“That single definition of the customer is being shattered,” said David Selinger, chief executive of RichRelevance, a retail services company.
Selinger was speaking at the National Retail Federation’s Big Show, an annual industry event in New York, during a session Sunday that focused on pressing changes in the luxury category.
Millennials, panelists said, are creating the upheaval. This group is seeking quality, craftsmanship and authenticity– not brand names. To them, “luxury is about where it was made, how it was made,” said Matthew Woolsey, executive vice president for digital at Barneys New York.
Selinger, whose company provides big-data research to retailers, said he’s found that today’s luxury shopper is much more likely to seek out a particular category of product rather than a specific brand. In other words, a woman won’t simply go to Burberry and find a handbag she likes, she’ll browse on her smartphone for handbags from a variety of sources, including easy-to-find designers such as Marc Jacobs and more niche ones such as Loeffler Randall. With such wide-ranging tastes, the competition is fiercer than ever to win these shoppers’ dollars.
The experts said that many of today’s millennial luxury shoppers fall into a category of customer known in industry jargon as a “HENRY” — an acronym for a person who is a “high-earner not rich yet.”
Because they have steady cash flow but little accumulated wealth, their spending patterns are different, according to Ken Nisch, chairman of retail design firm JGA. For example, Nisch said that over 50 percent of luxury cars in the United States are being leased, not bought. They’re turning to services such as Rent the Runway and Uber that allow them to have an upscale experience at a fraction of the cost.
“They are using luxury without owning luxury,” Nisch said, an important distinction for those trying to sell upscale merchandise.
Millennials are also ripe targets for a category that Nisch calls “functional luxury.” These are brands that provide products that perhaps feel less frivolous than fashion, even though they are still quite pricey. Apple, Whole Foods and even Sleep Number mattresses might be considered functional luxury brands. Nisch said he’d also put Shinola, the up-and-coming maker of trendy $2,950 bicycles, in this category.
If affluent millennials prefer to spend their dollars on “functional luxury” instead of, say, Jimmy Choo heels, experts say that fashion retailers will likely have to pull out all the stops to siphon off some of their shopping dollars. One approach might be personalization, in which shoppers receive highly tailored promotions and even see a uniquely-curated version of a retailer’s Web site.