Are Luxury Retailers Doing Better Than Assumed This Holiday Season?

Listening in on Neiman Marcus Group CEO Burt Tansky’s analyst conference call on December 9, one couldn’t help feeling depressed. Tansky, who oversees upscale department stores Neiman Marcus and Bergdorf Goodman, said that the luxury sector’s “challenging retail environment” was likely to go on for “an extended period of time.”

In the company’s most recent quarter–ending October 31, 2009–it saw year-over-year sales decline by 11.9% (to $868.9 million) and y-o-y profits shrink by 34%. In November, y-o-y comparable store sales decreased by 9.7%.

Yet if data from online personal finance service Mint.com is any indication, sales during the holiday season should be okay. Mint tracked spending per user at four retailers over the last year, and you can see that there’s been a significant increase. Definitely not as good as during the boom years, but okay. Especially for Nordstrom, which began providing online shipping to 30 different countries last month.

While it’s a little disconcerting that Banana Republic is included in the luxury mix, Mint does have access to thousands upon thousands of credit card and bank accounts, so it’s safe to say that these numbers are pretty accurate. Maybe there’s hope for the luxury retailer after all.

Why Hermes Is the Apple Of Its Industry

As a lifestyle reporter at Forbes and Forbes.com, I covered fashion and luxury industry news, but I also investigated trends in other areas of design, such as home decor and letterpress printing. I’ve always had a personal interest in product design, so I searched for stories in that world well.

Here’s what I learned. No matter what area of industrial design you’re examining–from cars to kitchen gadgets to medical equipment–the designers, marketers and executives at these varied companies live by one mantra: “I want to be the Apple of my industry.” In fashion and luxury, upcoming brands prefer the saying “I want to be the next Hermes.”

Hermes and Apple are very different companies. One is 172 years old, the other is just 33. Hermes makes money by employing technology similar to what was used when it was established in 1837. Loyalists love that each Hermes leather saddle, bag or boot is handmade in France with only the finest materials. The company even opened its own crocodile farm in early 2009 to keep up with demand for its exotic-skinned belts and purses. Conversely, Apple is lauded for advancing technology and spurring seismic shifts in specific industries. The iPhone, for instance, was a game-changer in the mobile market.

But as different as they are, Hermes and Apple operate on a similar platform: Offer the consumer something that they can’t get anywhere else. That’s why Hermes’s 10.2% year-over-year sales increase in the third quarter of 2009 (to $671.4 million), announced today, doesn’t surprise me. (Wholesale trading isn’t as strong as sales at the group’s own stores, which saw a y-o-y increase of 12%.)  Of course, a lot of that growth is in China, where 55 people are said to be made millionaires each day. But Hermes execs also remarked that sales in Europe and the US–or the “more mature” luxury markets–were also strong. (Competitors LVMH (Moet Hennessy Louis Vuitton) and PPR (owner of the Gucci Group) saw y-o-y sales decrease by 3% and 7.6%, respectively, in the third quarter of 2009.) Apple’s most-recent quarterly sales were up 25% year-over-year to $9.87 billion.

Those numbers–bad economy or not–could make any entrepreneur want to aim to be the Apple or Hermes of his or her industry. Is it a good idea? Probably. Just try to remember what too many companies–big and small–forget: It’s not just the marketing that makes Hermes and Apple so successful. It’s the product. A product that outshines any and all competitors in terms of quality and performance will almost always succeed. Seems like common sense, but there wouldn’t be so much crappy stuff out there if it was.