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Fashion Houses Have Designs on Online Luxury Buyers

Friday, 18 Feb 2011 | 3:26 PM ET

As New York Fashion Week came to a close, Nordstrom said it would acquire online retailer HauteLook, offering yet another example of the shake-up that is going on in the designer goods market.

A mdoel walks the runway for Luca Luca Fall 2011 at The Stage at Lincoln Center, New York City.s
Photo: Oliver Quillia for CNBC.com
A mdoel walks the runway for Luca Luca Fall 2011 at The Stage at Lincoln Center, New York City.s

HauteLook, an online retailerthat offers limited-time salesof designer goods, and its rivals (Ideeli, Gilt Group, and Rue La La) have gained a large following by providing exclusive discounts of high-end brands to their members.

In doing so, they have helped to prove that there is a large market for luxury goods online.

The flash-sale Web sites came on the scene during the recession and appealed to both a luxury consumer, who was feeling a little guilty about indulging at a time when others were suffering, and an aspirational consumer, who had a hunger for high-end goods, but needed a good deal to satisfy their desire. At the same time, these sites also helped recession-hit retailers get rid of excess inventory.

The interest in flash-sales sites as well as the continuing march of shoppers—especially more affluent shoppers—to ecommerce sites is prompting many high-end fashion designers and retailers to take another look—or even a first look—at their ecommerce strategy.

"There was a myth that when you are spending that much you want to try it on, feel it, touch it," said Sherif Mityas, a partner in A.T. Kearney's retail practice. But the fact is within the fast-growing online shopping channel, the sale of luxury goods is the fastest-growing segment, he said.

This means those who sell designer fashion and accessories are "scrambling to get online," Mityas said.

Luxury fashion house Luca Luca is one such designer, who is working to build an ecommerce Web site.

The designer had initially been hesitant to sell Luca Luca's products online because the brand wanted to make sure it was delivering the kind of service its customers expected, said Yildiz Blackstone, president of Luca Luca.

"Our customers still appreciate the one-on-one service we provide," Blackstone said. But there also was a realization that providing these products online was yet another way to provide a service.

"Time is our enemy," Blackstone said, noting that Luca Luca's customers are very busy and the company needs to "adapt to their lifestyle."

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Increasingly, consumers are expecting a seamless experience no matter how they reach out to a retailer, and it can be struggle as there are so many ways for customers to reach out. In addition to brick-and-mortar stores and a company's own Web site, consumers are increasingly using social media and mobile devices to shop.

At all of these touchpoints, designers need to keep the experience consistent with their brand.

"That's unlocking the Holy Grail," Mityas said.

And the task grows more complicated as the general public becomes more in tune with the fashion shows and buzz generated by New York Fashion Week and other similar events.

"It's only going to intensify," he said.

Ideeli, the fastest growing flash-sale retail site, harnessed the buzz of Mercedes-Benz Fashion Week to host sales timed to go live on the same day as the designers were showing at Lincoln Center. The site is an official sponsor of the event, and CEO Paul Hurley felt hosting the sales was a very concrete way to allow its members to be able to act on the news they were hearing from the shows.

"We're trying to provide the bridge (to our members)," Hurley said. "They are very excited about Fashion Week."

No doubt designers will also be looking for the right way to have the online buzz work to their advantage.

"I think it's healthy for fashion to be more interactive," he said. "There is a lot of energy coming from a lot of places...It's also good for business."

So it is likely that there will be a lot more experimentation with ecommerce as the year progresses.

"This really will be the year of trial and error," Mityas said. "Some are going to stick and some are not."

Nordstrom has tended to be out in front of its rivals, but it had lagged in the flash-sale arena. Both Saks and Neiman Marcus had hosted their own flash-sale events.

But Nordstrom has been ahead in other areas. The retailer has integrated its online and in-store inventory systems to allow customers to see what is available at specific stores. The company's Web siteincludes a blog and a product review system so that customers can see how others are rating products.

According to Mityas, Nordstrom has been able to reach out to its customers with personalized letters and assign personal shoppers to some of its best customers.

"That is taking service to a whole other level," he said. "But that is what you have to do to differentiate yourself."

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