The Luxury Link Of Shopping And Travel
Many owners are catching on to the fact that travelers want to buy luxury goods.
Rosemary Rice McCormick

Shoppers seek visits to South Coast Plaza in Orange County, California, because they equate the center with luxury.

The luxury centers of the U.S. have names that evoke the exclusive élan of five-star resorts:  South Coast Plaza, Ala Moana, Fashion Show, King of Prussia, NorthPark Center, Tysons Corner, Scottsdale Fashion Square, Biltmore Fashion Park, Carmel Plaza, Beverly Center, Cherry Creek, Woodbury Common Premium Outlets, Desert Hills Premium Outlets, just to name a few.  The word “mall” is seldom spoken. These are among the world’s top-performing shopping centers, owned and operated by the most successful developers. Not surprisingly, they are also active tourism centers, generating 25 to 65 percent of total sales from high spending domestic and international visitors.

Travel and tourism provide links to understanding and capturing the luxury market. Upscale shoppers view the luxury retail experience as a vacation. Luxury goods are significantly impacted by trends in tourism. Global tourism is expected to increase significantly over the next 10 to 15 years. The $165 billion luxury goods market represents nearly 18 percent of total retail sales.  Apparel represents the largest share of luxury goods sales. Europe (41 percent) and the U.S. (30 percent) are the most important markets followed by Asia (25 percent).  Japanese tourists traveling to the U.S. have returned to historic pre-9/11 levels and Chinese tourists represent an enormous new opportunity for shopping travel. These points were presented by Richard Baker, CEO of Premium Knowledge Group, at the Luxury Retail Retreat presented by Shop America Alliance in 2006.

The luxury retail sector has consistently outperformed all other retail sales growth in recent years. This trend is epitomized by Taubman Centers, whose shares advanced more than 46 percent in 2006, while most mall REITs were up 20.7 percent.  As reported by The Wall Street Journal (January 17, 2007), “Taubman, the owner of 23 malls in 11 states, may be succeeding because of its special niche — high-end malls with high-end anchor stores including Nordstrom, Neiman-Marcus and Saks Fifth Avenue.  High-end shoppers give Taubman license to charge what are reported to be the highest rents in the industry, averaging $42.18 a foot compared with an industry average of $30.88 a foot.”

Who are today’s luxury shoppers and what do they want?  How do they spend their precious time and seemingly unlimited money?  This topic was explored at the recent Shop America Tourism Conference by Alf Nucifora, chairman of the Luxury Marketing Council of San Francisco, who oversees the West Coast chapter of this global organization representing 700 of the world’s leading consumer luxury brands. Luxury Marketing Council members convene monthly to exchange ideas and develop exclusive marketing partnerships.

Personal affluence is defined by The Luxury Marketing Council as having at least $1 million in liquid assets, not including home value and retirement savings. In the U.S. alone, 9 million people meet that definition, and annually they spend 2.7 times more on leisure travel than the mass market — $6,223 versus $2,341. “Affluent Boomers are traveling more than ever as they hit retirement and grandparents are the force behind popular multi- generational travel,” says Nucifora. “Trips are longer and often themed or educational. Generation X will represent 32 percent of the U.S. market by 2020 and will outspend the Boomers by 18 percent in luxury goods. They are not intimidated by luxury, are fearless about spending and have an impulsive approach to travel. To Generation Y, luxury will mean saving time and reducing hassle.  And there is one more market to consider, the Aspirationals. They aspire to the good life and have high household incomes, but still live paycheck to paycheck. They will splurge on travel, dining, spas and recreation. They are your future!”

South Coast Plaza, Orange County, California.

The clarity of brand positioning is also important. Names like Ritz-Carlton, Porsche, Tiffany and Rolex all immediately bring to mind luxury.

“Products need to be authentic; arrogance in presentation is out,” says Nucifora.  “Luxury customers know what they want in regard to a product and it should be unique, customized and personal. Your programs should be driven by customer relations management and superior concierge services.  Your employees should be your partners in producing that level of customer service.”

He added that branding must be information-intensive. Online spending for U.S. leisure travel is projected at $100 billion by 2010 and will account for 34 percent of all online spending. 

“You must develop trust to get to brand loyalty,” Nucifora advises. “That demands constant communication and authenticity.”

Macerich is a leader in the circle of savvy developers expanding and enhancing their luxury shopping portfolios. Westcor, a wholly owned subsidiary of  Macerich, continues to capitalize on the luxury market by creating luxury shopping packages that offer unique experiences, personalized services, limo transportation and more. 

These packages incorporate the best-of-the-best in shopping from one-of-a-kind boutiques to high-style European stores at Kierland Commons, Scottsdale Fashion Square, Biltmore Fashion Park and The Borgata.

“Research has shown Scottsdale and Phoenix are welcoming a cultivated visitor and, knowing shopping is the Number 1 travel activity for visitors, we are taking our shopping packages to the next level,” says Kate Cavaliere, senior manager of tourism for Macerich. “It provides a great opportunity to highlight our high-end and one-of-a-kind specialty retailers that are becoming synonymous with Scottsdale.”

Woodbury Common Premium Outlets in New York is home to the world’s largest collection of designer outlets.

Value is also important to the luxury shopper.  The top retailer of fine wines in America is Costco. Luxury shopping is not limited to upscale urban malls and lifestyle centers. The designer outlet stores at the more than 30 Chelsea Premium Outlet Centers across the country attract millions of shoppers a year to destination centers. Chelsea’s centers include Desert Hills Premium Outlets, near Palm Springs, California, Las Vegas Premium Outlets and Woodbury Common Premium Outlets, an hour north of New York City. Woodbury Common is home to the world’s largest collection of designer outlets including Gucci, Dior, Fendi, Chanel, Salvatore Ferragamo, Yves St. Laurent and more. Shoppers often arrive by limo and depart hours later, laden with shopping bags.

“The rich and famous come to our centers because everyone loves getting a great deal, but we also serve shoppers who get their first taste of luxury by shopping with us,” says Jean Guinup, senior regional marketing director for Chelsea.

Eighty percent of today’s millionaires are “new money.” They are actually learning to define luxury from brands, experience and one another. What drives their consumption of goods and services? Some experts believe that consuming at the higher levels of income/wealth conveys messages beyond language. Goods or assemblages present a set of meanings read by those who know the code and the secret is in their totality. Attributes become more important as affluence increases. The experience becomes as important as the product.  This customer seeks and expects brands and products that:

• Are made to precise specifications

• Reflect craftsmanship

• Have sophisticated detailing

• Have a store atmosphere

• Offer personal sales assistance

• Offer service.

As a guru of luxury marketing, Nucifora’s bottom line is: “The rich are different. The luxury market is growing and changing at a very rapid rate. We are just starting to gain in-depth understanding of the luxury shopper traveler. This knowledge will be a major strategic advantage for the key players involved.” 

To facilitate the high level of interest in the luxury retail and travel sector and share new information and opportunities, Shop America Alliance and the Luxury Marketing Council will present the LuxeShopTravel Summit on August 9-10, 2007, at the Westin South Coast Plaza.

Rosemary Rice McCormick serves as president of Shop America Alliance and McCormick Marketing, a retail and tourism consulting firm.  She can be reached at MMinNapa@aol.com. Carolyn J. Feimster, president of CJF Marketing International, a retail and tourism consulting firm, also contributed to this article.


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