Luxury retail: Stepping back from the promotional precipice?

Luxury retailers like Saks and Neiman Marcus were caught unexpectedly in the economic downdraft last fall, and found themselves price-promoting like never before. Retail Wire panelists had a chance last week to discuss whether they will be able to step back. My opinion:

There’s a difference between high-end fashion retailers like Neiman Marcus and upper-moderate stores like Macy’s. Yes, Macys is prepared for the fourth quarter with better inventory management, but it sounds like Terry Lundgren is also ready for a highly promotional holiday season based on his interview comments. Macy’s is competing with the likes of JCPenney and Kohl’s just as much as with stores like Saks Fifth Avenue.

The upper tier of stores are in a quandary, however: They are in the business of selling trend and quality, but they were caught up in the promotional free-for-all when demand fell off a cliff last September. It’s important for them to refocus on “fashion” as a marketing tool, and as their brands’ reason for being. But it’s naive to assume that consumer demand will return to “the good old days” this fall, especially when the luxury segment remains the most hard-hit. Stores like Neiman and Saks need to strike a balance between brand reinforcement and adding value for their best customers.

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