1. Welcome to Luxury Pricing, Promotion and Distribution
Dr. Satyendra Singh
Professor, Marketing and International Business
University of Winnipeg

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

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

5. Patek Philippe $200,000

6. Patek Philippe: $320,000

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

8. 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 )
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

9. 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

10. Window Display

11. Harrod’s window display: Creativity, dream

12. Rolls-Royce at Harrod’s window

13. LV: Jennifer Lopez

14. LV: Uma Thurman

15. 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)…

17. The Bus Tour

18. Bicester village Shop

20. 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

21. Hilton in Sari

22. 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

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

24. France: Luxury Department Stores
Sephora Galeries Lafayette Boon Maché Printemps

27. 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)

29. 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

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

32. Takashimaya Japan

33. Tsum Moscow Dept Store

34. Media Selection 15

35. 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

36. 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

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

38. 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

39. 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

40. 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

41. 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)