Positioning Your Firm as ‘Luxury’ or ‘Premium’

We can no longer rely upon the “easy button” to generate sales or traffic in our showrooms. Housing remains mired in a slump likely to continue because of overstocked inventories and more rigorous lending standings. We can sit by and wait for the good times to return, or we can become proactive.

Chip Conley, CEO of Joie De Vivre Hospitality, understands the current economic environment. The keynote speaker at DPHA’s Seventh Annual Conference, to be held Oct. 24-26 in Phoenix, he faced similar market conditions in 2001 and was not sure if his chain of northern California boutique hotels would survive. Conley discovered that the same old tactics and business approaches were not going to pull Joie De Vivre from the brink of bankruptcy.

Conley says, “We need to restock our collective toolboxes and recall the reasons why we entered the decorative plumbing and hardware industry.”

I’ve heard from numerous industry peers that they became involved with the industry to carve out a niche, to capitalize on opportunities to perform better than what was currently available in their marketplace or to introduce new products and services to a market area that was not served or was under served. Many of us entered this industry to capitalize on opportunities and we discovered not only could we penetrate new markets, we could make a healthy living doing so.

Think back to the time when you opened your showroom or expanded new lines and market segments. Recall the excitement, the fear and the insatiability that you felt going to work each day. You likely invested a substantial portion of your energy, time and resources to enter the luxury/premium niche.

The processes used to establish your line, your showroom or your agency are similar to actions that you need to take to respond to our current economic environment.

We are all looking to exploit the market. Unlike the past, however, there has been an explosion of new and different products. The independent showroom faces much stiffer competition from multi-branch wholesalers-turned-retailers, big-box stores, the Internet and new entrepreneurs with fire in their eyes believing that the high-end market represents the promised land. You need to ask yourself, what is new, what is different, what new territories do you plan to explore?

Product differentiation rarely exists and, when it does, distinguishing characteristics and styles are short-lived.

Luxury vs. Premium

Today, the marketplace is not defined by products per se but by the story behind the products and the ability of manufacturers, representatives and dealers to create emotional bonds with consumers at all levels of the supply chain.

Our industry has become bifurcated between luxury or premium providers. Luxury is defined as very wealthy and comfortable surroundings; something desirable but expensive; very pleasant but not really needed in life; very expensive.

Premium, on the other hand, relates to something in scarce supply that is valued above its normal value.

Competitive necessities require independent showrooms, and the representatives and manufacturers that serve them, to be in the luxury business. Luxury is about being fresh. Manufacturers, representatives and dealers need to move beyond the product. It’s not the product that sells; it’s the story behind the product and the experience that the product delivers. No one really needs a $1,000 faucet or $20,000 tub. Selling in the luxury market demands creating an environment that enables consumers to connect with products so they feel they “can’t live without” them. Sustaining success in the luxury world requires creating emotional attachments.

Customers who are emotionally attached to a product or service will spend three times their preconceived budget to satisfy their emotional needs.

Chuck Williams understood this principle better than most and tied the success of his high-end kitchen products retail empire around the ability to tell stories behind the products featured at Williams Sonoma. Williams understood that it’s not just the merchandise, but also the in-store experience that attracted and retained customers. Williams was a master at telling rich and compelling product stories. Today, almost everything on display is presented with a sense of place, history, culture or adventure.

Williams and fellow retail maverick Gordon Segal, founder of Crate and Barrel, developed innovative techniques for dramatic visual merchandising and presentation that enable the stories behind the products to be told.

What stories do your business, literature, presentations and showroom tell? Our businesses cannot survive without objects and stories. Our products need to be luxurious, and we need to have a story that resonates with our customer base.

Those positioned as premium players will find it increasingly difficult to remain competitive. Manufacturers that don’t provide a steady stream of new and different products most likely will see their markets erode. Similarly, showrooms that do not provide fresh, new perspectives, product lines and visually stunning retail experiences will be mired in a premium marketplace distinguished almost exclusively by price.

The New Market

Twenty years ago, distribution was much easier. Manufacturers relied on reps to sell to showrooms that, in turn, would distribute to building and design professionals and the trades. In today’s market, though, manufacturers are trying to speak to all levels of distribution: wholesalers, specifiers, designers, architects, showrooms, homebuilders and consumers. Reps and showrooms increasingly are asked to call on designers and specifiers.

Our competition has also changed. We no longer go head-to-head against the independent retailer or big-box store within a specified marketing territory. Our competition also includes manufacturers and distributors of floor coverings, lighting, electronics and other items for the home.

The decorative plumbing and hardware industry today calls for more creativity and communication than ever. However, there is little synergy among the three principal links in the supply chain when it comes to communicating a unified and coherent message. A good team comprised of a manufacturer, representative and distributor is tough to beat, but each player needs to be up to speed in both image and knowledge.

There is a need for more synergy in the distribution channel as well.

The tough economic environment teaches us that we need to re-energize our businesses constantly and approach our merchandise mix, marketing, operations, and related issues with the same enthusiasm, drive and passion as when we first hung out our shingles. When you get to the point where you have made it, you need to start anew. If your showroom is not exciting, customers will go elsewhere.