Luxury brands flock to suburbs and vacation hot spots where the rich are riding out the pandemic
Forget about Fifth Avenue and Rodeo Drive.
Luxury retailers are rushing to open new and increasingly lush stores in suburbs and the vacation hotspots the rich retreated to during the pandemic. Gucci goes to Oak Brook, Illinois.
Moncler recently opened a store in Vail, Colorado, Dior has a new storefront in Scottsdale, Arizona, and Louis Vuitton in Plano, Texas. And Hermès, the maker of the $ 500,000 Birkin bag, is settling in suburban Detroit.
“There’s kind of a luxury land grab,” said David Hurley, executive vice president of the Watches of Switzerland Group, which opened eight stores this year, including Breitling boutiques in San Jose, Nashville and a suburb of Philadelphia. Like many others, we are doubling business expansion plans. “
Although the pandemic hit the economy and left millions of people jobless, the richest among them thrived on a booming stock market and rising home values. Americans have saved $ 2.6 trillion since the coronavirus outbreak, with the richest quintile accounting for 70% of the vast majority of that balance sheet, according to Oxford Economics.
With travel and dining largely off the table, many splurge in other ways. Luxury home sales – averaging $ 1.03 million – rose 88% last quarter, far outperforming their cheaper counterparts, according to data from national real estate agency Redfin.
The demand for second homes, which had more than doubled at the beginning of the pandemic, remained elevated until May. The high-end automakers Audi and BMW posted a 90% increase in sales in the last quarter, while Porsche sold a record 36,300 vehicles in the first half of the year. This spending shift has bolstered the fortunes of high-end brands.
The exterior of the new Gucci store in Planos Legacy West is more than 5,000 square feet. Gucci also has two stores in Dallas.(Pablo Enriquez)
Fashion house Hermès’ sales rose 127% last quarter, while luxury giant LVMH Moët Hennessy Louis Vuitton’s profits quadrupled year over year. Demand for Hermès bags, often viewed as investment pieces due to their high resale value, remained brisk during the pandemic, with one selling at auction for up to $ 450,000 last year.
According to Kayla Marci, analyst at retail intelligence company EDITED, brands want to benefit from the luxury boom by moving even higher.
Designers like Chanel, Gucci, and Louis Vuitton have upgraded handbags, and many others are adding new stores with VIP suites, private shopping appointments, and concierge services to cater to the wealthy. As a result, commercial real estate agents across the country are reporting unprecedented demand from luxury retailers trying to take advantage of cheap rents.
“The pandemic has decentralized luxury retail,” said Milton Pedraza, executive director of the Luxury Institute, a research firm in New York. “It looks like everyone has moved to the suburbs or their vacation homes – so businesses go there too.”
When New York’s elite flocked to the Hamptons to weather the coronavirus pandemic, luxury retailers rushed to meet them there. Gucci opened a two-story boutique. Christian Louboutin and Dolce & Gabbana set up pop-up shops. And Watches of Switzerland popped up this summer in a vintage Airstream trailer filled with watches for up to $ 50,000. The aluminum vehicle was last parked at the Hampton Classic, a week-long horse show, and equipped there with timepieces from Grand Seiko, TAG Heuer and Ulysee Nardin.
“We want to be where our customers are – and a lot of them are in the Hamptons right now,” said Hurley. Real estate developers say this has led luxury retailers to look beyond the iconic fashion districts of Beverly Hills, Manhattan and Miami.
Analysts say the mass migration to online shopping at the start of the pandemic gave brands a clear picture of how lifestyles are reshaping.
“Ecommerce is inherently hyperlocal – you ship from a warehouse to a specific address so you know exactly where the demand is,” said Justin Abrams, CEO of FlagshipRTL, the fashion and lifestyle brands building physical stores supports. with short-term market tests. “Brands say, ‘What are the zip codes we need to win? Let’s go there.'”
Exterior view of the new Tiffany & Co. store in Planos Legacy West.
So Moncler recently landed in Vail, Colorado, and that’s why Proenza Schouler has pop-ups in East Hampton, NY and Greenwich, Conn.
“There’s a lot more flexibility now,” he said. “It is no longer necessary to rent an area on Rodeo Drive for 10 years.”
In Aspen, realtor Angi Wang says luxury retailers who were once looking for seasonal pop-ups in ski town are increasingly committing to larger, long-term space. New additions this summer include Balenciaga and Overland Sheepskin Co.
“Our market used to be too small, but now everyone wants to be here permanently,” says Wang, who works for the real estate company Setterfield & Bright. “They’re screaming to come in to the point where we honestly run out of space.”
When the country’s most expensive mall opens its luxury wing next week, nearly two dozen high-end brands, including Saint Laurent, Anne Fontaine, and Dolce & Gabbana, will be housed in a sprawling shopping and entertainment complex in East Rutherford, NJ
The $ 6 billion American Dream mall will include a two-story Hermès flagship and 110,000-square-foot Saks Fifth Avenue department store. But there will also be other luxury brands: an indoor koi pond, oversized shapes and a sculpture garden designed by Jonathan Adler.
Executives and analysts say such subtleties for pandemic-weary consumers are carrots. Many brands are looking for larger and more opulent spaces and equipping them with private shopping suites, cocktail lounges and live streaming studios.
“It’s about bold flourishes that say, ‘Come to us because we want to see you,'” said Ken Downing, chief creative officer of mall developer Triple Five Group. “Customers need a reason to visit.”
Like many other industries, luxury retailing stalled at the start of the pandemic as companies weathered mandatory closings and tried to keep losses in check. Neiman Marcus, the centuries-old chain of high-end department stores, filed for bankruptcy, and many others shut down locations and halted construction plans.
“Everyone froze in the beginning,” says Todd Sachse, founder of Sachse Construction, which works with high-end brands like Gucci, Louis Vuitton and Ferragamo. “Unless a project was already under construction, it came to a screeching halt. But things picked up late last year and now there are honestly a lot more options than we can handle. “
Many brands, he said, are updating pre-pandemic plans and putting even more money into new business. A luxury store, he said, was just about to open its doors last fall when the brand decided to step up its opulence.
“We literally got a call that said, ‘Stop, don’t finish it. It’s not pretty enough. We want to improve it even more, ”he said. “Luxury brands not only survived Covid, they also achieved higher sales and higher profits.”
The rapidly growing luxury resale market, boosted by online shipping services like RealReal and Rebag, has also increased the appeal of designer handbags, watches and jewelry, especially among younger buyers.
At Watches of Switzerland, the sale of used Rolexes and Omegas is becoming an increasingly large part of the business. The company adapts in a different way, offers more private appointments and creates separate areas for more and more customer needs: cocktail bars and lounges for a leisurely browse, quick service stations for those collecting a watch, order a watch or have it serviced.
“Shops are becoming hybrid spaces to suit the remote consumer lifestyle,” said Kayla Marci, analyst at retail intelligence company EDITED. “The experience trade is a major trend to lure consumers back into the store.”
Luxury brands, she said, have been scaling back their wholesale partnerships in recent years to sell directly to consumers. With their own stores, brands have more control over what they sell and how much they sell, resulting in higher profit margins.
“A lot of businesses big and small want to bypass the big ones and go straight to consumers,” said Pedraza of the Luxury Institute. “When you open a shop in a certain area, it creates a buzz.”
The RealReal opened at 3120 Knox Street in Dallas in April. The store takes over the space that used to house Kate Spade New York and is one of the new stores in the Knox District.
Jonathan Adler, the potter and designer known for his contemporary home furnishings, closed all eight of his U.S. stores at the start of the pandemic. However, he says demand remained strong as many customers – millennials and squillionaires alike – called for orders. Others bought by text message. A first-time customer recently lost $ 35,000 after receiving a company catalog in the mail.
With the reopening of the world, it has doubled physical locations with larger footprints. A new store opens at American Dream this month, followed by stores in Dallas and New York’s SoHo neighborhood.
“We took advantage of favorable rental conditions and the demand for our product,” said Adler. “We’ve also invested in our technology, but brick and mortar are still crucial. There are still people who just want to sit on their sofa before buying it. “
Abha Bhattarai, The Washington Post, WP Bloomberg
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