Luxury Products In Recessionary Times
Luxury products, the recession, baby boomers: How’s that for a potpourri of subjects? Actually, they are closely related. I hope that if I can provide you with a bit more insight into what’s happening in these areas you’ll be able to use this new knowledge to strengthen your sales approach.
First a little history: Luxury products for the bath and kitchen are a relatively new phenomena. Here’s a perfect example: When we started our high-end showroom business in the early 1980s, there were only four decorative faucet lines: Artistic Brass, Broadway Collection, Phylrich and Sheryl Wagner. The first two are long gone and the last two have been joined by more than 100 decorative faucet manufacturers from all over the world.
Colors of finish plumbing fixtures were just taking off. Chrome was by far the number one finish on faucets. Back then the leading fixture and faucet manufacturers were just starting to stick their toes into the more decorative/luxury product areas. Antique Brass was the number one finish after chrome (and I hear it’s making a comeback now). Polished brass became popular and turned out to be a first class nightmare because the “protective coating” lasted about 10 minutes. Thank goodness for the introduction of PVD and other “lifetime” protective coatings that are offered today.
There were no fancy vessel sinks or any of the great variety of decorative products available today.
My first visit to a kitchen and bath show was in 1985 in Philadelphia. It took me about three hours to walk the entire show. Compare this to 2008 where the show had 573,700 square feet of exhibits and the attendance was 45,200. Now a person can hardly get through the show in three days! This all transpired in a short 23-year time span. (I’m aware that numbers were down in 2009 - but this is purely a sign of our current economic times.)
Luxury Is Here To StayWhen we started our business, family and friends told us we were taking a huge chance because in their opinion, fancy bath and kitchen products were going to be just a short-term fad. Thank goodness, for both us and you, they were wrong.
A couple of years ago I gave a talk to showroom owners and managers of a very well-known manufacturer of kitchen and bath products. The talk was on “The Future of Luxury Products in the Kitchen & Bath Industry.” Since I didn’t have a crystal ball that would give me any insight I was looking for, I Googled that subject and did hours of research. The end result, and what I tried to convey in my talk, was that luxury products for the kitchen and bath are here to stay for the long haul! The kitchen and bath have evolved into the two most important rooms in the home and are expected to remain so for the next 30 years at a minimum.
Who Buys Luxury Products?One of the most interesting things I learned about luxury products is that 25 or more years ago only the wealthy purchased those types of items. In the last 25 years “middle class” homeowners have learned how to save money by shopping the various big boxes and discount stores and they will spend this “saved” money on the luxury products they want - be it cars, travel, clothing, jewelry or products for the home. This has expanded your target customer base dramatically.
So yes, luxury products are here to stay. And yes, the sale of these products has dropped off dramatically in the past year. It’s been impossible to ignore the fact that even the “rich” have tightened up their purse strings. I believe there are two main reasons for this:
1. The more wealthy folks (your main customer base) have taken a pretty serious hit to their portfolios, including money invested and property owned. They’ve seen their investments decrease in value anywhere from 25-50%. Sure, many (most) of these folks are still very well off - but they are taking a cautious “wait-and-see” attitude until they’re comfortable that the worst is over and things are back on an upswing.
2. Even though the more well-off folks out there still have some pretty good “nest eggs” and they could afford to build new or do that big remodel, they don’t feel comfortable doing it now because they feel it might not look good to their friends, family and neighbors. They know we’re in a pretty serious recession and now would not be the time to show off by spending a lot of money. Heck, their neighbors may really be feeling a hurt - so they don’t want to make them feel any worse than they already do. In other words, “conspicuous consumption” is out! It will be back, but it will probably be next year - and slow at that!
These well-to-do folks may not be spending as much money as they used to, but when they do open up their pocketbooks they’re looking for great craftsmanship and quality. So please learn how to underscore these points in your sales pitch.
They will also be using the Internet more for a lot of their purchases, partially because it’s easier than running from store to store and partially because they’re looking for the best deals out there.
How’s your Web site? If it’s not the very best in your marketplace you’re missing a huge opportunity.
Economic IssuesSpeaking of luxury products and the downturn in the economy, look at these numbers: Tiffany sales were down 35% in November and December 2008. Nordstrom’s (one of my favorite shopping destinations) net profit was down by 68% in the last quarter of 2008. This was mainly due to a cut in store pricing. Sure it helped to move inventory - but when you lower margins, it impacts the bottom line dramatically.
As a consultant I have been advising my clients to accept the fact of lower sales for the short term - but please don’t cut the price. Cut expenses, not margins!
Everyone’s feeling the hurt. The luxury hotel business is off by 20%; luxury car sales are down; even fine wines are down by 18%.
Baby BoomersI’d like to conclude with a few words about your main target customer: baby boomers. Yes, I know you’re thinking, “Hank, the plumber is my main customer!” And yes, I know this may be the group buying and installing your products - but it’s the baby boomer who’s making the product selection and whose home it will be installed in.
There are some 78 million baby boomers in the United States (and 11 million in Canada). They are aged 44 to 64. They are not only the largest group to enter our society, they are also the most educated. Best educated equates to best jobs, which in turn leads to best wage earners. These folks are at the peak of their earning years. They are seeing their kids move out of the home and complete college. This means that obligations are behind them and they can concentrate on themselves. They can finally change homes (probably downsize); they can buy that second home of their dreams or remodel the home they live in. After dreaming of that new “no-holds-barred” master bath loaded with all those neat things that you sell, they will be flocking to your showroom hoping you will help them turn their dreams into reality.
There are certain unique things about how these folks shop. First, they want “one-stop” shopping. They would rather work with one company and one salesperson - not several! The more products and services you can offer, the more they will like it.
For whatever reason, this important group of customers wants to know as much as they can about the products they’ll be purchasing. It used to be that if it looked good, they’d buy it. Not anymore! They want to know how it works, what makes it better, etc. This means the more product knowledge you can absorb and then relate to the prospect, the better chance you’ll have of being the successful salesperson.
These folks are busy. They’re always in a hurry. You have an opportunity and challenge to help make them slow down, take a deep breath, relax and make their shopping experience easy and fun. Of course, being very efficient and aware of their time constraints will help also.
This group is very “techie.” They probably will have done some online homework. (So again, how’s your Web site?) But because they will be spending a lot of money, they will want your expertise and some hand holding.
They will want to go as “green” as possible and they will favor value over lower prices. Therefore, you must learn to “sell” your value. You must tell them why you are the best, your company is the best and the products you sell are the best! This is huge: Learning to sell value. (Look up some of my past articles on selling skills to learn more about this.)
So there you have it: Luxury products are here to stay, the economy is down, but it will come back - and baby boomers should be your main target!
If you have any questions or comments on this or anything else, please feel free to get in touch with me at email@example.com.