After ‘Perfect Storm,’ Luxury Titans Foresee Some Sunshine Ahead

Italian luxury executives said they saw a strong pickup in June’s sales at the Altagamma conference in Rome on Friday.

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Cagnoli also noted that the transformations of the market should not be underestimated and pointed to a series of core changes that have shifted focus from expansion to consolidation, from global dominance to local attention.

He challenged general market assumptions such as: customers gravitate towards larger, strong brands; product diversification is a surefire route to increased sales, and that store openings continue to be the right strategy.

“Less walls, more knowledge,” Cagnoli said. “It’s now more important to know your customers better.”

Kristine Miller, director of Bain & Co. San Francisco, agreed that there was an abundance of square footage that the market could not absorb. She said sales per square foot dropped to $400 in 2001 from $734 in 1971.

If companies can’t rely on store expansion to fuel growth, then they must rely on building customer loyalty and targeting the local clientele. Despite increasing pressures from a weak dollar, retailers were convinced that consumers were willing to pay top price if the product was there.

“We have to work harder to create demand and to produce products that consumers want,” Tansky said. “The affluent customer is set to make a substantial move forward.”
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