DISCUSSION

Macy's is still trying to figure out Millennials

March 27, 2015Written by RetailWire Staff

Macy's plans to move into off-price may have as much to do with a slowdown in its higher-end product sales as it does with observing the success of off-price formats like Nordstrom Rack. At least one gets that impression from a controversial comment made by the company's CFO Karen Hoguet at a recent industry conference in which she placed blame on a few different actors for the lull in luxury sales.

"We did some consumer research, and the customers said, she likes going to the off-price retailers because she doesn't have to put lipstick on," Ms. Hoguet said, according to a transcript of the conference quoted in MarketWatch. "I think part of that is the customers are buying other things, whether the electronics, cable services, Netflix, whatever."

It's not clear whether Ms. Hoguet truly intended to blame Netflix, Millennials or customers not wanting to dress up to go shopping for Macy's fourth quarter shortfall of analyst expectations ($9.36 billion to the analyst-predicted $9.40 billion). But technology does appear to be redefining what constitutes worthwhile luxury goods among younger generations, making one wonder if, even with all its omnichannel savvy, high-tech luxury products are a blind spot for Macy's.

According to a Quartz article, an executive at the Baseworld watch and jewelry trade show referred to the emergence of the Apple Watch as a "kick in the ass" to the high-end watch industry. TAG Heuer and Google partnering to release a smartwatch to compete with the Apple Watch is perhaps the clearest evidence that high-end brands are moving toward tech to court affluent Millennials.

The most affluent may be turning away not just from traditional luxury items, but from big price tags in general. A CNBC article reports that high-end luxury brands may in fact be pricing themselves out of their own markets.

The article stated that, according to the Boston Consulting Group, median luxury handbag prices increased 14 percent per year in the decade between 2002 and 2012, notably outpacing inflation.

Some retailers discussed in the article, such as Mullberry, have jacked up their prices aiming for exclusivity and later had to drop them because their products weren't selling at the higher prices. Boston Consulting Group also predicted a slowdown in growth of personal luxury goods over the next three years.

A shift in discretionary spending on the part of the affluent away from personal luxury goods and towards more experiential luxuries, such as travel, is one major reason for the impending downturn in luxury good sales cited by Boston Consulting Group's study.

Discussion Thread0