Summary
Niche marketing along with a surplus of goods offers exclusive online resellers short-term business opportunities. Here's more.
Analysis
While spending for luxury items has declined, many consumers continue to pay higher prices for high quality merchandise and premium brands, especially if it’s behind closed doors so to speak. Clearly the uber-rich have continued their traditional buying habits, snapping up great deals as prices for most goods have declined. For instance, while the jewelry industry has been one of the hardest hit retail sectors with sales declining from 15% to 35% over the 2008 holiday season, reports suggest that anonymous buyers for very large, rare, diamonds has actually increased. The rich know a good deal when they see it and they have the money to take advantage of the opportunity.
Obviously there remains another consumer segment like the uber-rich that are willing to buy luxury brands and quality merchandise if the price is right and the transactions hidden from the ordinary public. That is, provided they are also computer savvy. Gilt.com and RueLaLa.com make such an offer for with the added cache’ of a members only club.
Certainly, designer names like Elie Tahari, Alexander McQueen and Manolo Blahnik aren’t household names and carry premium prices even when discounted. But they also appeal to an affluent, eclectic consumer, which begs the question whether the online membership club concept can be generalized to better known luxury products. For instance, if the combination of quality and value is a key factor for success, then would Blue Nile benefit from the added element of being a membership only club? Probably not, in part because its critical mass has exceeded size necessary to sustain the business and Blue Nile doesn’t really sell branded merchandise either.
In reality, both Gilt.com and Rue La La are great examples of guerilla marketing in the Internet age. Niche players aided by the fact many luxury brands are overstocked and under distributed probably mean these web site businesses will prosper, at least until the excess inventory is absorbed into the market. The question is will designers fabricate new inventory to serve this niche market at the expense of their traditional distribution? Probably not, but that doesn’t preclude the opportunity to offer lower priced lines to online resellers, while maintaining price points for their traditional customers.
