On a recent trip to San Francisco I rummaged through more shops than my finances would have liked in pursuit of that feeling. My favourite offered handmade clothing – the product isn’t unheard of and, in itself, wasn’t groundbreaking, but the in-store experience could not have been faulted.
I could clearly see and feel that quality was paramount for this retailer, but the staff went out of their way to educate me on the product and share their story. I was shown where the clothes were made, the process and materials used, and where these were sourced from. I was sold. In fact, I was sold three times. I walked out with my new jeans and two shirts, feeling as if they’re worth much more than what I paid for them.
As consumers become more savvy and wield more control than ever before, the world of retail has experienced the rise and rise of ‘premium.’ But putting a definition on the term isn’t as straight forward as it used to be. And for retailers themselves, it’s heralded a new landscape where pleasing the masses is a much more interactive and fluid process.
The term ‘premium retail’ conjures different images for different people. It can be comfortably applied to everything from traditional luxury stores like Prada on the high street of a bustling metropolis to a small-town retailer offering handcrafted wares.
In the traditional sense of premium, New Zealand isn’t exactly a mecca, with few international premium retailers trading here. The ‘luxury’ segment of New Zealand’s tourism site ‘100% Pure New Zealand’ emphasises outdoor experiences like fly fishing and heli-picnics over retail, directing wealthy visitors keen for some shopping to upmarket boutique areas like Auckland’s Parnell and High St, and The Tannery in Woolston.
However, in recent years a number of large fashion houses have made their presence known, with the likes of Gucci, Louis Vuitton, Tiffany & Co and Prada setting up shop while Hugo Boss and Chanel have shown interest. First Retail managing director Chris Wilkinson has suggested that the appetite for international luxury brands in Wellington was a factor in attracting Australian department store David Jones, which opened its doors on July 28.
On a global scale, however, real growth in the premium goods and services industry has eased to between 1 and 2 percent according to a report by Bain & Company. The data gives a good picture of what’s happening at the top end of the luxury market, but it doesn’t capture the breadth of what is now considered premium. Louis Vuitton handbags are part of the picture, but so are handcrafted bags made from New Zealand deer leather, not to mention aged meats sold in supermarkets.
News of this easing is supported by Euromonitor International, which stated in its Global Luxury Goods Trend report that the industry is entering a new phase where conspicuous consumption is giving way to more meaningful luxury experiences.
This places New Zealand, somewhat surprisingly, at the forefront of global luxury trends. With a market that isn’t as interested in high-end spending as, say, Tokyo, where a 2003 study by Saison Research Institute indicated 92 percent of residents in their 20s owned at least one Louis Vuitton product, Kiwis have instead focused on satisfying our own unique market situation. New Zealand has a reasonably price-sensitive market, which coupled with the rise of Millennial consumers, has dictated the move into a retail model that’s heavily based around experiences.
There has been a marked increase in the ‘experience over product’ trend in recent years. Premium supermarkets are becoming more prevalent; businesses are sharing spaces to create farmers’ market-like environments, and even that mass-market juggernaut McDonalds has introduced table service. This focus on customer experience is becoming the new hallmark of ‘premium’ as consumers come to expect more than just a product.
A premium retail experience does need to have a certain level of “story” to it for sustained success. Mark Gascoigne, founder and principal of creative interior design and retail architecture firm Studio Gascoigne, says: “The whole ‘I’ve got a shop so people will come buy stuff off me’ doesn’t really work anymore - it’s about the story. There should always be an implied backstory to go with the experience, because in the absence of that, you’re just a product. And as soon as you’re just a product, people can go online and find a cheaper option.”
The fact that people can and do go online as an alternative to shopping at bricks and mortar stores can obviously be to the detriment of the physical store, but it can also push retailers into thinking about their brands more holistically. Retailers can gain useful knowledge from watching a customer proceed through their path to purchase online. The question is, how do retailers provide an equal or superior experience and create a ‘premium’ environment and offering for their customers? Especially when it’s likely their product or similar can be sourced elsewhere for a cheaper price.
“One of the biggest changes and challenges has been the consumer taking control,” says Gascoigne. He feels it’s that shift in power that has driven retailers to bring unique experiences to customers. “A lot of retailers don’t understand this - they have a shop full of seemingly great product that has been selling well for years, then all of a sudden it seems as if it’s not what the customer wants.”