October 30, 2012
The hurricane brewing in the Northeast region of the United States has brought luxury retail and travel to a halt, but retailers are not likely to suffer as consumers shift purchases to ecommerce or are willing to wait it out for the in-store experience.
While luxury brand hotels in the affected regions could remain closed this week due to Hurricane Sandy's arrival and after-effects, retailers can potentially sustain revenue during the storm through online and mobile commerce. However, affluent consumers and visitors to New York will likely postpone planned store visits and purchases in favor of storm preparation and only return to the in-store shopping environment that they prefer when they can.
“In terms of net, I do not think there will be much impact,” said Steven Dennis, president of SageBerry Consulting LLC, Dallas, TX. “Certainly, the next few days will be hit very hard, but that is likely just to delay purchases rather than eliminate them.
“I think we will see a minor shift toward ecommerce,” he said. “Most purchases will just be deferred several days or more depending upon how long stores are closed, but there will be some complete losses from the tourist business.”
Closing up shop
In New York, for instance, luxury retailers such as Bergdorf Goodman and Saks Fifth Avenue closed their doors Monday, Oct. 29 in preparation for Hurricane Sandy.
In fact, Saks is closing numerous store locations in the Washington, New Jersey and Boston markets.
New York residents as well as visitors to the area are being urged not to leave their homes. Those living in low-lying areas have been asked to evacuate to higher ground or move to other neighborhoods in the city or outside.
Therefore, retailers could lose out on sales during these days. But this will not have a huge impact on overall sales, experts say.
"Fortunately, this storm is hitting the East Coast on Monday and Tuesday, which are relatively weak times for retailing," said Pam Danziger, president of Unity Marketing, Stephens, PA. "If power outages are minimized, this storm should not have too big an impact on luxury retailing.
"However, if major malls and retail centers lose power for an extended time, say, through the weekend, then these retailers will take a hit to their sales," she said.
Another industry observer agreed. Retailers will not see a net loss, per Milton Pedraza, CEO of the Luxury Institute, New York.
In general, consumers who want to make a purchase in-store will likely postpone their purchase and make plans to come back when the storm has subsided.
“By mid-week if stores start to open, the demand will still be there,” Mr. Pedraza said.
“There will be very little fall-off from store closures, but 10-20 percent of consumers who had intentions to purchase could hold back even more or forget about it,” he said.
“The longer it takes to recover from the hurricane, the more likely retailers are to have some loss.”
Luxury retailers are taking to social media to share storm-related messages and store closure updates.
For instance, department store Bergdorf Goodman seems to be taking this time to assert its standing as a New York lifestyle brand.
The retailer posted quite a few tweets yesterday. Some gave examples of what New York residents were doing for fun during the city-wide shutdown.
Department store chain Nordstrom, which does not have a New York location, posted on Facebook yesterday to wish consumers safety and link to its store locator that showed altered hours and closures.
Furthermore, the most common message among retailers is a push for ecommerce while retail stores are closed for Hurricane Sandy.
Some of Bergdorf’s tweets gave the phone number to customer service and linked to the department store’s ecommerce site.
Consumers who would normally seek out the in-store shopping experience will probably browse via online and mobile, but digital will be the primary channel for commerce during the storm, per Mr. Pedraza.
“I think that mobile purchasing is still relatively new, especially for luxury items,” Mr. Pedraza said. “It will not have a large positive impact, at least in terms of luxury.
“Luxury is not as spontaneous,” he said.
Barneys New York is also encouraging ecommerce during the Hurricane Sandy.
The retailer sent out an email to its database yesterday with the subject line “A Guide to Staying Warm and Safe at Home,” per Jordan Phillips, founder and director of Lure of Luxe LLC, New York.
The Barneys email showed an umbrella, throw blanket and backgammon set. It contained a “shop now” button.
“Store closings are not ideal for brands, but all retailers will benefit if they make the most of the situation,” Ms. Phillips said.
“Hurricane Sandy has received international media attention, so it provides New York brands and retailers with an extraordinary opportunity to connect with consumers from a digital perspective,” she said.
“Natural crises provide luxury brands an opportunity to connect with clients emotionally through providing stellar customer service and localized philanthropic efforts.”
On the other hand, losses in the travel sector are something that hotels cannot get back, Mr. Pedraza said. But luxury hotels can arrange to transfer guests to other brand locations in areas that are on higher ground.
There will not be that large of an impact unless damage from the storm causes extended closures.
“There is no question that travel assets will expire,” Mr. Pedraza said. “You cannot get that use of a guest room back again.
“It is time-sensitive,” he said. “These hotels are going to see a loss, but hopefully not a huge one.”
Luxury hotel brands can keep the focus on customer service during a natural disaster so that customer retention is not diminished.
For example, the Trump International Hotel & Tower across from New York's Central Park is waiving cancellation fees. The hotel brand posted this update on Facebook and also told consumers that on-site restaurant Nougatine would remain open all day yesterday.
“Regardless, any natural disaster provides an opportunity for luxury hotels to shine, and prove to their guests that they offer an added level of comfort and service in times of crisis,” Ms. Phillips said.
Tricia Carr, editorial assistant on Luxury Daily, New York