The New Luxury Playbook: Change in the Luxury Market
The blog post talks about digital transformation in luxury, the new luxury market landscape and changes in luxury digital marketing to conquer a post Covid 19 world.
It is a fact that COVID-19 has disrupted the market landscape, leaving businesses throughout the globe in massive chaos. Marketers across industries are trying to redesign their business models and the luxury industry is no exception. What is important to focus on is the mindset of the people during times of crisis; people tend to be more conservative in their purchases and adopt a “waste not want not” philosophy. The outbreak of COVID-19 may cause luxury consumers to assess things from a different outlook. By moving luxury items lower in their hierarchy of needs.
Dynamic growth is important across all industries, but this is especially true of the present scenario of the luxury industry. The industry as a whole should completely transform itself to fit into a post COVID-19 world. The most important way to achieve this is through digital transformation. Digital transformation presents the world of luxury with new challenges in navigating the intricate relationship between luxury brands, digital technology and the internet. Hence, it is a necessary step for luxury businesses to rebrand themselves. Disruptive innovations driven by technology are forcing luxury fashion brands to adapt and future-proof their business models using digital technologies. Furthermore, e-business concepts, like e-commerce and experience commerce, are key for the luxury industry to adapt to changing consumer behaviour.
However, the very fact of luxury being unique is what creates huge problems for luxury brands to diversify. Strategies that may be obvious for large, multinational companies comes with many challenges for small and medium-sized heritage luxury brands. These brands often have rich histories, culture and reputation tied to it. Due to this, luxury as an industry cannot collude to create a seamless digital market for its consumers. An individual strategy is required to help individual brands, but the outcome is well worth the added effort.
What is important to consider in the luxury space is that digital transformation began to make rounds much before COVID 19. It is not just because of sheer necessity but is a result of years of carefully thought out strategy. The trajectory of digital in luxury has now come into sharper focus, given our present situation. Digital is a critical source of growth and a powerful way to increase brand equity. It enables companies to reimagine key enterprise processes, both from front and back-end perspectives. The digital model will allow luxury brands and retailers to use data to get closer to customers. Brands can capture dynamic preferences and make the process of turning data into new products seamless.
As of 2018, online sales of personal luxury goods account for 8% of the €254 billion global luxury market. Furthermore, we expect online luxury sales to more than triple by 2025, where nearly one-fifth of personal luxury sales will take place online. Digital is having an even greater impact on how luxury shoppers choose brands and goods. Nearly 80% of luxury sales today are “digitally influenced”. Meaning to say that consumers hit one or more digital touchpoints in their luxury-shopping journeys. Although the impact of digital transformation on consumer behaviour and luxury purchases varies, nearly all luxury shoppers have embraced the digital lifestyle. This is not restricted to any particular age group.
Now that we have covered the scope and necessity of digital transformation in the luxury industry, we now move on to discuss what tangible solutions could look like in a post-COVID-19 world:
Authentic Engagement with Customers
In the initial stages of a digital transformation, your business should remember that its primary target is the existing customer. Once that group has successfully been shifted online, you can expand and diversify to attract a larger consumer base.
Email, social media, and other digital channels like advertising have seen significant spikes in usage during the COVID-19 crisis. To stay relevant, luxury brands must continue to communicate frequently with consumers. Even if most consumers are not currently looking to make an expensive purchase. Use digital channels to launch purpose-driven communications regarding health, business continuity and community building. It will allow your business to have continued engagement with your audience and have them perceive you as a brand that stands for positive ideals. Remember to have a consistent tone throughout your communication endeavours, and be empathetic towards your consumers’ situations. An example could be a restaurant hosting an Instagram Live session where they share cooking tips or recipes.
Revamp and Scale Up your Online Presence
In luxury, delivering excellent customer experience online is crucial. Most customers are used to completing a purchase only after looking, touching and thoroughly checking the product due to the high price. One key element of the digital transformation process would be for your business to reallocate your resources and shift management attention from offline to online. Increasing manpower in the online segment while efficiently working to make sure the offline experience is not dampened will ensure that your core business is not compromised.
To revamp and scale, your business should work to remove friction in the online customer journey. For example, improve your website’s search function. Expand your online assortment by curating the recommended list once a search is completed (perhaps through AI) and expand your online assortment. What has worked for our clients is our suggestion to redeploy store personnel from closed stores to support online fulfilment or to assist consumers via digital call centers. Setting up a two-stage experience commerce model, where brands can emulate the store experience to their best capabilities, is something that we have leveraged to help luxury businesses.
Technology has opened up new doors of possibility for the luxury space to enter. Brands can now reach customers more frequently and effectively, without either you or your customer having to leave their homes. Using technology to engage and grow customer interactions can nurture the emotional benefits that luxury provides. For this strategy to be effective, luxury should be showcased not as an extravagant purchase, but a necessary one.
Dabbling in new and digital brand engagement strategies will help expose areas in your business that require additional work. Apart from big campaign creatives, brands also need to think about creating additional marketing collaterals that are quick and less expensive. This does not mean a reduction in quality. Instead, it means to use digital media efficiently to create the same quality with lower costs. One avenue that luxury brands can take to this end is to hire a creative team. One that works on digital media designs along with designs for existing marketing collateral and products. An in-house team will ensure that everyone involved in the digital transformation is already a part of your business and hence understands it well.
Using digital marketing will allow your brand to understand consumer insights through analytics, giving you an insight on what your customers like and dislike. Your business’ ultimate goal for a complete digital transformation process should be to develop a clear content strategy. If implemented correctly, this will feed customer wants and desires, strengthen the brand and its relationship with its audience. Diversification will be of utmost importance in a post-COVID-19 world.
August 11 2020