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Luxury E-commerce: Can Late Adopters Still Catch Up?

Luxury E-commerce: Can Late Adopters Still Catch Up?

Luxury E-commerce: Can Late Adopters Still Catch Up? Luxury E-commerce: Can Late Adopters Still Catch Up?
VP Experience, Strategy & Marketing
Valtech US
Line Tousignant

October 26, 2020

It’s no secret that luxury brands have been slow to embrace e-commerce, and many have yet to do so still.

With the exponential growth of e-commerce over the last few decades, you might wonder why luxury has hesitated to keep up with the times. There are many driving factors:

  • the perception that e-commerce does not offer the same sense of exclusivity or experience as a physical store
  • a concern that digital, especially e-commerce, is not only incompatible with a luxury experience but that it could harm brand equity
  • skepticism that consumers would risk spending top dollar for products they have not tried or touched

However, for the latter point, statistics prove otherwise: China reached $7.5B USD in online luxury sales in 2019 and, according to McKinsey, online global luxury sales will more than triple by 2025 to $91B USD. Those still dubious can look to Swiss watchmaker Omega. Omega launched an exclusive limited-edition timepiece available online only. The watch sold out of its 2012 units in less than two hours.

Mobile Marketplaces for Luxury

I remember presenting the concept of a mobile marketplace to a group of luxury brands in Paris back in 2014—a time when consumers were migrating to smartphones as their primary device. The mobile marketplace idea was received with limited enthusiasm. Although some luxury brands could see the potential benefits of a mobile experience, most expressed concerns.

They worried that a marketplace would hinder control of the brand environment and that products would be presented next to their competition. Their focus was on exclusivity and their answer was that they could build their own application. They did, and most failed as they simply ignored the very predictable consumer response: no one was interested in downloading an endless number of apps to stay in touch with brands they liked. Today, most luxury brands have recognized the need to join digital marketplaces such as Farfetch, NET-A-PORTER and others. As it turned out, consumers were already ahead of brands and showing the way.

Now is the Time for Luxury Brands to Transform

Consumers have fully embraced digital and innovative technologies. Luxury brands have no choice but to embrace digital transformation. Some luxury brands, such as Louis Vuitton and Burberry, have experimented with digital to remarkable success. But for the late adopters, now is a critical time.

Late adopters must shift their focus away from the risks of change. The greatest risk is the damaging cost of not transforming. We have seen the impact of online e-commerce. Many traditional retailers that did not adapt have now filed for bankruptcy or closed their doors permanently. COVID-19 has doubly impacted luxury brands, from temporary store closures to drastic reduction in their retailer network. Consequently, opportunities diminished for connecting with existing and potential customers. And finally, late adopters have little data about their customers—they are starting with a blank page.

So, How can Luxury Retailers Catch Up to the Digital Future?

A "test and learn" model is the best and most scalable approach. A pilot starting with a proof-of-concept lets retailers gain insights and build improvements over time. This approach challenges the idea that a product must be perfect before being introduced to demanding customers. Yet luxury loves perfection.

Still, luxury brands must experiment to adapt to the digitally native shopper. Today’s consumer values experiences over products and has a different definition of experience than what brands may perceive. The point here is that being late to the game puts brands at risk of no longer understanding their customers’ expectations and behaviors.

A Digital Transformation Will Prompt Many Questions:

How can a luxury brand differentiate itself in a digital world where the unique and personalised experience usually offered in-store is not part of the equation?

Is there a risk that a brand might reduce its perceived value when offering an experience comparable to any mass market experience that uses similar e-commerce tools?

From our point of view, a digital transformation should not remove the uniqueness and personalisation of the purchase experience—it simply delivers the experience differently.

The Path to Digital Success for Luxury Brands

First, sales associates, stylists or beauty consultants who have built strong customer relationships should remain part of the process. They should receive the tools required to support digital yet personalised customer communications.

A successful digital transformation should focus as much on communicating the brand values as the brand does on the quality of its products. To achieve this goal, brands must look at their operations and logistics as much as they do their customer-facing tools.

Brands need to view the digital experience as a part of the full customer journey. The digital part of an experience can be the starting or middle point of the journey within the funnel of engagement. As an example, a social media channel could offer a full purchase experience, but it could also be the door for a consumer to immerse themselves in a brand's history, values and authenticity. Alternatively, it offers a platform to build community where members interact with each other and the brand around common values and priorities. Community unites and builds loyalty.

Luxury brands do not need to walk away from their fundamental values—they need to find diverse ways to express those values, whether that be through blockchain for authenticity, augmented reality or even Zoom sessions for one-on-one interactions. In the end, it is not the technology that matters—what matters is that luxury brands embrace the new consumer.

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