As Suzanne Kapner and Ryan Dezember recently reported in the Wall Street Journal, Neiman Marcus, the highest of high-end department stores, is now struggling as even its wealthy shoppers are discovering the benefits of and possibilities for discount shopping, both online and in stores. As Steven Dennis has written here at Forbes.com, similar struggles are affecting high-end specialty stores such as Tiffany, Kors, Saks and Nordstrom. The days of strong pricing power that allowed for continual revenue growth at luxury retailers appear to be over.I mean everyone likes getting a deal even if you are buying $500 shoes. One thing that is very interesting is this trend.
The second front in the battle destroying the luxury retailers is being fought on the internet. The presence of a few billion internet shoppers worldwide allow niche producers to reach wider markets. This provides shoppers everywhere with access to high quality and unique goods produced at small scale. Plus, having avoided the costs of brick and mortar stores and large marketing budgets, these goods are often available at much lower prices.I have been buying some clothes from an online retailer called Gilt.com. They have all sorts of designers I have never heard about that make great quality clothes. They are also almost always at a reasonable price as well. So a dress shirt that I wear to work costs like $20 to $40 which is a price that I would not get a Neiman. The clothes look like the same quality you could get from there but the price is so reasonable.
I would be willing to bet that new designers would rather make their clothes for Gilt and be able to put more of the money into their pockets than an brick-and-mortar. I haven't even set foot in the part of the mall that has those products in like several years now. I would be willing to bet the next time I do I will be looking at empty store space.