Hot Commodity

For several years now stores that cater to the more prosperous demographic have seemed “immune” to the ups and downs of the business cycle, but in today’s economy, as the real estate market and Wall Street are both struggling, it appears that even the upper class is trying to save, especially when it comes to “discretionary” purchases such as clothing, electronics, jewelry, home furnishings, etc. that they might usually splurge on at higher end department stores.

From the retailers’ perspective, everyone likes to advertise when times are good, but several companies seem to scale back heavily on marketing gimmicks and campaigns as soon as the economy turns a little sour, even though there are probably other areas of discretionary investments that could be (and should be) minimized instead. Finding ways to improve operations, decreasing overhead, and overall increased efficiency are all ways to cut costs, and can give a company an extra advantage when times are rough, especially when their customers might be trying to cut back.

As the fall season approaches, several of the nation’s higher-end retailers, anxious about the uncertain economic outlook, are weary of engaging in large advertising campaigns, but Bloomingdale’s (a division of Macy’s) and Saks Fifth Avenue (a unit of Saks) recognize the importance of continually appealing to and “wooing” customers, and are stressing “innovative advertising” as a means to attract customers even in an economic downturn (according to an article in the Times).

 “We’re in a tough economy; there’s no denying that,” says Jack Hruska, executive vice president for creative services at Bloomingdale’s in NY. He adds, though, that those retailers “who play up their strengths will emerge stronger when the economy comes back than those who retreat or scale back. We’ve seen that time and time again.” Clearly other retailers must have their eyes wide closed.

 Bloomingdale’s is introducing an elaborate campaign centered on music, and based on successful results of an experiment with a virtual catalog in the spring, Saks Fifth is expanding the availability of video clips online to offer shoppers a more comprehensive virtual version of their catalogs. They are also attempting to appeal to youthful shoppers that may be slightly younger than their typical customer base, via an outreach campaign to almost 100 blogs and a presence on social media websites like Facebook.

Frivolous advertising spend is obviously unacceptable whether or not the economy is down, but both companies are cognizant of the fact that for luxury goods there’s an expectation of better service and that they must be able to convey this level of service at all times in order to retain a loyal customer base. Thus, in times like this, they are astutely looking to drive outsized growth with “innovative initiatives” and looking for “ways that are nontraditional” to reach the hearts and minds of their customers.

I met Ron Klein (Chairman & CEO of Macy’s East) in this past February at the Undergraduate Business School Leadership Conference, and he shared with us several of their “work-in-progress” campaigns at the time. They were entertaining and appealing and I’m looking forward to the newest round, which were just released yesterday. Bravo!

This entry was posted on Thursday, September 4th, 2008 at 12:28 pm and is filed under Company Zeroes and Heroes, Marketing. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.