The rich get richer and for everyone else, there's Target

      Jacqueline               Renfrow

The luxury retail market is doing well. Reports at the end of 2014 showed that many of the high-end brands, such as Diane von Furstenberg, Bergdorf Goodman, Barney's New York, Michael Kors and Saks Fifth Avenue, are reporting increases in sales and revenue as they expand their physical and online presence globally.

Not only are they expanding in traditionally wealthy markets, such as those in the United States and the United Kingdom, but now there is a push into new markets, such as India's, as the middle class abroad continues to grow.

The luxury market in India grew 30 percent in 2013 to $8.5 billion and is expected to reach $14 billion by 2016. Bulgari opened its first flagship in India at the end of last year. And earlier this month Snapdeal, India's largest online marketplace, acquired Exclusively.com, giving Indian shoppers increased access to luxury goods online.

So what does the expansion of luxury goods mean? Well, for those that are past the economic slump and back to feeling comfortable with spending, there are handbags, watches, apparel and home goods to be had. And for everyone else there are still discount, big-box retailers such as Target and Walmart—the tried and true one-stop shops where you go in for one item and come out $150 later, as Jamil Ghani, VP enterprise strategy, Target, described it during last week's session at eTail West.

When I talk with my friends, most are still number crunching. The NRF predicts a 4.1 percent increase in retail sales in 2015. But while the economy transitions back toward growth and away from recession as employment rates rise, consumers still lack confidence. As a result, I'm surrounded by shoppers that want to stay thrifty while decorating their homes and stocking their pantries with organic goods at the same time. This means they'll be looking for a one-size-fits-all kind of store, with both convenience and low prices.

With all that said, there will always be a place in the market for luxury goods. Even for middle-class shoppers, there are special anniversaries, weddings and birthdays where one might splurge. But for the day-to-day purchases, I think the era of big spending may be waning in the United States, because many Americans will continue to look for convenience and a better price over expensive quality.

Why? One, because buying products for their labels and brand names seems to have lost its appeal. And two, because many new retailers now aim to offer tantalizing all-in-one deals.

As a prime example, Abercrombie & Fitch (NYSE:ANF) announced plans to remove logos from most of its clothing last year when dwindling sales showed that it was no longer "cool" to wear the brand's logo.

Now we're starting to see the emergence of innovative disrupters such as Warby Parker. Here is a company founded on the principle that good eyewear should not cost too much. However, the founders still want to offer convenience and customer service, so they found a way to create a retail presence both online and offline that includes both a good price and good service, wherever and whenever customers want it.

Customized products and services—which used to be found only in luxury stores—no longer seem out of reach for the average shopper. For example, online jewelry retailer Bauble Bar is using video conferencing technology to offer shoppers the opportunity to connect with a stylist via live chat.

So as more and more retailers find innovative ways to woo customers with the right kind of customer service, prices and product selections, it may become increasingly difficult for luxury stores to compete in the market share. Even the role of convenience stores continues to grow in popularity and presence. Convenience stores now account for 33.9 percent of all retail outlets in the country, according to the 2015 NACS/Nielsen Convenience Industry Store Count. Compared to other retail channels, numbers even out to about 41,799 drugstores, 41,529 supermarkets/supercenters and 26,572 dollar stores. And these stores are now offering healthier food options, fuel and expanded digital loyalty programs, meaning customer loyalty will continue to grow.

The traditional big-box retailers, which have continually set themselves apart through product selection and price, are now putting a greater focus on improving customer loyalty and service. These options range from implementing curbside pickup and customer rewards programs, to better customer service through specialized employee training. Last week Walmart announced a boost in minimum wage and benefits for its employees with the idea that investing in staff will reap better customer and brand relationships.

In the digital age, quality, customized products and better customer service will become more and more mainstream, rendering the desire to shop at luxury retailers less powerful for those that can find what they need at a big-box or discount store.  Look out luxury retailers, digital is giving you a run for your money. -Jacqueline

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