Maricich Points to Luxury Market Opportunity

March 13, 2006  by in UnCategorized   

By Home Furnishings Business in on March 2006 By Powell Slaugther

Furniture retailers at premium price points, who are considering trading down to more mass market prices, might learn a lesson from specialty luxury retailers.

Century Chief Executive Officer Bob Maricich gave the example of Saks Fifth Avenue, as a company that found down-pricing led to confusion among their consumer base and lost sales to competitors, during a CEO roundtable Monday at the NHFA/AHFA All-Industry Conference in Orlando, Fla.

As a supplier of high-end furniture, Maricich's position may be in his company's best interest, but he offered attendees a compelling object lesson outside furniture in Saks' case.

In the wake of the Sept. 11 terrorist attacks, Saks began to approach lower price points and a younger, hipper image that eventually led to the recent naming of a new chief executive, Maricich said. Competitors like Nordstrom and Nieman Marcus continued their focus on the luxury market and grew sales as Saks lost ground.

Saks' approach of lower prices and a more youthful image alienated its traditional customer base, Maricich said, pointing out that the lesson shouldn't be lost on furniture retailers.

"The last two years have been the best for luxury marketing in every category, except furniture," Maricich told the audience. "The biggest failure in our industry is the failure to provide a luxury experience. Luxury is more than product – it's an experience that incorporates everything from advertising to marketing to display."

Premium price-point goods represent only 4 percent of the $70-plus billion furniture business at retail, he said, but it's a profitable segment that could get larger.

"I maintain that if more retailers focused on creating that luxury experience in their stores, that would be more like 6 percent to 8 percent now," he said. "And the demographics are very good. Gen Xers and empty nesters are the fastest-growing consumer groups. What happens when you become an empty nester? You have more disposable income, and 23.1 million consumers will be hitting that tier in the next few years."

Market research, he said, indicates that once consumers trade up, they rarely settle for less.

"Once you fulfill that luxury experience, you've got them," Maricich said. "And if you have a good, better, best strategy, you'd better make sure to differentiate the 'best' in your marketing and store experience. You have to give consumers a reason to pay more."