We were gonna cover something else this week but something just came across our desk. Name of the company is Aerotyne inter-…oh we’re not doing that today?

But for real, we read something in WSJ last week that needed a further deep dive.

So let’s get into it.

How luxury caters to loyalty

Neiman Marcus recently stated that 2% of its customers are driving 40% of its sales. They’re not alone. A number of luxury retailers count a small % of customers delivering outsized gains to their top line revenue. Currently, in Neiman Marcus’ case, the company is working to build better relationships with customers who spend $25k+/yr.

• We see similar companies trying to court their über loyal customers this way. Brunello Cucinelli and Gucci are opening invitation-only stores in major markets, so the whales don’t have to swim with the plebes on a weekday.
  

• Catering to loyalty isn’t new, but with new generations coming into prime earning years, we may start seeing a change in how brands interact with varying degrees of loyal customers.
  

• Take a look at your closest fancy mall and you’ll see waiting lines outside Moncler, LV, even Gucci. You may not spend $10k-15k+/yr. on various items, but if you buy 1 great piece a year? They may push you to the front of the line.

That sort of stuff.

The pie is only getting bigger (graph below).

Why cater to the top 2% instead of the bottom 98%

Well, let’s not assume retailers aren’t doing that. But there’s a huge efficiency in getting your biggest customers to spend 1-5k more than having someone come off the street and start buying shirts for work.

It costs less because the existing relationship is already there, and it’s easier because they have more money than you do.

Does this only happen with luxury retailers?

ABSOLUTELY NOT.

Wal-Mart, Target, Kroger are all after your dollars. They use data to find you and entice you with bespoke offers through mailers, apps, etc.

Target is really notably very good at this. A few years ago their strategy for capturing young families made a lot waves in the customer analytics space.

Charles Duhigg has a great piece in the NYTimes. Read all of it if you can, but we’ll leave you with a small insight into how new events can be the trigger point in customer loyalty:

What AI Made This Week

Sick Fits by Ahmed

10+ years ago, Raf Simons came out with a small collection of fishtail parkas that basically broke every threadhead’s brain. He made a name for himself and eventually had a close-to-legendary run as Dior’s creative director.

He’s been a top 5 influence on the last decade of Menswear. There’s also a wonderful documentary of him taking the helm at Dior.

Sharing my favorite piece here.

Have a great week!

Ahmed and Peter