Retailers Debate: Should You Discount?

The heads of Saks and Louis Vuitton debated the wisdom of discounting at a panel at the American Express Publishing Luxury Summit titled “What Price Luxury?”

Stephen Sadove, chairman and CEO of Saks, defended his decision to slash Saks’s goods prices by 70 percent during the most difficult period of the recession.

“It was the smartest thing that could have been done,” he said. “I would do again in a heartbeat. It was really an economic decision based on the reality of the time. “

He said the industry went from double-digit growth in the beginning of 2008 to double-digit decline. As a result, the company was sitting on far too much inventory.

Saks determined that customers didn’t want to trade down brands but wanted different price points within the brand. So it approached its vendors, which responded with solutions such as different fabrics for different price points. “We got the problem behind us,” he said. “Our competitors bled for another six to eight months.”

Louis Vuitton took the opposite tack, maintaining price points, inventory levels, and advertising programs. “We changed absolutely nothing in our approach,” Daniel Lalonde, president and CEO of Louis Vuitton, said. “The thing that made our business robust in the last couple years is that we never went on sale.”

He noted that Louis Vuitton is totally integrated, and sells the products it manufacturers exclusively through its retail stores. Lalonde stressed the importance of providing “full-price leadership” and focusing on the product. “The product is by far the most important thing in luxury, and I think it will be that way for some time,” he said.

Ted Teng, president and CEO of The Leading Hotels of the World also was a panelist. Dana Cowin, editor-in-chief of Food & Wine, moderated the discussion. The Luxury Summit, held at the Mandarin Hotel in Las Vegas, concludes today.

Stephen Sadove (right) and Daniel Lalonde respond to questions from Dana Cowin.