How to sell luxury products? An interview with Wojciech Kopciewski
What do customers who buy luxury products pay attention to? How to make sure to not only offer the thing itself but also the story behind it? What to analyse to ensure the appropriate positioning of a luxury brand? These questions will be answered by Wojciech Kopciewski, co-owner of Artebrands.
Aleksandra Hołownia, Dealavo: Artebrands is a distributor of luxury brands, including Alessi. What is unique about the determination of pricing strategies for prestigious products? How are they different from other product categories?
Wojciech Kopciewski, Artebrands: In our business, we sell products to people who are not price-sensitive. If we sell a citrus squeezer, we sell more than just a squeezer. We also sell the history behind it, the design and quality. It is a squeezer that will decorate any place you put it in, not just an object to quickly hide away in a drawer.
When we took over this business in 2018, there were many sellers who tried to compete by price, as a result of which the market functioned with low margins. It was necessary to educate a large part of the market – the example of the automotive industry comes to mind here – even Ferrari would lose some of its charm if it had been discounted at all times. In the business of luxury products, it is important to communicate the history and emotions to the buyer, not to mention the quality of service, instead of competing with price. The customer wants a product that will give them a story they can tell to their friends. It will not be enough to say that the squeezer “is used to squeeze lemons” or “was bought with a discount of 2 euros”.
In the case of the Alessi brand, we can tell endless stories about our products. For instance, the Juicy Salif squeezer was made when Philippe Starck was eating squid at a restaurant. This inspired him to create the design of a squid-shaped squeezer on the menu. It eventually became an icon – appearing in several films and being shown in museums all over the world. These are the aspects people appreciate in luxury goods.
Alessi Juicy Salif Citrus Squeezer, source: link
Some time ago, I saw a larger version of this product on LinkedIn.
W.K.: Yes, our spring-summer 2021 collection includes XXL products. They include the most popular products of the brand – the Philippe Starck squeezer and the Big Love spoon from Miriam Mirri.
What is the history of this spoon?
W.K.: In the 1990s, there was a competition to capture emotions in objects. It was then that Miriam Mirri, in cooperation with the F.F.F. studio, created a spoon where the part used to pick up food had the shape of a heart. Theoretically, it was an easy idea, but no one had come up with it before. And this has become an Alessi icon. It is currently the best-selling product in the history of that company.
Big Love spoons. Source: link
This history shows the charm of being the first.
W.K.: That’s how design works – it does not matter if we are talking about things in a house, cars or buildings. Design should inspire, motivate to take action and change the world. And that’s exactly what happens. Not every product will become something big, but it can change the way we perceive all kinds of things. Let’s consider the current approach of companies to packaging or recycled products – this trend has also originated from the realm of design.
Previously, you said that consumers should not pay attention to the price of luxury products. What should they pay attention to, then?
W.K.: Looking at it from a broader perspective and returning to the example of the citrus squeezer, the customer can buy such a product at any store with kitchen accessories for a price ranging from a few to several dozen euros. That is why when you decide to buy a Juicy Salif squeezer for EUR 75, it should not make a difference to the consumer if they buy a specific product for one or two euros less. Instead, they have to know what they are paying for.
Apart from the design I mentioned earlier and the entire history connected with the product, the key aspect is to ensure the quality of service and offer a product that is proven, safe and durable. Consumers also want to make sure that they receive their product as soon as possible.
2020 was a breakthrough year – the availability of the product, not the price, became the most important criterion on the market. Our clients (i.e., stores Artebrands cooperates with as a distributor) increased the prices of certain products or brands deliberately because they knew these products were not available on the market.
How likely is price erosion in e-commerce? How does the increasing number of online stores and retailers on marketplaces affect the management of the pricing strategy of the company?
W.K.: Firstly, in our case, this is a bit easier because the products of the brand are not sent everywhere. We use so-called selective distribution, which means that we only work with select partners who meet our criteria.
The second key aspect is education. As I mentioned before, price is not the only criterion for a purchasing decision. There is no place here for permanent special offers. Obviously, some discounts may be introduced from time to time, e.g., Black Friday or special offers during the summer. We try to support our partners, making sure that there is always something going on with select products of the brand, but never with the entire range.
It is very important to monitor the prices and stay up to date with what is going on in the market. On the one hand, you have to analyse the prices of the products of your own brand to know if there are no excessive variations or if products from other countries do not appear in the area you manage. I will also want to check if my clients maximise the margin potential of the brand. If not, I always try to understand the reason why. I also analyse how do we compare with competitive brands. If the competition is lowering their prices, we try to use this in discussions with our partners, i.e., the brands. If another brand has inferior products offered at higher prices, in turn, we can point out that there is some room for a price increase.
The owner of the brand also sets the recommended prices, which remain constant throughout the year. This makes the process a bit easier.
W.K.: Yes, the final decision on the resale price is always up to the retailer. It is my duty as a distributor to make sure this does not harm the image of the brand. If one retailer would organise a year-round special offer, it would be harmful to the image of the brand and would also adversely affect the entire industry.
That is why I always emphasise the importance of education. I often try to understand why the product should be discounted according to the retailer. The usual reason is that people cannot sell things otherwise. This is often because the quality of the store is poor – the staff often change, do not know the products and are unable to explain the difference between them and the history behind them. In such cases, people often choose the easy way and decide: “OK, I’ll just lower the price”.
Unfortunately, there is always someone who is trying to sell by price alone. This usually demotivates educated clients, who help to build the business and the positive image of the brand. When the retailers try to lower the margin to match the price set by an uneducated customer, the sale of such products ceases to be attractive to them. In such cases, the entire business suffers. Skilful price management is critical to running a good business – both for your own sake and for the sake of your partner.
It could seem that to me, as a distributor, the price of the product offered by the partners should not make that much of a difference. However, increasing issues with the price – how it is managed by the clients, i.e., retailers – can affect my results if other clients cease to support the brand.
This suggests that it is very important to select appropriate business partners. How often do you encounter new retailers that do not know this good practice?
W.K.: On our part, we always try to get to know our clients well. In times of the pandemic, this was rather difficult, but we always want to see how the company functions and how it sells. We are the ones responsible for the appropriate selection of partners. We do not work with everyone – we have specific criteria that will not be met by companies of inferior quality. In particular, we try to check if the company has a physical store, how big it is, what is the possible exposure and in what aspects will the client be able to support us. We include these aspects in the business terms and use them as the conditions for our cooperation.
Many businesses want to have the widest possible distribution, i.e., have as many points of sale as possible. This makes sense if the offered products are purchased on an impulse. Examples of this include chewing gum or mineral water. However, this does not work well with luxury products. In this case, the target group are customers who enter the right store.
During the very first stages of our operation, we made a mistake – one of the luxury brands was sold at a store that sold cables, batteries and lighting products. This simply could not work. It did not even matter that the company was actually very good – it was very good at selling cables, batteries and lighting products, not luxury household goods. Ultimately, the prices at the store were reduced by 30%, but the client still failed to generate any significant turnover on these products. From the client’s perspective, it was a waste of time. It also harmed the brand as well as other clients, who had to give up on their margin.
When you talked about pricing strategies earlier, you mentioned the analysis of the prices of competitive products. In your opinion, are there any good practices or key aspects to analyse in this regard?
W.K.: Obviously, it all depends on the perspective you are looking from. From the perspective of the brand, such analyses should be performed by the trade marketing department.
From my perspective, i.e., as a distributor, I always check how we are positioned in comparison with the competition. I do it to find out the potential of the brand. I also try to estimate the turnover of the competition.
Let me give you an example of how can this be used. I recently analysed what the competition was selling, and it turned out that half of their turnover was generated by products that sold very poorly at our stores. As it turned out, we were 50% more expansive than the competition. Competition that offered good quality and interesting design. I contacted the brand and told them about the situation. I said that we are much more expensive, and the price difference is too big – it was much smaller in other categories. The brand decided to perform a test. We now offer a discount on the products from this category, and we have recorded a tremendous boost in sales.
It is also important to know which retailer is suitable for a specific product category. It is very interesting that some clients are very good at selling kettles, while others excel in selling, for instance, porcelain ware. That is why it is necessary to cooperate with different clients and accurately suggest what products they should offer. Thus, in a way, we are the business consultants of our customers.
So, we now have two things that should be analysed. Firstly, comparing the product range and price positioning with the competition and, secondly, the analysis of the sales volume of the clients in the individual product categories.
W.K.: Yes, another important aspect is certainly the inventory in stock. Obviously, physical stores have limited space. They should stock the products that are particularly important to us – the top sellers – or the latest collections. The Alessi brand now has more than 1800 indexes, and it is obvious that we would not be able to display them all at any physical store. However, e-commerce enables us to display these products.
When working with clients, it is important to check if they have the full product range and how it is described and displayed. The important thing is to not only check the listing but also the quality of the content in the stores of our partners.
There has been talk recently of the increasing importance of marketplaces, such as Allegro or Amazon. What do you think about it? Have you noticed this trend, too?
W.K.: The factor that causes the sales in marketplaces to rise is primarily the low price of the products. Many companies that offer top-shelf products actively avoid marketplaces. Examples of this include Nike or Ikea, which do not cooperate with Amazon.
Our company is present on Amazon through our brand owner, and we also have our brand zone on Allegro. Based on my observations, presence at a physical store is still critical to the correct functioning and development of a brand.
The pandemic showed that online presence was a must, but now, according to the available data, people are returning to physical stores. They want to touch the product, see it up close and then make the purchase.
We are now observing the opportunities for communication with consumers using social media. Many of our clients run a profile on social media for their store, but not all consumers get there yet. That is why we try to maximise this potential.
Do you have any other pieces of advice for retailers such as your potential clients? Would you like to mention other good practices they should remember?
W.K.: The first thing you should pay attention to is good communication with the consumer. If you are selling online, you should make sure to always offer some feedback, e.g., enable the tracking of the shipment or notify the consumer of the progress of the order.
If you are selling at a physical store, you have to ensure that the person visiting your store sees the most important products and gets to hear their history. The consumer should feel comfortable while shopping and should be satisfied with making the right choice after they leave the store.
To make this happen, the retailer should be able to offer the full product range and have the knowledge required to give accurate advice. The retailers should know what they are worth precisely because of this knowledge, familiarity with their product range, perseverance and their time.