Luxury and Discount Retailers Seize Digital Marketing Momentum

Target, Ramey says, deserves recognition in its own right because it has figured out a way to not only offer a luxury-grade customer experience at discount prices, but has also found a way to offer luxury products, forming temporary partnerships with brands such as Missoni, Alexander McQueen, Jason Wu, and Prabal Gurung. The designers put together collections exclusively for Target, which then sold them at fairly low prices, but for very limited amounts of time. "Though short term, the collaborations gave Target customers a taste of luxury at a comfortable price," Ramey says. "Plus, because they were so short-lived, the collections generated a lot of excitement among shoppers."

Even without designer collections, Target's strength lies in the fact that it doesn't market itself as a discount retailer, Ramey asserts. Instead, Target markets itself as a store for everyone. "They are constantly posting photos of celebrities shopping at Target. Just recently, Michelle Obama was photographed there, and it was a national story. Target is proud of that image. They've portrayed themselves as everyone's store, and they've become that."

While discount retailers such as Target have made an effort to inject a bit of luxury into their marketing, sales, and customer service approaches, luxury brands have conversely dipped their toes into the discount field waters to market themselves to a broader group of shoppers through flash sales. Web sites like Gilt Groupe, Rue La La, and Hautelook consistently feature expensive, luxury brands at deeply discounted prices, selling the goods for as much as 60 percent off and offering their exclusive invite-only list of members a new sale every morning.

From a marketing perspective, flash sale Web sites have a lot of appeal for customers because they are marketed "more like boutique shops rather than larger, traditional retail stores where inventory often remains static for some time. With flash sales, offering different deals every day encourages consumers to come back to the site frequently, and shopping becomes more of a fun experience," says Jacob Shin, vice president of customer acquisition at Newegg, which just launched its own flash sale initiative.

Quicker turnover with limited inventory also encourages impulsive consumers to buy, and by requiring membership and promoting a sense of exclusivity through their social media channels, marketers make consumers feel like they have access to products and prices that are not publicly available, Shin adds.

"No matter how wealthy, shoppers still want a deal," Pedraza says, "and flash sales bring luxury and discount together in a way that gives luxury shoppers the deal they want, while maintaining the exclusivity and culture of a retail brand. For discount shoppers, it's a similar effect—it gives them the brands they might not otherwise be able to afford or want to splurge on, without compromising their desire to save."

For vendors and merchants, flash sales help optimize their supply chain, cash flow, and customer reach. Luxury brands are able to move inventory quickly, reach a broader audience, and give vendors the opportunity to highlight their products while gaining maximum exposure. This is a crucial marketing strategy for luxury brands that want to attract discount shoppers, Shin says.

While flash sales are "hot" right now, the space is pretty crowded, Shin asserts. Though the flash sale model works very well for some businesses, it's not a one-size-fits-all solution. The bottom line is that retailers need a deep understanding of their customers' behavior and must find the best marketing solution that delivers products to them.

As they are faced with evolving, increasingly connected customers, both the discount and luxury retail industries have to continue to adjust the way they do business and interact with their customers, albeit in different ways. "Social media and digital marketing will continue to play an integral role in the way people shop, no matter where people are shopping," Butler says. "It's a major part in the retail equation now, and companies that don't find a way to implement social media in a way that's relevant to their core shoppers will likely not succeed. Social media is no longer a 'nice to have.' It's a 'need to have.'"

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Associate Editor Maria Minsker can be reached at mminsker@infotoday.com.

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