Chasing Big Spenders: Stores Step Up Services For Key Luxe Customers WWD August 1, 2006 By Sharon Edelson NEW YORK The top 20 percent of shoppers will help propel the luxury goods market to $1 trillion by the end of the decade and U.S. retailers are doing everything they can to snare them. Stores such as Neiman Marcus, Nordstrom, Saks Fifth Avenue, Barneys New York and Bloomingdale's, not to mention specialty boutiques, are competing ever more aggressively to win the loyalty of these high spenders. Now it is no longer enough to execute their businesses flawlessly; stores must attend to their clients' needs with above-and-beyond service, romance them with perks, shower them with gifts and provide them with access to special events. Providing lunch for a client seeing a personal shopper is de rigueur, as is having personal shoppers go to the homes of important customers and organize their closets. them with perks, shower them with gifts and provide them with access to special events. Providing lunch for a client seeing a personal shopper is de rigueur, as is having personal shoppers go to the homes of important customers and organize their closets. Here are some of the special programs stores have to impress customers: * Neiman Marcus' rewards program, InCircle, has a special "thank you" for clients who accumulate five million points in one year ($1 spent on an NM credit card equals one point): membership in Exclusive Resorts, a luxury residence club, and three weeks in one of the residences. Virtuoso, a travel service for InCircle members, is based on the idea of "pulling strings" and uses the personal connections of agents to, for example, reserve an entire beach at Little Dix Bay. * Saks Fifth Avenue's menu of perks for Diamond Plus customers, who spend at least $25,000 a year at the store, includes free local delivery, complimentary valet parking, storage of one fur at no cost, advance notice of sales and invitations to special events. Saks also hosts a dinner at a top restaurant once a year for its best customers, who spend between $25,000 and $200,000 a year, and gives them a gift at the end of the evening. * Jeffrey Kalinsky, founder of Jeffrey New York, has taken special clients to showrooms to be fitted for custom designs. In one case, Michael Kors took a customer's measurements himself. Another time, Kalinsky arranged for designer Martin Grant to meet a customer's daughter at his store where he measured her for a dress. Danielle Morolo is another who has gone above and beyond, all in the name of service. She's packed her customers' suitcases for vacations, gone to Palm Springs on an errand for a client and spent part of her summer vacation in Florence searching for lace for another client. Morolo, a personal shopper at the Americana Manhasset in Manhasset, N.Y., represents the new breed of retail employee who'll stop at nothing to please a customer. No request is unreasonable "as long as it's legal," said Morolo, whose approach underscores the heightened competition among luxury retailers. Barneys New York is aggressively expanding into markets dominated by Neiman Marcus and Saks Fifth Avenue. Nordstrom is committed to selling a comprehensive designer offering in at least one store in each of its major markets. European and American designers are building increasingly large flagships and opening multiple units in some cities. "The high end is where the money is, where all the growth is," said Robert Buchanan, a retail analyst at A.G. Edwards. "That huge sucking sound at the back of the room is the sound of factory jobs permanently migrating to the Pacific Rim. In retailing it's a game of haves and have-nots. If you have power and the aura of exclusivity...the world is your oyster." Four million U.S. households had net worth of more than $1 million last year, according to the Census Bureau. Consumers like these will be the ones driving growth in luxury goods, where sales are expected to jump to $1 trillion by the end of the decade from $525 million at the end of 2004, according to the Boston Consulting Group. "The top 15 percent to 20 percent account for an astounding percentage of our business," said Michael Gould, chairman and chief executive officer of Bloomingdale's. "We have a very loyal customer base." A very small segment of Giorgio Armani's total customer base in the U.S. the top 5 percent is responsible for a surprisingly large amount, 47 percent of total sales, according to Victoria Cantrell, senior vice president and chief information officer, Giorgio Armani Corp., the U.S. subsidiary of Giorgio Armani SpA. The data underscore a mandate, she said: Protect the top-spending tier of customers and grow the next 30 percent tier through up-selling, cross-selling and greater loyalty. Many stores said that the personal connections sales associates or personal shoppers make with customers is critical to building loyalty. Morolo's personality suits the Americana's customers. Friendly, supportive, and honest, she won't hesitate to tell a client an outfit isn't right for her. The shopping center's clients are social creatures who are active on the charity circuit and love to flaunt their finery. They get a kick out of meeting designers and enjoy being treated like fashion insiders. "We take them to showroom events," said Andrea Sanders, vice president of Americana Manhasset. "They like that. That kind of access is important to them. They ask to be taken to fashion shows in New York. They also like to go to the charity events they're not involved with." Shoppers call Morolo at home at 7:30 a.m. and send her e-mails in the evening. "I've had people call me from the office and ask me to go their homes and pick something out of the closet because they didn't like what they were wearing," she said. "I have the security codes to clients' homes." But not all luxury customers are cut from the same silk cloth. Morolo's customers may crave attention, but Louis Boston's clients have an understated New England sensibility. The store's highest-spending shoppers, who drop $80,000 to $100,000 a year, eschew entrance-making fashion and are turned off by fussy service, which they perceive as overbearing. "My customer doesn't want to be identified by clothes," said owner Debbie Greenberg. "She doesn't want to secure the It' handbag." Nor do fashion personalities particularly impress her. When Greenberg introduced Zac Posen, who was visiting the store, to a customer one day, the woman quickly said "hello" and left. Approaching these customers requires finesse. When they visit Louis Boston two or three times a year they expect to see a dressing room full of suitable outfits. "Everybody in the store is a personal shopper," Greenberg said. "They know their customers' wardrobes inside and out and go to their homes to organize them. The sales associates don't work on commission. I don't believe that infuses good behavior. Their salary is based on a team effort." Greenberg said she provides her customers with another service: the confidence of knowing they won't see someone else wearing their dress when they go to a party. "I buy only one of every size in a style," she said. "The floor is chock full of choices." How can a customer who shops only twice a year score a new Marni dress in her size when inventory is so small? "You need to have your sales consultant selecting for you," she said. "We'll send something to a customer. If they like it, they'll keep it. If they don't, they'll send it back." Many transactions at the luxury level are conducted in this way without customers ever setting foot in the store. Those who enjoy interacting with a sales associate expect a certain environment. Retailers know that a woman who's uncomfortable in a dressing room won't stay long enough to spend money. "It's all about intimacy," said Holt Renfrew's fashion director Barbara Atkin. "As stores get bigger we need to adopt the mind-set of small boutiques." The five new personal shopping suites at Holt Renfrew's Bloor Street flagship in Toronto are a step in that direction. A dedicated elevator for the suites delivers customers to a lounge where there's a kitchen and marble bathroom. Each 600-square-foot suite is self-contained with a point-of-sale station, iPod docking station and high-tech lighting system. Between 5 and 10 percent of Holt Renfrew's total business comes from personal shopping, according to Karen Lerner, president, who said she'd like to see it grow to 15 percent. "We empower our personal shoppers to know the right touchpoints for individualized service. Our personal shoppers go to runway shows and to market with the buyers," Lerner said, noting that the retailer is looking to hire two personal shoppers for a total of six.