In my previous post, I discussed three midpriced retailers eyeing the luxury market as a way to boost revenue and profits. How will luxury retailers react? Maybe luxury retailers won’t even notice since they have their eye on another prize. As mentioned in today’ WSJ.com article, “Luxury Retailers Pin Hopes on Outlets”, luxury retailers are also looking for alternative channels to increase their bottom line. Perhaps they have found relief with outlet stores?

Profit Margins

Although outlet stores might sound promising at first glance, luxury retailers do need to be careful. Sales might increase with new business, but they need to monitor profit margins as outlet store profit margins tend to be less than that of luxury retailers.

Full-priced stores

What about full-priced stores? Luxury retailers also need to be careful that their outlet stores do not cannibalize their full-priced stores.

Ann Taylor, J. Crew, and Gap are introducing luxury items to boost their profits. Banana Republic is launching a new upscale line called BR Monogram while J. Crew will start to offer limited-edition products such as a $3,000 jacket. How risky are these new upscale collections?

Losing Loyal Customers

These retailers run the risk of losing current loyal customers. Loyal customers might feel that they cannot relate to this “upscale” image and will have no desire to purchase upscale items. Loyal customers could be turned off by this move and might altogether stop shopping at the retail store.

Difficulty Gaining New Customers

Retailers also run the risk of not gaining any new customers. For customers with higher price points, they have other high end retail store options.

Slow Economy
The third risk for these three major retailers is launching new lines during an economic downturn. Monthly same-store sales for March have been the worst in 13 years. Many retailers are struggling to turn a profit with their main businesses. Ann Taylor, J. Crew, and Gap will not only have to focus on their main businesses but they will have to allocate extra resources such as marketing dollars to make sure their new lines have a shot at success.

The Upside

The luxury tier of fashion has been outperforming midpriced retailers for the last several years. Perhaps now is truly the best time to launch an upscale line.

The Retail Consumer Dissatisfaction Survey, mentioned in this stores.org article, reveals that 33% of customers are unable to find a salesperson, 25% are ignored completely by assciates, and 6% leave because of lack of trained help. Poor customer service results in lower revenue. During hard economic times, retailers need to do whatever they can to make maximize revenue. Retailers need to make even more of an effort now to train their sales associates accordingly.

Tom Ryan of RetailWire.com recently started a discussion on greening loyalty programs. From chlorine-free diapers to recycled trash bags, brands are coming up with creative ways to join the green movement. How can you make your green customer loyalty program stand out? One way to make your loyalty program stand out is by having exceptional green customer benefits.

Green Customer Benefits

Many brands will offer reward points through a credit card or debit card. Customers can then use these points to donate to a “green project” of their choice that the brand supports. However, this only appeals to a select group of customers. The majority of customers would rather use the earned points to reward themselves. How can you provide a green reward system that can benefit more customers as well as the environment? Offer eco-friendly products such as green home products or organic pet toys.

For Earth Day on April 22, Toys ‘R’ Us launched an eco-friendly line of toys including Natural Wooden Toys, Natural Cotton plush animals, and Organic Cotton Dolls. More children and parents are becoming environmentally conscious and the introduction of eco-friendly toys by Toys ‘R” Us shows how the company is making an effort to cater to this lifestyle.

Toys ‘R’ Us further differentiates their product offerings and has a competitive advantage over other retailers who do not have an eco-friendly line. For children, they can enjoy the benefits of all natural toys that do not have chemicals or lead paint which other toys non eco-friendly toys might have.