Even before acknowledging the effects of the pandemic, the internet was the quintessential way to reach the younger generation. Yet many luxury brands are still reluctant to engage in online retail.
In this article, we provide an overview of the possibilities and pitfalls that luxury brands face, since only a well thought out digital marketing and e-commerce strategy with intuitive and innovative solutions can provide the key to success.
In the past, the digitalisation of the luxury goods industry was not considered a priority, as the compatibility between exclusivity and the mass market aspect of the internet was questionable. Yet the turnover figures of luxury e-commerce tell another story, pushing luxury brands to reconsider the importance of going digital.
Online retailing, for example, has seen the strongest growth in the luxury goods market in recent years. With a total turnover of 19 billion euros, European luxury e-commerce market finds itself in third place, just behind the USA and Japan. E-commerce is therefore the driving force in the digital revolution of the luxury industry. While luxury brands initially only set up showcase sites or apps for their branding and communication strategies, they later also created online shops or turned to sales channels suitable for the industry, such as YOOX, Tmall, Style.com, Galeries Lafayette and Harvey Nichols.
According to the McKinsey Digital Luxury Experience Study, digital sales account for less than 10% of all sales in the luxury goods sector, yet they have shown a much greater growth rate of +27% since 2010 compared with in-store sales, which grew by only 7%. This upwards trend is expected to continue for the foreseeable future.
Moving online is becoming essential! But how?
Before we take a closer look at marketing and e-commerce strategies for luxury brands, we would like to clarify which expectations different groups of customers have when it comes to online offers.
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Many consumers of luxury goods now find their buying habits very much influenced by the digital world. This means they either shop directly online, or in-store after looking up products online. However, this buying behaviour varies globally. Consumers in the US (69%) and the UK (66%) are particularly influenced by digital media, while in Europe the influence is somewhat lower, for example 49% in Italy and 47% in France.
Multi-channel marketing experiences, that is, brand presence across various communication channels, are particularly popular among customers. 85% of millennials and 75% of baby boomers even expect luxury brands to have an omni-channel presence, i.e. a seamless shopping experience, whether from a desktop or mobile device, by phone or in a regular shop. Essentially, what many consumers want brands to offer is a well-integrated service and expect similar promotions and benefits online as in-store.
At this point, around 60% of luxury brands now have an online presence, and the renowned Boston Consulting Group (BCG) predicts that by 2025, one fifth of luxury brand sales will be made online. Today, the proportion is already around 12%. Single-brand sites dominate, accounting for 29% of online sales. However, these sites are losing momentum. In contrast, multi-brand sites and marketplaces such as Matchesfashion (25% and +5 points compared to 2014) and department stores’ sites (21% and +3 points compared to 2014) report stronger growth. Italian fashion giant YOOX, the market leader in fashion, design and art, has launched its marketplace in 2022 in more than 25 European countries, including France, Germany, Spain and Italy.
What is driving this? Customers have a better purchase experience on these platforms, with greater choice, more editorial content and a quicker buying journey.
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Some fashion houses, such as Gucci, Saint Laurent and Boucheron, offer several cross-channel services within the Kering group, for example, providing customers the opportunity to check product availability in-store online. Gucci has even added a geolocation function to this service.
Versus Versace was once one of the first fashion houses to offer its collection online, just minutes after its catwalk debut. Nowadays, Burberry also hosts two fashion shows a year which are then made available online the day after their catwalk debut. Tom Ford followed suit and inspired the CFDA’s “see now, buy now” model.
One of the fastest-growing, yet most challenging markets for luxury brands is China. Here, brands must develop on Chinese online platforms such as WeChat and Weibo, as well as on e-commerce platforms such as Tmall and JD.com. Here, brands can maintain their identity and benefit from special sales periods in the Chinese market, but they must keep a watchful eye out for counterfeits, as these are particularly prevalent in Asia.
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Looking to preserve their exclusivity, luxury brands have been slow to enter the realm of social networks. Nevertheless, the international study “Online Luxury Brands 2016” conducted by the PMX agency showed that social networks account for about 6% of the web traffic of the top 80 luxury brands. In addition to Instagram, primarily photo-based social networks such as Snapchat are particularly suitable for luxury brands. During the Paris and London Fashion Weeks, these platforms were often used for campaigns.
Due to its visual focus, Instagram is the leading social network for luxury brands, but Facebook, with its premium format “Canvas”, YouTube and Periscope are also widely used in the industry. When Instagram was opened to advertisers in March 2015, brands such as Lacoste, Air France and Guerlain immediately invested in their visual marketing operations here, as “luxury” is the second most shared topic in the Instagram community, according to Linkfluence.
According to Iconosquare (Instagram analytics and marketing tool), as many as 90% of the most popular French brands on Instagram were luxury brands. Chanel is in the lead and increased its follower base from 6 million to 15 million within a year. Today, the official Instagram page already has over 45 million followers and nearly 4000 posts. An investment that seems to be worthwhile, then.
The numerous possibilities of digital marketing and online trade pose a great challenge, however. If you’re looking to expand your customer base to include the generation who’ve grown up with online shopping, you have to meet them where they tend both to shop and to spend most of their free time: on the Internet.
It’s also important to place a strong focus on smartphones and tablets, as this is precisely where 50% of luxury goods searches are conducted. At the same time, a unique customer experience and exclusive offers are essential for strong customer loyalty and increased sales.
With its many years of experience, Lengow helps to develop clever solutions for the different distribution channels and to improve the performance of luxury brands. A tailored customer journey is just as much a focus as the increased visibility of products and the increase in sales worldwide. Like this, you allow your “luxury” customers to buy your products anywhere and at any time, and on any sales channel and any end device.
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