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Jun
2015

Luxury Retail Service in China, the missing link

The first ever multi-brand luxury retail service audit in Shanghai, shows room for improvement and an opportunity to dramatically increase sales.

2012 was a tipping point, and 2013 is the year of consolidation for the luxury market in China, the old rules have changed, and new ones now apply. Service in China’s luxury stores has typically been lower than many other places in the world for many reasons, but it could easily be improved and used as a differentiator in a more difficult market.

Our audit team set out to determine the current level of luxury service in Shanghai across 39 of the best-known luxury brands within the Watches & Jewellery, and Fashion & Accessory sectors.

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Management summary

This report summarises the findings of the first ever, independent multi-brand luxury store audit carried out in Shanghai across the Watches & Jewellery, and Fashion & accessory sectors. 39 stores belonging to 39 individual brands were audited over a two-week period, by the same audit team, using consistent audit criteria to ensure repeatability of the data gathered.

The purpose of the audit was to benchmark luxury retail service in what is regarded as China’s most cosmopolitan city that is home to many of the most sophisticated and experienced luxury shoppers in the country. Luxury retail service has for many reasons not been the highest priority for luxury brands in the past, but after the significant change in market dynamics experienced in H2, 2012, brands operating in China have begun to adapt and change their operational strategies, and we aim to assess retail service in this context.

As a business, we have always had a strong view that great luxury retail service is a key contributor to both short and long term sales, and that for brands in China, now is the time to use in-store service as a key differentiator and a means to develop long term customer loyalty. The operational landscape has become more competitive for brands in the past 12 months, and consumer attitudes have also matured and their experience broadened to a point where they cannot and will not be treated in the same way as they were in the past by luxury brands.

In this report, we focus on execution of the core luxury service standards that we would expect to be delivered by any luxury brand of stature. We did not take the audit beyond this point because delivering the basic luxury level of service would be a sound base from which a stronger foundation could be built in future. Our findings did not surprise us in general terms as they were supported by our own previous experiences and the comments of consumers made directly to us, and on social media sites. What was surprising was the inability of many stores that were visited to deliver to ‘basic’ retail service standards, as we would have expected 100% conformance to these criteria even if there were weaknesses in ‘luxury’ service. Many premium or medium grade retail stores in the city would in our experience regularly deliver to such a basic standard and in fact on occasion above it.

Note: The actual performance results of the stores audited for this report remain anonymous within it, and performance data shown graphically is for comparative purposes only.

Exhibit 1 below is a graphical summary of the audit findings. Throughout this report, with the exception of examples of good practice, all brand names have been removed for confidentiality reasons.

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General findings

No brand attained what we regard as basic luxury service standards, and many failed to perform well in delivering basic good service the level of which can be found in many less prestigious stores.

Variations between the best and worst brand performers is considerable.

No brand delivered its basic service aspects completely correctly: the most common points of failure can be found below.

Brands are clearly letting their customers down by failing to deliver the level of service that reflects and reinforces the brand value that they portray in the media and through other channels.

Of all the stores visited, approximately 30% would in our opinion, have failed to ensure a customer would have remained within the store because their initial reception of the client was

  • so poor, and they would have walked out immediately. For the sake of consistency and direct comparison, the audit team carried on with their task to evaluate all 20 points of assessment.
  • Basic areas of retail service failure were
  • Staff chatting amongst themselves around the store, before and after customers entered.
  • No visible positive attitude when performing their job.
  • A failure to engage with the customer unless directly approached.
  • A lack of sincerity in their facial and body language when approaching a customer.
  • Poor attention to detail in terms of store environments that were untidy or unclean in some cases.

Comparison of store performance

The graphs following demonstrate the performance of the brands across F&A and W&J sectors, for confidentiality reasons, their identities are anonymous. The 0% dotted line below indicates the basic retail service criteria which we would reasonably expect all brands to attain a score of 90%-100%. Above this line we move into the attributes of service that would be regarded as basic luxury service measures that would differentiate service of a minimum level expected in our view to be delivered to customers in any reasonably good store.

The first observation to make is how badly in some cases, retailers fail to deliver even basic service standards, the worst offenders in both sectors delivering little more than 50% of the required attributes. The same stores also barely delivered any experience attributes within those attributed to basic luxury standards.

Broadly speaking the ratio audit criteria of basic service to basic luxury for the audit was 40/60.

Summary

While luxury brands have invested heavily to drive customers to their retail stores, now is the time brands should invest in their front line retail staff, who are the true ambassadors of the brand, and who are the individuals who bring in revenue and build a real and tangible connection with consumers.

We believe that there are huge opportunities for improvement in luxury retail service in China; an improvement would provide brands with immediate short-term revenue gains and long-term sustainability.

Principally, it is important for the operational management of luxury brands to introduce a genuine service attitude and make sure the retail team understand its importance, and how service can help them achieve their sales objectives. It is crucial to make this change in staff attitude so that they realise that it is their duty to receive every customer passing through their doors with consistent service representing the brand standards, rather than making assumptions and being disrespectful.

The audit results clearly demonstrate that the basic service skills in every store still need to be enhanced. Getting the basics right will build a sound foundation for service improvement, and help the retail staff to develop the true luxury service, that is missing at this time.

We would argue that is never wrong to over service a customer. During our audit, there is one brand that provided service over and beyond what would be considered its brand status and values. This gave the customers a very good reason to buy, and a feeling of pleasure.

Developing a unique style of luxury retail service that is so recognisable is now an opportunity in China, as it will differentiate the brand and attain standards far ahead of those currently on offer. The starting point though, must be delivering good solid basic luxury service, which as we have seen is still some way off, yet attainable in China given the right management focus and attitude.


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