Does The Rich Niche Twitch To A Different E-Commerce Itch? And If Ditched, Do They Switch?

Written by Evan Schuman
October 23rd, 2008

As the U.S. economy collapses (temporarily mind you, but a collapse nonetheless) and holiday sales contract, the one segment rumored to likely fare best is merchants selling to the highly affluent.

But in what could be bad news for E-Commerce, those rich niche retailers tend to resist online sales more fervently than other E-tail segments. There are many reasons for that, including the perception that their customers don’t like online storefronts as well as in-store environment investments.

Simply put, retailers selling very high-priced items to a decidedly well-to-do clientele often invest much more heavily in creating a comfortable environment with an abundance of personal attention. There’s a reason retailers such as Nordstrom, Neiman Marcus, Armani, Coach and high-end jewelers tend to be the last to embrace kiosks, mobile-commerce and online promotions.

Consumer electronics (large-screen TVs) and luxury automobile dealers tend to be the exception because the nature of their products lends them to demos, multimedia and very extensive spec sheets.

Why the perceived resistance? It’s not merely age. In a survey conducted this summer by Google, wealthier customers were younger than some might expect. The average age of the "ultra-affluent" (household annual income of more than $250,000) was 43, while the average age of the survey millionaires (household annual income of more than $1 million, but those surveyed had an average monetary worth of $50 million) was 37.

For the record, Google’s survey—done with Unity Marketing—only accepted consumers between 24 and 64, so if there were lots of affluent consumers 65 and older, it would have excluded them. That said, 37 is still fairly young, and it shouldn’t explain technology resistance.

The resistance seems to be based on the association of kiosks, mobile and online with a do-it-yourself mentality, as though the retailer is pushing its work onto the customers. On the very younger end—your Gen Y shoppers—consumers who have grown up with the Web have the opposite attitude; they believe they can shop online, work a mobile transaction and handle a kiosk faster than an associate can help them.

This gets into the perception versus reality issue, but in two ways: the consumer’s actual perceptions about retail technology and the retailers’ perceptions about those consumer perceptions.

In other words, will high-net-worth shoppers truly feel put off by E-Commerce, kiosks and mobile commerce or do high-end retailers simply believe that their consumers would be so put off?

John McAteer, Google’s head of retail, argues that a lot of luxury goods retailers have convinced themselves that their customers would resist online. "They think their consumers are reading magazine" glossy ads and that Web advertising is too pedestrian for them, McAteer said, "despite the fact that nearly all of the millionaires (in Google’s survey) classified themselves as Internet shoppers."

He argues that the down economy will force the issue, as high-end goods retailers will have little choice but to use more efficient technology, for both marketing and running their stores directly. In-store inventory updates are going to be one of the key drivers, McAteer said.

I think many of those high-end merchants might be doing the technology a disservice. Executed properly, it can make for a much faster experience and few value their time more than the working rich. Forgive me, but that’s intended to distinguish between earned money wealth—such as Wall Street traders (well, that’s now an out-of-date example. Better make it surgeons or CEOs)—and old-money wealth, inherited through the ages.

Then again, the faster time issue may also prove to be a retail problem. In a luxury sales environment, time is not nearly as much of an issue as comfort, relaxation and enjoying the experience.

Is there a fear that a faster, more efficient experience would undermine the carefully cultivated atmosphere? Would it undermine upsells? Would it make the shopping experience more rushed and less pleasant and potentially drive customers into the arms of a more relaxed rival?

Or, worse yet, will those consumers be so comfortable with online that they’ll start to like it and begin buying their Rolexes and caviar from Amazon?

A recession can influence retailers to do many things they’d otherwise resist, but will it drive them into the arms of Twitter, BillMeLater and YouTube? Even worse, what if the recession sharply reduces the number of ultra-affluent altogether? It’s enough to turn your personal shopper into an avatar.


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