirational” customers. The recession has quickly reversed the trend to trade-up as more are delaying expensive purchases.

One cannot determine at this time if this is a lasting shift in customers’ preferences; some infer that last month’s lacklustre Christmas retail selling season reinforced a belief that the whole industry needs to rebrand itself. The word luxury suggests nowadays showing off; the time for that no longer is appropriate.

Brands that used their names to sell products currently are faring badly in the current environment; the recession’s effects have been brutal for many. To respond to that trend, numbers are placing a lot of attention into beautifying stores rather than expansion. They are trying to innovate, “money back if unsatisfied,” and now are emphasizing quality, the fact that such items last longer. Design may be underscored, so price becomes less significant.

Cutting prices usually is counterproductive, denigrating the luxury label. Possibly a retail outlet may diversify into something other than expensive jewellery; more functional merchandise can widen the appeal to buyers.

A trip through a jewellery store recently revealed, for example, that trays are being offered to supplement the usual sales lines.

Eskimo art was on display, something whose true value is difficult to recognize.

Canada should make more of an effort to break into the export market. Newly rich Chinese would be likely targets for expanding sales as a unique Canadian item would entice buyers. Native art could have wide appeal and provide high margins.

All in all, one must recognize that trends require new thinking by luxury goods retailers; old business models need to be overhauled.


Bruce Whitestone