COMPETING WITH LUXURY BRAND RETAIL Philadelphia PA

There's been quite a buzz going on about the new "Place Vendôme valley," a stretch of several blocks along Manhattan's Madison Avenue. Along a 20 block stretch, some of the most influential brands in fine jewelry are finding new homes: Leviev, Ivanka Trump (Dynamic Diamond), Kwiat, Graff, and Chopard are expanding along that stretch, which already includes David Yurman, Chanel, Bulgari, Aaron Basha, Judith Ripka, Fragments, Ilias Lalaounis, J.J. Marco, and a host of other brands, including many fine watches, most of whom also have wholesale businesses.

Understandably, some independent jewelers are concerned by the retail expansion of such luxury brands within local markets. The current stampede of luxury brands to Madison Avenue is the most obvious example of the trend, but we could just as easily look to Worth Avenue, Highland Park Village, or Rodeo Drive to see similar developments.

What is the best strategy for the "High Street" independent jeweler in facing this challenge? Let's take a lesson from our retail fashion colleagues who have been dealing with this issue as Ralph Lauren, Chanel, and so on have been expanding their branded stores.

The first point to understand is why the manufacturers are expanding their own retail operations. Based on my experience consulting with luxury brands, their motivation is not principally financial. It is brand-related. For several years, manufacturers of true luxury brands have been concerned that independent retail outlets have not been delivering their brand's promise or experience to the luxury customer. This concern includes everything from the design of their account's stores to the final delivery of the wrapped merchandise.

Prada is an example. Prada's flagship store in lower Manhattan, which opened in 2002, was designed by renowned architect Rem Koolhaas specifically to embody the brand spirit of Prada. The interior architecture was revolutionary at the time. As soon as the customer crosses the threshold she experienced a new view of life and its style potential. This piece of Italy was not a Michelangelo; it was a Maserati. The sales associates were not curators; they were like skilled technicians who knew how to tune your attitude by tweaking your instep. Prada wanted this experience to be different than the experience you received at Neiman Marcus. They wanted you to leave thinking Prada, not an Italian Fortnight promotion.

Ralph Lauren is another master of style and lifestyle. Enter his branded flagship store (or his headquarters on Madison Avenue) and you enter a time machine that instantly transports you to a polo match at the Hamptons. It is a gentleman's or gentlewoman's world in which the ritual on the field simulates the controlled social competition in the stands. As one female client said, "When I put on my Ralph Lauren, I put on my game face." The Ralph Lauren brand is the uniform of American civilization.

The best brands (the ones with real heritage) know that independent businesses, from their logos to their layouts are geared to merchandise to the customer, not to a specific brand. They know that your sales associates are incented to romance and sell any six figure watch or a seven figure ring in stock. The customer who comes in enquiring about a Patek will be treated in a similar (hopefully excellent) fashion as the customer who inquires about a Jaeger-LeCoultre. You will deliver a good experience. But you will not deliver their brand's experience.

This is why these brands are coming to your home town. What is the best counter-strategy? Well, their strength is their weakness. They are brand-centric. You, if you are at the top of your game, are customer-centric. You have the flexibility to match the offering to the customer's best interests. You don't have to sell a Maserati to someone looking for a luxurious hybrid sedan.

Your relationship with the customer will have touch points at every important date on their calendar: anniversary, graduation, grandchild, birthday, and bat mitzvah. You will meet them at the auction held for their favorite charity. You will greet them by name, know their spouse has blue eyes, and know she would look fabulous in the necklace that just arrived no matter what the brand.

Done well, customer-centric trumps brand-specific competition at the local level every time.

Richard Baker is CEO and founder of Premium Knowledge Group, Dallas, Texas, a consumer research and intelligence company which tracks America's wealthiest consumers and their product and service purchasing patterns. He can be reached at rbaker@premiumknowledge.net.