Luxury Briefing: Greater retail productivity and dwell time are fashion’s new targets

“The most successful thing we’ve done is add bars to some of our stores,” Massimo Caronna, North America CEO Brunello Cucinelli told McKinsey & Company in an interview published this week. A poster brand for the ongoing quiet luxury trend, Brunello Cucinelli did around $973 million in 2022 revenue, an increase of 29% year-over-year. “What the bar and the seating area allowed us to do was keep the customer there and create a relationship with the client. I always tell everyone, ‘It’s easy to start a relationship. It’s harder to maintain a relationship.’”

Other updates the company has recently made to its stores include expanding its dressing rooms to provide more privacy, creating mini-libraries and hiding cash registers. On average, shoppers now spend 10-35 minutes in-store per visit, Caronna said. 

Statements made across third-quarter earnings calls this week showed that other luxury brands are aiming to follow suit. On Tuesday, Gildo Zegna, the chairman and CEO of Zegna, Thom Browne and Tom Ford owner Ermenegildo Zegna Group, attributed the company’s 23% year-to-date revenue growth to the “ongoing and substantial improvement in [its] store productivity.” In 2021, the Group targeted a 50% increase in store sales by 2025, but it’s “well ahead of the plan,” according to Zegna. He added that strengthening in-store operations will continue to be prioritized as the company focuses on “sustainable long-term growth.”  

For its part, Hermès reported a 16% year-over-year sales increase, which included a 22% boost in retail sales. They were driven, in part, by the “strengthening” of its store network, according to the company. On Friday, it debuted a revamped Chicago store with a new second level that includes an “after-sales lounge” and a “confidential salon.”

Kering, meanwhile, reported retail revenue declines of 6% across its brands, which factored into its 13% year-over-year revenue slump for the quarter. Weakened in-store traffic was a noted factor, while investments in “retail elevation” were among the stated plans to right-track the business. For its Bottega Veneta brand, which saw an overall 13% revenue decline, that will include upgrading the store network, enhancing “retail excellence” and better conveying the brand narrative. 

Setting the table to strengthen customer bonds in stores is catching on among luxury brands. In a presentation to investors in March, new Prada CEO Andrea Guerra said that boosting retail productivity would be his biggest focus for 2023. He listed store renovations and a renewed focus on clienteling as contributing strategies.

And, like Cucinelli, many brands are leveraging bars and coffee shops as in-store engagement tools. For example, Maison Margiela outfitted its first store in China’s Hunan province, which it opened on Monday, with a café. It’s the fifth in-store café the brand has opened since June 2022. And earlier this month in Singapore, Swiss watchmaker Richard Mille opened a mega-store complete with a sports bar and a dining room. 

Higher in-store dwell times have been linked to higher sales, but it’s a long game. For brands, customer connections established in-store serve as the foundation for strong lifetime value.

A smaller luxury brand that has experienced great success with the strategy is NYC-based KZ K Studio. After founding the brand 15 years ago, founders Jesse Keyes and Karolina Zmarlak introduced a client-facing studio inclusive of a “library bar” on NoHo’s Great Jones Street in 2022. Six years prior, the company underwent a rebrand focused on client relationships, resulting in 50% sales growth each year, with 2020 being an exception. It currently has 15 employees and 2,000 repeat clients, most of whom have experienced a thorough, IRL introduction to the brand by a founder.

“Fashion has been in a special rut in the United States,” he said. “You walk into a fashion retailer or department store and it feels like a big warehouse trying to sell you stuff, rather than like hospitality or an extension of a [company’s] home. There’s no warmth that allows people to connect and develop a relationship.”

He added, “What’s a better space to learn about someone than a bar?”

Keyes’s background is in architecture, having designed popular clubs, bars and restaurants, including La Esquinta in NYC. He said his vision for KZ K Studio was a company that would reject fashion’s typical “advertising, media and trend play,” in favor of focusing on timeless designs and earned trust through client relationships.

In NYC, KZ K Studio hosts hour-long client appointments, which typically start with the client ordering a drink from the Library Bar Menu or a meal from a partnering neighboring restaurant. They then take a studio tour, while learning about the brand’s modernist-and-multi-functional concept. That includes viewing racks and bookcases by sculptor Alex Roskin and seeing the room where the brand’s patterns are made. Upon returning to the bar, they sip or eat while learning about the latest collection’s point of reference.

For the past six years, each of KZ K Studio’s biannual collections has been based on a specific modernist movement. Keyes and Zmarlak immerse themselves in the movement through a trip and also study it through books that later populate the bar library. Former collections have focused on the work of Luis Barragán, which involved a trip to Mexico City. Up next will be the designs of Adolf Loos, the architect behind Vienna’s famous American Bar.

The brand is “complex,” best shopped by “building pieces over time to develop an architectural house of clothing you can live in,” Keyes said. By being walked through it, clients grow to understand that the brand is “creating clothing in their best interests, from a professional and productive and creative perspective.” And at the same time, “the relationship becomes more meaningful,” he said.

In addition to hosting studio appointments, KZ K Studio takes a biannual tour, of sorts, to showcase the latest collection. Currently, Zmarlak is on the road and making stops in 20 cities, where the brand will co-host trunk show-inclusive events with partners including Thompson Hotels and the retailer Tootsie’s. KZ K Studio also sells in specialty stores “that have a direct relationship with their clients,” Keyes said. It formerly sold in department stores, before deciding there were “too many layers” between the brand and the client, he said.

KZ K Studio’s processes have served it well. For example, the founders often send “try-on boxes” of new styles to clients, based on preferences communicated in one-on-one meetings. Those clients regularly buy 80% of the pieces.

Such personal service is hard to maintain while scaling, but big growth isn’t a priority, Keyes said. 

“If we’re going to do it, we’re going to do it like Cucinelli,” he said, also citing a Caronna comment in the McKinsey story. “It will be ‘gracious growth,’ and we’ll make sure every step we take speaks to our values and allows us to continue real communications.”