Despite the success of early trailblazers such as Net-A-Porter and Farfetch, the luxury sector has lagged behind the rest of the fashion world when it comes to adapting to a digital future.
The luxury sector’s hesitancy in embracing e-commerce is understandable. It's an area of retail that has relied on a sense of exclusivity, as well as the beauty and inspirational nature of its store experiences, to sell to a consumer base that has traditionally responded well to both. However, as retail continues to evolve, driven by developments ranging from voice technologies to social media, even luxury shoppers are starting to want different things, and luxury brands are starting to lag behind.
Growing Online Sales Require Better Digital Customer Service
Consultancy McKinsey & Co reports that online sales of personal luxury goods currently account for 8 percent of the total market. Within two years, it predicts this will grow to 20 percent, with almost a fifth of these sales being completed online by 2025. As online sales grow, however, consumers are often being left disappointed by their digital interactions with luxury brands.
While great customer experience is at the heart of so many luxury brands’ proposition, the sector as a whole continues to lag on the digital end, with e-commerce sites that falter in usability, personalization and responsiveness, often leaving consumers frustrated with a digital experience that's not aligned with the service they receive in-store. In fact, nearly half of all consumers say the online experience for luxury brands isn't as strong as it is in-store, highlighting again opportunities for improvement.
Bizarrely though, some brands still hold onto the belief that their customers prefer to shop solely in-store, and as a result view investment in the online experience as a secondary priority at best. This is misguided when 90 percent of luxury shoppers claim to use online platforms at some stage during the purchase journey, and eight out of 10 luxury items are influenced by digital in some way.
Millennials’ Buying Power Continues to Increase
In addition, millennial buying power is increasing year-over-year. Deloitte recently reported that millennials now make up a larger segment of the luxury market than baby boomers (99 million vs. 77 million). Last year, Gucci reported that 50 percent of its sales came from millennials — i.e., digital-native shoppers who are used to buying online, and whose first experience with a luxury brand is most likely to be via its website. This audience has much higher demands for convenience, speed and a tailored experience — even more so for the high-spending consumer in this demographic — as well as less patience for those brands that fail to deliver on the above or, instead, offer up frustratingly complex or slow user experiences.
It’s not just millennials though. Consumers across generations have changed dramatically, and will continue to do so. Now more than ever, the luxury consumer is looking for an experience. They want one-of-a-kind, hard-to-find items that no one else has. In addition, Amazon.com, along with midmarket pure-play peers, continue to shape consumer expectations around delivery and convenience. As a result, luxury brands need to evolve in response. It's not enough to launch a mobile site or invest in high-quality imagery; brands also need a shift in mind-set.
This shift must include consideration of the digitally enabled services consumers might want now and in future (e.g., personalized homepages), and then investment in the technology that supports these changes, such as systems which can capture data across all of your channels and funnel it into a single system for more intuitive intelligence.
Luxury Brands Need to Take Digital Seriously
It’s clear that luxury retailers cannot afford to neglect the online experience, particularly customer demand for frictionless e-commerce. This is especially true when competitors are ramping up their efforts and beginning to excel in this environment. Burberry, for example, is leading the way among traditional retailers with a digital strategy that has included live streaming of “see now, buy now” catwalk shows as well as in-store interactive mirrors which show customers content based on the clothes they’re looking at. Gucci has experimented with more advanced technologies, working with Spanish artist Ignasi Montreal to create virtual reality project “Gucci Hallucination” for its spring 2018 campaign with a series of scannable interactive ads.
The common thread is a "seamless enhanced digital experience," and that's paramount for the sector to retain its edge. Having the right systems in place — both on the front end and operational side — is absolutely key to presenting the online experience, from inspiration to purchase, that customers now expect.
The belief that "online doesn't matter" is outdated, and I have no doubt has played its part in holding the sector back. Embracing the opportunities of e-commerce could revolutionize the way brands interact with customers. E-commerce has permeated almost every area of retail, and there's no reason why luxury fashion shouldn't reap the benefits.
Let’s be clear though, getting digital right in a luxury environment isn't easy. However, it represents a significant source of future sales growth. Luxury consumers react particularly well to certain parts of the digital customer journey — e.g., they're comfortable with a personal touch, making them more likely to be open to sharing data and preferences.
Luxury shoppers do expect a high level of targeting, and with 43 percent of purchases now being influenced by personalized recommendations, it’s clear that this is an area that should be exploited by brands. Providing a personal approach means having access to customer data. The right technology (e.g., a solution to sync information across your different platforms) is a crucial component. It enables all areas of the business to have access to a single record for any given shopper, allowing deeper insights, from their buying behavior to preferences and loyalty to the brand. The endgame is an enhanced customer experience at all ends of the buying experience, from up-to-date communication regarding delivery changes to acknowledgments on social media after purchase to follow-up recommendations and personalized offers.
A digital offer should reflect luxury’s traditional strengths: impeccable customer service and personalization. The good news is the opportunity to do that is here. Implementing the right systems will help propel brands forward to become more innovative and user friendly; to create a true omnichannel operation; and embed a seamless, consistent and enhanced cross-channel customer experience.
Yes, this may require new approaches and technologies, but that will be a crucial part of luxury’s development into the e-commerce space, providing the foundation from which to delight customers, using new channels, in the same way high-end brands currently impress in-store.
Derek O'Carroll is CEO of Brightpearl, a cloud-based ERP for retailers and wholesalers.
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