Michael Kors recently announced that it will shutter as many as 125 of its stores, approximately 15 percent of its total physical footprint.
It’s certainly not the first retailer to make some difficult choices – and, of course, will not be the last. And although it’s easy to make the leap to the same reason we always hear – Amazon, Amazon, e-commerce, Amazon – it’s a little too simplistic to think online shopping is the only reason Michael Kors is struggling (it’s most certainly not).
In fact, true luxury retailers – Louis Vuitton, Gucci, Valentino – are doing quite well. Michael Kors is simply not a luxury retailer in that same category. It’s the next tier or two down: too expensive for everyone but not so pricey that an upper-middle class suburban professional can’t buy a bag. In its same industry class, Coach offers the perfect playbook – it’s a brand that’s definitively turning around dimming prospects, reinvigorating itself and its sales, most recently wowing the Street with its acquisition of iconic purse purveyor Kate Spade and tactics like exclusive, short-run products.
If Michael Kors wants to win back the market, here’s what it needs to do:
Remember that no matter the level, luxe retail is somewhat synonymous with exclusivity.
Luxury retailers have to walk a very fine line – and it’s damn hard to do. Too pricey and hard to get – and you’ve locked yourself into a comparatively small market (e.g. Hermes), which may or may not be a bad thing. But too many discounts and outlets – coupled with ubiquitous appearances across department store chains – and suddenly you’ve strayed into “everyone’s got one” territory.
Michael Kors fell squarely into that second category and guess what? Customers with money to burn like the feeling of exclusivity – that it’s just a little bit hard to get a particular wallet or bag. Brands lose their luster when every third person you pass on the street has a bag that sports that shiny MK logo. If Michael Kors wants to win, it needs to throttle way back on deep discounts – the very tack Coach is taking with Kate Spade – and start making its bags something women are excited to own.
Make stores product playgrounds.
Retailers with physical stores have a distinct edge. And two out of three shoppers, according to our research, actually want to come in to a store to see products for themselves. That’s even more the case when it comes to luxury goods. First, an expensive product is a big purchase for most people – and even the wealthiest among us still love to touch the pebbled leather of a beautiful wallet or admire the workmanship of handcrafted Italian shoes. It reassures us that the investment we’re making is worth it.
Second, the in-store experience is often the critical component of the path to purchase in the case of products like these. If retailers start thinking less about stores as discrete units and more about maximizing the store experience so it functions as a true marketing channel, overall performance will improve. Michael Kors – and other retailers, for that matter – should care less about where a sale is made, either online or in person, and more about whether it’s made at all. It should rethink the store experience in its remaining physical locations to feel more personal – so shoppers feel catered to and taken care of while they’re browsing.
Millennials, the country’s largest living generation at over 75 million people, care deeply about the story behind the brand and goods that feel unique and limited. There’s a reason high-end retailers like M.Gemi and Cuyana are doing well. They understand the powerful appeal of a limited supply coupled with lovely execution. (In fact, Cuyana’s website says, “We are a brand that believes in fewer, better things.”). Translation: spend more on quality, own less junk. One way or another, Michael Kors should think about how to appeal to millennials of means, whose values dictate purchasing high-quality, limited-run goods with a premium on a brand backstory that rings true.
What do you think it will take for Michael Kors and other struggling retailers to rebound?