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Luxury brands must become digital or risk ‘dying out’

By Vivian Hendriksz

23 Sept 2016

Business |STUDY

London - Luxury brands which fail to evolve their digital front risk getting left behind as digital is the "inevitable, inescapable business shift of the future." Although some companies, such as LVMH, are beginning to invest in the digital domain, being digital means so much more than just ecommerce, and luxury labels who refuse to do so will die - according to a study from the Boston Consulting Group.

Entitled "Digital or Die: The Choice for Luxury brands," the study found that the luxury sector is behind other sectors in its understanding the benefits of digital technologies and taking them on. From a survey of 10,000 consumers in ten countries, in addition to interviews with industry leaders, the study aimed to highlight the role of digital in the luxury sector as it continues to have a larger influence on how consumers interact with brands each day.

Luxury brands must embrace the digital or risk falling behind

For example, the study found that close to 6 out of 10 luxury sales are digitally influenced, which means that more and more shoppers are being affected by digital tactics - whether it be promoted online advertising or social media channels. Online commerce accounts for 7 percent of the global personal luxury market, but will rise to 12 percent by 2020 - more the reason for luxury brands to embrace the digital domain now.

The study names several examples of how digital continues to change the luxury sector, such as the Apple Watch Hermès, a partnership brought about thanks to the digital. Online beauty subscription Birchbox, which sends subscribers a box of selected high-end beauty products each month helped usher in a new business model for luxury items while Net-a-Porter, the first global online luxury retailer and fashion magazine disrupted the market and help reshape distribution channels.

Luxury consumers expectations are continually being raised by initiatives likes these, and brands which fail to keep up with what consumers want now will lose their competitive edge, warns the study. Millennials in particular, who grew up with emergence of the internet and account for 32 percent of the world's population, are an important demographic as they will become the luxury buyers of tomorrow.

Luxury consumers expect brands to meet their expectations both online and offline

According to BCG study, millennials hold a much higher premium on experiences than things, with 66 percent of those questioned strongly identify with a brand or brands in comparison to 51 percent of the Baby Boomers. In addition, the study also found that millennials were more likely to become active online advocates, with 60 percent keen on sharing both their like or dislike for a product.

However, just because digital plays a larger role in the millennials shopping journey - with 45 percent checking prices via mobile and 43 percent searching for promotions online, even while in store - older generations in Japan and Russia are the heaviest online shoppers for luxury goods and services, according to the study. In addition, 75 percent of Baby Boomers who purchase luxury goods are ready for omnichannel interactions.

Although it comes as little surprise that the US and the UK remain the most digitally mature markets, with two-thirds of luxury shoppers purchasing the last product online, researching it online and purchasing it in a store or vice versa, the two countries the closest associated to luxury - France and Italy - are the least digitally mature markets, according to the study. Only 31 percent of the customers surveyed claimed to have previously researched their last luxury purchase online and then bought it in store, compared with 47 percent who did in the US and Brazil.

Consumers continue to seek out “two-way interactions” with brands online

But one of the main findings of the study shows that consumers are ready for omnichannel interactions with luxury brands - as 80 percent of shoppers actively expecting this. Over 40 percent of those questioned added that they expect to have "two-way interactions with brands", which means luxury brands can no longer rely on pure online "push" marketing as consumers seek brand interaction, claims the study.

Even though online luxury shopping is growing in most markets, luxury shoppers eagerness for omnichannel interactions does not mean they will shun physical stores or websites added the study. Shoppers also demand integrated delivery services (31 percent), the same promotions and rewards online and offline (24 percent), as well as a consistent brand image across all channels (22 percent.) That is why luxury brands should be prepared to "meet" their customers no matter where they are on their shopping journey, stressed the study.

A few luxury brands have stood out from the crowd in adopting digital practices beyond ecommerce. One of the brands which has set the pace for the rest is British heritage house Burberry, which shifted its entire business strategy to the digital over a decade ago. Thanks to its full use of technology and partnerships with the likes of Snapchat, Instagram and Google, the brand is able to offer shoppers a full shopping experience both online and offline and has become master of storytelling and social media marketing - evident by its 42 million followers.

The Choice for Luxury brands: Digital or Die

"Luxury brands will be successful only by keeping the customer front and center. With that as a prerequisite, brands must press forward, urgently, with digital initiatives," concludes the study. "They can no longer look to emerging markets for dependable growth. Digital tools, skills, and mindset are the oxygen that will enable them to anticipate and respond rapidly to the expectations of tomorrow’s consumers. But they must realize that a complete embrace of digital requires nothing less than a companywide transformation effort encompassing all business areas and all employees."

"The choice is clear. To embrace digital fully and strategically is to set a course for renewed growth and more predictable prosperity. To ignore it is to signal to stakeholders that they should put their faith—and funding—elsewhere."

Homepage photo: Yoox Net-a-Porter Group, Website

Photo 1: Burberry Apple Music launch, Burberry PLC website

Photo 2: Birchbox, September box, Facebook

Photo 3 & 4: Burberry mobile photo campaign, Burberry PLC website

Photo 5: Birchbox, Facebook

Photo 6: Net-a-Porter.com, website

Photo 7: Burberry Snapchat campaign, Burberry PLC website

Boston Consulting Group
BURBERRY
Digital
HERMES
Luxury brands
LVMH
Net-a-Porter.com