, ,

Bal Harbour, a luxury mall in Miami, Florida, hosts big names such as Saks Fifth Avenue, Jimmy Choo, Louis Vuitton, and Chanel. It has long relied on international travelers for its profits, which it enjoyed since it opened in 1965—with the exception of 2009. The global economic downturn looked like bad news for Bal Harbour and its luxury counterparts. And yet just two years later, the mall earned sales per square foot of $2133, or more than five times the $400 average for regular malls.

What explains these shifts? It appears that wealthy consumers are not spending as they once did, before the recession, but they also have not stopped shopping altogether. Retailers are responding in two main ways.

First, luxury brands have added more moderately priced lines to expand their target market and give even high-end customers the option to buy less expensive options. Similarly, luxury department stores such as Neiman Marcus are expanding outlet stores. Its Last Call storefronts appear in outlet malls, whereas the Neiman Marcus Last Call Studio stores sell fashion goods at reduced prices in lifestyle and power centers.

Second, luxury retailers are expanding, looking for the best mall locations to create the upscale feel and ambience that luxury customers demand before they will buy such products. The luxury brands also realize they need to maintain or increase the number of stores they run, because their presence alone provides superlative advertising for the brands. And thus, Coach has announced that handbags priced over $400 are an increasingly large percentage of its overall sales.

Discussion Questions:

1. What are luxury brands doing to improve sales in their stores? 

Anna Robaton, “High End, High Demand,” SCT, August 2011.