In his book “Crossing Fifth Avenue to Bergdorf Goodman”, the former CEO of the luxury specialty store wrote that there was always a “magic price” where the merchandise sold and the customer was happy and that a merchant’s job was to find that price. A week ago, when Bergdorf Goodman held a store-wide sale with price reductions of up to 75%, the “magic price” was probably on the minds of the store’s merchants.
The classic understanding is that reducing the price of merchandise gets rid of old inventory and frees up capital, allowing a merchant to invest in new inventory that might interest customers – a process that helps the merchant gauge the “magic price”. Given that price is also an indicator of an article’s value, in luxury retail, it is important that a reduction in price is not equated with a diminishing of a brand’s value in the eyes of the customer. Saks Fifth Avenue learnt this lesson the painful way when it slashed prices throughout its store in the midst of the Great Recession. Design houses balked and clients came away wondering if the merchandise was ever worth the full retail price to begin with. For luxury retail, the sale is a great merchandising tool that needs to be reformulated with greater sensitivity.
To begin with, the price reduction can be made to seem like a courtesy or a gesture of goodwill on the part of the retailer. This can be achieved through the execution of a well-curated private sale event. At Bergdorf’s, the sale was marked by an evening where the store remained open past its usual store hours. Instead of opening up the store to everyone, invitations could have been sent out only to valued clients and the additional store hours could have been reserved for them.
This form of targeted sales as a client engagement gesture could even tap on social commerce and client information gleaned from past purchases. A store could send out emails to clients offering styles from an upcoming sale and offer them the choice of putting articles on hold. Given the detailed information retailers have about their clients, the store could even offer a client only styles in his or her size. In doing so, the retailer turns a sale into a personalized event and a form of direct client engagement – exactly the sort of service one expects from a luxury retailer