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Hermes Birkin Bag
Hermes Birkin Bag

Luxury's cautious comeback in Calgary Add to ...

Hermès doesn't open its first store in Calgary until next month, but already the French luxury goods retailer has a waiting list of about 40 local shoppers for its Birkin and Kelly handbags, which can cost from $8,000 to as much as $170,000 apiece.

The pent-up demand underscores Hermès SA's survival strategy during good times and bad: It keeps women craving the handmade bags by stocking so few of them. But the Calgary waiting list also reflects new signs of life in that city's once-thriving, high-end retail market after it was slammed by the global financial meltdown.

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"People are feeling a lot more positive," said Jennifer Carter, chief executive officer of Hermès Canada, which has three other stores in this country. "Despite the negativity that's surrounding us, we cannot complain."

Upscale merchants in Calgary, who rode high with the oil and gas boom of the past few years, now are betting that the city's well-to-do are ready to open their wallets again.

On Oct. 7, luxury chain Holt Renfrew is replacing its store with one three times larger. New Bentley, Aston Martin and Spyker auto dealerships opened their doors earlier this year and, this month alone, sold almost twice as many $150,000-plus cars as in previous months - including a $275,000 silver Spyker C8 Aileron.

Two mall developers are mapping out ambitious high-end expansion plans at separate sites, adding such fashion stores as Michael Kors, Diesel and a second Harry Rosen by next fall.

Still, the merchants are bracing for a new normal.

They wouldn't necessarily have chosen to open in today's softer economy but were locked into long-standing lease commitments. So they're adjusting their strategies and taking fewer risks to lure a more cautious consumer.

"These are new and different times, so our approach has got to change," said Caryn Lerner, chief executive officer of Holt's.

Calgary remains appealing because it has a relatively large number of households with an income of $100,000 or more, said Grant Kosowan, director of consultancy Orange National Retail Group (Prairies) Inc. in Calgary. The city currently has little high-end retail, and a steady stream of shop-happy tourists passing through on their way to Banff and Lake Louise.

Luxury retailers who couldn't find good locations in Calgary a year ago, when there were virtually no vacancies for that kind of retail space, now have more choice, he said, making it "an opportune time to get into this market." The city's retail vacancy rate will probably rise above 6 per cent by the end of the year, although the most desirable space "will remain negligible," he said.

Retail rents in Calgary dropped 23.1 per cent to $43 (U.S.) a square foot in June from a year earlier, according to a report from Cushman & Wakefield.

Retailers already in Calgary are doing things a bit differently. Some are paring marketing budgets and shifting spending to discreet promotions. Many are sticking with tried-and-true brands rather than testing upstart lines. Others are more guarded in their choice of merchandise. Men's clothier Harry Rosen, for instance, is focusing on high-profile premium brands such as Zegna and Hugo Boss, and ditching fledgling labels, CEO Larry Rosen said.

The strategy is helping the chain to make gains. Over the past month, its Calgary store has quadrupled its number of large sales - worth $8,000 or more - compared with earlier this year, he said.

"Customers haven't refreshed their wardrobes in a year and now they're buying big, preparing for the next boom, so to speak," he said. "There's a new energy."

Birks jewellery chain, with three namesake stores and a Brinkhaus outlet in Calgary, is focusing more on classic styles, such as solitaire diamond earrings, and dropping trendier pieces such as crystal chandelier earrings, which were the rage a few years ago, said Tom Andruskevich, CEO of Birks & Mayors Inc.

Retailers are also showing restraint in their marketing. The jeweller has lowered its ad budget by more than 10 per cent this year, but in a departure, it has invested in promotions to woo customers. Rather than blatant discounts, it has offered, for instance, $1,000 off wedding bands with the purchase of a diamond engagement ring.

"We're trying to do it in a way that is in keeping with our brand image," Mr. Andruskevich said. The initiatives are beginning to pay off: Sales in the Calgary stores have picked up over the past three months, he said.

Holt's has invited just 500 guests to its upcoming launch party in Calgary compared with about 1,200 to its Vancouver store opening gala in 2007.

By design, Ms. Lerner is seeking a more "intimate, personalized" marketing strategy. To add a personal touch, she said, Holt's salespeople are asking their best customers about some of their favourite things and offering them such treats in "a random act of kindness." In recent months, they've handed out items like magenta orchids, New York fashion show tickets and restaurant vouchers.

And the retailer is trying to find out more about its shoppers by reaching out to them on Facebook and new microsites like HoltsContemporary.com where some of its fashion-forward customers are blogging about trends and events.

Still others have chopped their ad budgets dramatically. The company that opened the new Bentley, Aston Martin and Spyker auto dealerships in Calgary has slashed its ad spending by 25 per cent this year. Dilawri Group of Cos. has shifted advertising to the Internet, cut back on newspaper ads and renegotiated better rates for its remaining ads, co-owner Tony Dilawri said.

The changes go beyond pitching products differently. The retailers have fine-tuned their approach to pricing, often stocking more items at the lower end of their price range.

At its two BMW dealerships in Calgary, Dilawri has focused on selling used cars, particularly more recent models. Holt's is carrying more merchandise at its lower and mid-priced ranges, and less at the top price levels, Ms. Lerner said.

Some top-end retailers, such as Hermès, are profiting from simply sticking with what they've always done. Hermès runs a conservative shop at all times, stocking limited amounts of merchandise and rarely having to mark down prices to clear products, Ms. Carter said.

The strategy could serve Hermès well at its new Calgary store, she said. Its business may also be bolstered by the changing habits of the ultrarich, who are trading down from a pricey vacation to a $420 Hermès silk scarf, Ms. Carter said.

So far this year, Hermès Canada has enjoyed more than a 10-per-cent jump in sales - although not as much as last year's 20-per-cent gain, she said. "Our local clientele may not be travelling as much, so they're shopping more with us."

 

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