The luxury strategy: how to maintain brand value while driving online sales
It is nothing new to note that companies and brands are developing an increasing awareness around the importance of having an online presence. Since 2020, the ongoing pandemic has only exacerbated the need to move online. E-commerce has become a saving grace for businesses all over the world, enabling them to continue trading as other routes to market are cut off.
Since 2020, the ongoing pandemic has only exacerbated the need to move online
One sector that has traditionally battled the move to online sales is luxury. The internet’s ubiquitous convenience, coupled with the inability to create the ‘desired’ sales environment, has typically been viewed as incompatible with a luxury brand’s identity. Founded on the principles of inaccessibility and exclusivity, many luxury brands could not envisage adopting the internet without compromising on brand value. It took Prada until 2007 to launch a website, and Chanel still functions as more of a lookbook – you can’t buy anything online except cosmetics, fragrance and sunglasses.
Millennials and Gen Z set to make up 50% of all luxury spending by 2025
The assumption that affluent shoppers would always favour an intimate and tactile offline shopping experience is being challenged by a wave of luxury retailers that have gained momentum over the last 10 years. E-commerce sites such as Net-A-Porter and Farfetch have successfully demonstrated that luxury consumers are willing to shop for high-end goods online at a price equal to those in-store.
This is largely because luxury’s primary growth engine has shifted from baby-boomers and Generation X, to digital savvy millennials and Generation Z, who made up 40% of all luxury spending and generated 100% of growth in 2019. It’s predicted that together they could contribute to half of all luxury purchases by 2025. Therefore, if brands want to attract this growing segment of luxury consumers, they must ensure their online strategy is in line with evolving digital habits.
Pandemic v luxury
When the pandemic hit, the importance of digital for the luxury sector catalysed further as many luxury brands were forced to adapt their offering. 170-year-old Harrods of London had never closed its doors before (not even during the Second World War). Yet on the 25 March 2020, it transitioned to operating completely online. It joined the likes of Bicester Village and Selfridges in enabling virtual personal shopping, so that consumers could access its products and enjoy the in-store experience at home.
Brands such as Bottega Venetta and Fendi hosted virtual events for entertainment, while others used their digital voice to support those most in need.
Gucci, for example called on its online #GucciCommunity to contribute to its crowdsourcing campaign and fund the development of a Covid-19 vaccine. Before the crisis, e-commerce accounted for 10% to 12% of luxury sales worldwide. As a result of the pandemic, Walpole’s chief executive officer, Helen Brocklebank, predicts the industry will comfortably exceed forecasts to generate 25% of its revenues online by 2025.
How can luxury brands digitally re-create ‘the luxury experience’ in 2021 and beyond?
Despite the obvious benefits that e-commerce may bring, there is still a sector-wide fear of the shift to online sales. With the launch of so many luxury retailers and the increasing need to stand out, luxury brands must identify new ways to engage with affluent consumers digitally and maintain their brand value.
So, what can we learn from the brands that are doing this well? Here are some factors that should be considered.
1. Maintain a superior level of consumer service via online channels
Luxury brands must ensure that the superior level of consumer service experienced in-store is mirrored in their digital strategy. In November 2020, Bicester Village launched a virtual personal shopping service so that consumers could browse its 79 boutiques from the comfort of their own homes.
A bespoke shopping consultation is arranged via WhatsApp, video call, or email, and afterwards the carefully curated selection of items is delivered to the customer’s doorstep. Gucci took this one step further and set up a live streaming service from a replica showroom in Florence, enabling personal shoppers to bring items to the camera based on consumer requests.
2. Create one-to-one connections through personalised communication
Creating an intimate connection with consumers online is particularly important to ensure brand loyalty when engaging face-to face is not possible. A key part of LVMH’s digital strategy is connecting consumers to its team of Parisian fashion experts 24/7 via live video chats on its e-commerce portal 24 Sèvres.
While LVMH CFO, Jean-Jacques Guiony admitted 24 Sèvres has a long way to go to compete with rival ecommerce sites, he also stated that online sales during the pandemic had improved enough to compensate for store closures. Even Chanel, who has tended to avoid eCommerce acknowledged in an interview the benefit of 1:1 communication via digital channels during the pandemic: “In the last few months, as our boutiques remained closed throughout the world, our teams have kept in touch with their clients… We are convinced that the use of digital tools will become more widespread, as people might go less to the boutiques, because of health crises or political tensions that might arise.”
3. Create communities through storytelling to build long-term relationships
When live and in-person events are unable to take place, creating communities through storytelling is crucial for brands to target and retain their consumers. This will create long-term relationships that can be enhanced going forward. For example, in March 2020 Bottega Veneta launched a virtual residency ‘to keep us inspired and entertained during isolation’. Each week it celebrated creativity through streaming talents such as musicians, writers and performers via 10 online platforms. Similarly, the following summer, Fendi delivered Fendi Renaissance. This was a one-off live streamed event of Vivaldi’s Estate from the Four Seasons, performed by an orchestra on top of the breathtaking Palazzo della Civiltà Italiana in Rome.
4. Enhance the luxury retail experience through augmented reality (AR)
According to a new report by Accenture Interactive, 61% of consumers said they’d be more willing to buy from a brand that uses immersive technology such as AR. AR expands the reach of brands to those who are unable to visit a store and lets them try on items at home.
A typical barrier to luxury online has been the inability to experience the item in real life, therefore by blending the virtual with reality, consumer trust and investment in a brand is likely to increase. A great example of this is Burberry’s new AR shopping tool. When searching for a Burberry item via Google Search, consumers can view an AR replica and compare it against other real-life objects. For example, consumers can place the iconic TB Bag against an existing outfit before making the final leap to purchase.
There is still some way to go
Despite competitors ramping up their e-commerce activity, Chanel is planning no major changes to its retail strategy in light of Covid-19. Phillipe Blondiaux, chief financial officer at Chanel, recently told the Financial Times: “We remain convinced that an in-person relationship between fashion adviser and client will remain central to the luxury experience.”
And so far, Chanel has been proven right. Online sales have not yet been able to drive the same level of upsell opportunities as stores. Research from the Luxury Institute shows that 68% of consumers still prefer making purchases in store, largely because they are reluctant to part with large sums of money over the internet.
However, this will change with the emergence of the new luxury consumer that expects high-quality personalised experiences in stores and digitally. If brands can prove they are to be trusted through offering superior consumer services, creating one-to-one connections and communities and successfully integrating the online and offline; purchasing large ticket items via digital channels will become more common.
One thing is for sure, the need for luxury to take advantage of e-commerce and digital channels will only increase, and brands that successfully recreate ‘the luxury experience’ online will win the digital shelf.
If your brand is looking to improve or develop its e-commerce strategy, Capgemini is here to help. Please get in touch to find out about our services.
Alice Paul is a digital marketing and e-commerce consultant at Capgemini Invent.
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