Luxury brands have been reluctant to adopt digital commerce
For years, prestige goods companies have looked down on online sales channels, which they have perceived as inappropriate for an industry which is all about high-quality and exclusivity.
“We think for luxury it’s not right. It’s good in countries that don’t have the shop nearby.”
Many preferred keeping luxury in the rarefied world of high-end boutiques and department store glossy storefronts. They have mostly been using the online channel to showcase the brand, through institutional websites with limited product content and information.
Whilst many retailers have hesitated to adopt e-commerce for fear of store sales cannibalization, the reluctance of premium brands seems to have been mainly driven by a somewhat conservative view of the luxury shopping experience. This view has been largely supported by the stereotype of e-commerce as a discount channel on which it is difficult to perceive and experience the product quality.
Meanwhile, multichannel retailers and e-tailers have successfully tapped into the opportunity
Many retailers and e-tailers have successfully managed to fill the gap. Amazon and Net-a-Porter have become worldwide references, respectively in luxury beauty and high-end fashion online shopping (see our article Amazon: the beast luxury beauty brands should tame rather than fight).
Digital commerce has also enabled local luxury retailers to become global players. Colette, the Parisian high-end boutique, is enjoying a large international success of its online store. Bergdorf Goodman, the luxury department store based in New York City, recently launched its international e-commerce website, making its products available to shoppers throughout the world by shipping to more than 100 countries.
Flash sales websites have also flourished and widened consumer access to luxury goods over the past decade, boosted by the economic downturn. They revolutionized the industry by creating a parallel online distribution channel that enabled brands to get rid of excess inventories.
New customer behaviors and expectations
The rise of the connected consumer and the multiplication of touchpoints have drastically reshaped the customer journey. Today’s consumers expect to interact and engage with brands seamlessly regardless of the channel and touchpoint. They also expect experiential interactions and access to the same level of information and services.
Social media has been a game changer for the fashion industry. It has enabled brands to provide real-time information pointing to content and events on other channels, both online and offline. This has increased engagement and given rise to “everyday influencers”, by enabling a two-way conversation with a wider audience.
“As more people use the Web for shopping and inspiration, reaching people online is critical for fashion brands, particularly around key moments like fashion week.”
The customer journey is increasingly starting online. Brands without a strong online sales channel and e-marketing acumen are going to struggle to compete, in and outside the store. According to a survey from InReality published last month, 75% of U.S. shoppers admitted to using a mobile device in store, mainly to compare prices and find product information. This gives digitally savvy retailers and e-tailers the opportunity to swoop in the customer journey and potentially, steal a sale.
“Stores remain the main channel for beauty. But their role is shifting from transactional platforms to experiential ones […] every consumer that walks through a door is armed with product information and opinions.”
A missed opportunity for an industry that had Customer Experience deep in its DNA
Prestige brands have historically been excellent at delivering outstanding customer experiences and building strong customer relationships. The tools and technologies offered by the digital era should have given them the edge, allowing them to increase their reach and impact, in addition to penetrating new markets.
Most luxury companies have been focusing on their global offline expansion, by opening numerous flagship stores and outlets. However, they have not always adapted to local markets and to the behavior of their population. According to yStats.com, in 2013 only a fraction of top prestige brands mentioned they operated in the Middle East on their website, or offered Arabic language on it, while it is a key luxury goods market.
Luxury groups’ international versus regional strategy is also not alway clear cut. For instance, we found the case of a premium brand for which the .ae extension (United Arab Emirates) redirects visitors to the global .com website. However, a local Google search for the same brand points to another regional website. Whilst both sites offer a store locator service, none of them were able to provide accurate location information for UAE stores (the .com locating Dubai somewhere in Eastern Russia).
Cross-border e-commerce is also a source of confusion, and UAE visitors landing on the global website might not realize at first that the brand actually doesn’t ship to the Emirates.
It may sound as a paradox but high-end brands were probably better equipped to tackle the early pitfalls of e-commerce than any other consumer company. Their renowned product quality, brand excellence and caring customer relationship could have easily reassured and encouraged new online shoppers.
A common trait between retailers and e-tailers that have successfully digitized luxury commerce, is their development of strong CRM capabilities. They have grown powerful direct marketing skill sets and excellent customer knowledge, which allows them to reach and influence luxury online shoppers through personalized communications and recommendations.
As competition intensifies and customer acquisition costs steadily increase, the challenge for luxury brands in the multichannel era appears bigger than ever, in particular for those that are still trying to tame e-commerce.
The Reality of Retail Report: April 2015 – InReality
Integrating Luxury Retail Online & Offline – luxurysociety.com
Luxury Brands Split Over E-commerce – WWD
Luxury Brands Late in Adopting Online Sales Channel – ystats.com
How Social Media is Changing Fashion Week – tintup.com
Bergdorf Goodman rolls out new e-commerce platform – retailtechnology.co.uk