Welcome to Luxury Pricing, Promotion and Distribution Dr. Satyendra Singh Professor, Marketing and International Business University of Winnipeg s.singh@uwinnipeg.ca www.uwinnipeg.ca/~ssingh5

Hermes Birkin named after Jane Birkin $9,000-$150,000

Clive Christian’s Imperial Majesty $215,000 (16.9 Oz)

Patek Philippe $200,000

Patek Philippe: $320,000

Patek Caliber  $5m Most complicated watch X 2 Ferrari’s price!

Pricing Price depends on Positioning of the luxury; e.g., true luxury Operating cost, custom duty, foreign exchange Operating cost (retailing + staff) = 30% Distributors need 60% margin (co-efficient 2.4-2.6) HK, SP, Guam and Panama  no custom duty Duty-free shops  20% cheaper EU (France) may be cheaper than EM (Brazil) due to custom duty  yet buy in Brazil  why

Promotion Limited advertisement  control and project image Mass advertisement is not efficient for luxury goods Some brands do not advertise in mass media  Zara Some countries ban luxury advertisements  China Window displays To create dream and desire Needs creativity and interactivity Product merchandizing and communications Name products after famous people  Gucci’s Jackie Kennedy bag Use of celebrities for promotion  debatable LV/Furla… use celebrity as a brand ambassador

Window Display

Harrod’s window display: Creativity, dream

Rolls-Royce at Harrod’s window

LV: Jennifer Lopez

LV: Uma Thurman

Discount No discount  LV destroys old goods We cannot ↓ value  Control image and supply Loyal customers  loyalty gift  by invitation Reason  New wed, 1st baby, 1st degree, … Outlet Shopping village La Vallée Village (France), Bicester village (UK)…

The Bus Tour

Bicester village Shop

Selling Techniques Trunk shows Pre-season shows Post-season shows Next season’s collections are previewed held in luxury store  by invitation  buy Burberry /Ralph Lauren  outside Pre-season shows Collections launched just prior to main season Post-season shows By invitation  50% off  True luxury avoids this Shopping lunch Eat lunch in store (e.g., Fendi…) and then buy  very selected few are invited

Hilton in Sari

Luxury Department Stores 25,000 square feet  a place of worship People like spending time or meeting there Location is important  customers avoid crossing river, railways, bridge… They carry multiple brands Department store are opinion leaders

Sales in 2010  $150m Monday = 9,000 visitors Saturday = 17,000

France: Luxury Department Stores Sephora Galeries Lafayette Boon Maché Printemps

UK: Luxury Department Stores Harrod’s Selfridges  2nd largest in London House of Fraser Canada: Holt Renfrew (10 stores only (very upscale): Toronto, Ottawa, Montreal, Calgary, Vancouver, Edmonton)

USA: Luxury Department Stores Macy’s Bergdorf Goodman, Barney’s 5th Saks Avenue  stay as long as you wish Nordstrom  largest independent store It has a loyalty program: 2nd floor  > $2,000/year (You should spend) 3rd floor  > $10,000/year (Personal concierge service) 4th floor  > $20,000/year (customers get fashion show ticket, can host private party in store for their friends

Japan: Luxury Department Stores Mitsukoshi Isetan Daimaru and Matsuzakaya Takashimaya  Most exclusive

Takashimaya Japan

Tsum Moscow Dept Store

Media Selection 15

Luxury Retail Strategy… Company Operated Store (COS) Free standing flagship store (i.e. one door) Non-COS Franchisee Distributor/Retailer Bluebell, Dickson Poon  Asians markets. Mercury  Singapore markets

Luxury Retailing Strategy Company Operated Store (COS) Rolex, Bréguet… prefer COS Distributors Perfumes and cosmetics 75% of luxury perfumes and cosmetics are sold through department store

Perfume Distribution Perfume store countries Selling through small perfume shops France, Italy, Germany Department store countries US, UK, Australia, Canada, Japan

Kinds of Luxury Outlets… Free standing, flagship COS Shopping centre retail store Rent + % of sales for common promotional activities Outlet in retail park with own entrance with parking, yet in mall Must be destination brand  extra effort justification

Kinds of Luxury Outlets … Shop-in-shop department store  can be COS No cash register, but brand’s staff and merchandise Give % of sales to the store (but no rent) Brand has its own identity and culture LV  Matsuya in Tokyo Chanel  Daimaru in Osaka (2 floors & own elevator) Counter in a department store Store does everything for you  Merchandising, pricing, promotion, space allocation, organises activities...  Takes % of sales  Brand has no self identity and no control

Kinds of Luxury Outlets … Corner in a department store  between shop-in-shop and counter in store Brand pays its staff; but store takes title to the merchandise So the Brand gets limited identity, but stores put many brands together to create a full spectrum of store image  Gents suit, perfumes… Franchisee store  can be COS 3%-5% of sales, No investment Franchisee must follow instructions and buy goods Minimum sales are needed as guarantee Chanel, LV, Hermes  against franchising/licensing

Kinds of Luxury Outlets Factory outlets Shop attached to your factory  like shop-in-shop Duty-free shops  airports Customers have $ in pocket and time in hand # of flights passing through the airport Destination, nationalities, type of travellers Japanese smoke a lot – mild cigerettes Americans like Whisky, Cognac (Hanessy and Martin)