One of the big questions that we have heard from many of our clients and retail reporters is –“Is there or will there be too much luxury retail in Canada now?” Our answer is “it depends how you define luxury.”
The definition of luxury has been changing globally, so here is how we break it down for fashion. The key elements in the luxury equation include – brands/designers, retailers, and customers. Each of these elements are changing and evolving.
Starting with brands/designers – it used to be very clear that brands like Gucci, Burberry, and Hermes were key luxury brands. Now there are new high-end luxury brands like Prabal Gurung, but there are also many mid-tier luxury brands that have helped democratize luxury like Michael Kors and Vera Wang. Making it more confusing is the fact that these brands and designers are working with middle market retailers like H&M and Target to do capsule collections. Where is the source for the “real” brand?
Next there are the retailers – how we defined luxury retailers used to be stores whose assortment featured luxury brands/designers. These retailers were generally known for impeccable service and often fought for exclusive arrangements with the brands. Stores like Holt Renfrew, Saks, and Neiman Marcus fall into this category. And these brands/designers have long had their own flagship stores as well. In addition, department stores carried a selection of the luxury brands. Contemporary retailers like Barney’s in New York and new online retailers like Gilt Group and Ssense have stepped into the luxury definition―usually featuring updated contemporary stylings from established brands along with more contemporary brands like Commes des Garcons.
Finally there is the luxury customer – we characterize this shopper as the wealthy socialite who spends hundreds of thousands of dollars on designer fashion. Often these people would be categorized as “old” money and the “nouveau riche” with the first group wanting to maintain their status and the latter group wanting to prove their status. While these two groups may still exist in Canada’s major cities, this luxury customer has been joined by many other sub-groups such as the “aspiring luxury” customer. As the Canadian population has changed so has the luxury customer with our two largest immigrant groups―East Asians and South Asians―wanting to buy luxury brands both for themselves and for others. In addition, younger customers do not necessarily see the clear divisions between luxury and other products so they will team a $10 T-shirt with a $3,000 designer bag.
So back to the question about the saturation of luxury in Canada. The size of the traditional luxury market in Canada is generally considered to be small with Holt Renfrew, Harry Rosen, a handful of luxury boutiques plus the dedicated brand stores for key designers providing for the demand for luxury goods. If this is the way that we define luxury, then the answer is that if we add Saks and Nordstom (which Holt Renfrew does not consider a competitor) then it is likely that we will tip the balance towards saturation. However, if we look at luxury from a broad point-of-view, we are not really sure how high is up.