Luxury Fashion Brands See a Future on the Retail Floor, Not Just Online

The perceived slump in sales of luxury goods has top fashion brands considering all sorts of strategies to pump up consumer engagement. 

Burberry has just transformed its London flagship store into a digitally-enhanced shopping experience that brings to life its Burberry World online store, following on the heels of Audi's flagship Audi City digital retail experience in London. This may be just the beginning of a trend to re-engineer the traditional retail store environment so that it entices and excites consumers who would otherwise choose online shopping.

Indeed, fashion brands are more committed to sales on the retail floor than one might think. Brands including Coach, Crocs, and Tumi are planning to open more stores of their own, but they haven't given up on the department store, either. At last week's Reuters Retail and Consumer Summit, Richard Dickson, CEO of branded businesses at Jones Group, stated that "We believe in the department store. Department stores have done a brilliant job continuing to energize and re-invent themselves in order to stay relevant."

With a portfolio of fashion brands that includes Anne Klein New York, Gloria Vanderbilt, Jones New York, and Pappagallo, Jones relies on its retail partners to help promote its brands. John Idol, CEO of Michael Kors, added, "There's a customer who's very dedicated to shopping at a Macy's or a Nordstrom or a Dillard's or a Lord and Taylor and that customer may or may not shop inside a specialty store."

Reuters cites Macy's as an example of a retailer that has gone through a significant makeover by focusing on fashion, with a $400 million makeover leading to the soft opening of the "world's largest shoe floor" (boasting more than 300,000 pairs of shoes) last month. The new department store trend is to cater to individual labels and become "houses of brands." What's more, Reuters reports, the new Gucci store opening at Macy's New York City flagship this fall will be "its biggest location aside from its own flagship."

Department stores are innovating in their own right. Hot on the heels of its Louis Vuitton collaboration, Selfridges London flagship just opened a redesigned men's department that houses thirteen brands in a concept architect Alex Cochrane describes as "sculpture park meets retail." Sculpted design elements are both fanciful and practical; faux solid stone divides the space while metal "trees" display clothes.

Meanwhile, Nordstrom, with over 230 stores around the U.S., is focusing on personalizing the in-store shopping experience. The upscale chain engages customers with "persona stylists" and plans to eventually eliminate cash registers in favor of mobile payment systems. In 2014, Nordstrom will launch its first Canadian stores, following the trek north of the border that Target is now embarking on, and last week launched its in-store partnership with Britain's Topshop and Topman retail brands at 14 locations.

Still, some upscale retailers are proceeding cautiously in new markets. Neiman Marcus, for example, is making a move into China, but it is doing so online instead of on the street, at the same time it's experiment with mass retail by partnering with Target this holiday season. Macy's is taking a similar tack with China by going online first, which "means Macy's and Neiman Marcus can learn more about Chinese shoppers' buying habits before deciding whether and how to scale up," reports Bloomberg.

In another retail trend, both luxury brands and upscale department stores haven't overlooked the fact that even the well-heeled are seeking bargains. That's why "luxury outlet malls" are currently a hot item in the U.S.

Neiman Marcus, Nordstrom, and Saks Fifth Avenue are all looking at luxury outlets as a promising channel; the outlet-branded "Nordstrom Rack" has already seen growth of over 7 percent.

Of course, virtually every luxury brand and upscale retailer has move into virtual sales — but that's not stopping them from pushing the envelope as far as they can in physical stores.