Throughout the pandemic, much of the interaction between luxury brands and their customers has, by necessity, moved online. But can a sector that has traditionally thrived on personal contact, live events and celebrity endorsement retain its cachet in an e-commerce environment?
As lockdowns and social distancing restrictions took place around the world,brands in the luxury sector were faced with a massive problem. As highlighted in a report by consultancy McKinsey, luxury goods tend to attract the global consumer, with 20 per cent of purchases made outside the home countries of the buyers. Asian buyers, in particular, tend to buy abroad, seeing luxury item purchase as part of the travel experience. With borders closed, this side of the market dried up. And of course, domestic markets were also hit by the simple fact that stores had shut down, along with events, such as fashion shows and wine tastings. As a result, luxury sales fell 20 percent in 2020, according to consultancy, Bain.
Brands and consumers responded by going digital. Bain's research found that while only 12 per cent of luxury purchases were online in 2019, that figure had risen to 23 percent by 2020 as marketing budgets migrated to the digital space. But that raises a question. In an e-commerce world where price is prioritized over experience, can the purveyors of luxury in all its forms retain their cachet? Or to put it another way, how do they differentiate?
A Luxury Experience
As Peter Gullick, Marketing Director at Retail Marketing Group, sees it a permanent shift has taken place in the market. Luxury consumers have got used to buying online and while many will return to stores, they will also continue to shop digitally. They will expect the online offering to be as enticing as the physical.
,,This means luxury brands have to put significant effort into both of those experiences and ensure the human touch that separates their brand from the mainstream is present throughout the customer journey," he says. ,,In particular, brands and agencies will need to work together to elevate the online experience from one of flat images and bland content to an interactive and engaging opportunity to present product in context."
This may be particularly true in the case of Millennial and Generation Z consumers. Research by Boston and Consulting Group and Altagamma found that between them, these groups account for 36 per cent of luxury sales with this figure expected to rise to more than 50 per cent by 2025.Crucially these generations are digital natives who are equally at home buying online and offline. This presents luxury brands with an opportunity to raise e-commerce revenues - assuming. they get the experience right.
Performance is Key
Replicating the physical-world allure of a luxury product is not necessarily an easy thing to achieve.
Sam Manning is CEO of Crafted.co.uk, a full-service agency focused on the luxury sector. As he points out, the obvious route for brands is to focus on rich media on their websites. He cites the image gallery deployed by Rolex.com as a good example of how this can work, with the images replicating at least some of the experience of visiting an online watch store. But he warns that embracing rich media can be counterproductive. ,,There's a danger that big sites get clunky and slow to load," he says.
So when Crafted was asked to create a site for superyacht company, Burgess Yachts to support a digital-first strategy, the approach was to combine striking visuals - reflecting the company's brochures - and brand-aligned copy with fast performance across all channels. The site had to work well and look good not only on laptops and tablets but also on phones.
Rich media is not the only game in town. Threads Styling, is seeking - in its terms - to redefine the luxury shopping experience by eschewing e-commerce portals in favour of chat apps. Founder Sophie Hill says that Millennials and Generation X consumers, in particular, are moving online for luxury goods but they want something more than e-commerce as usual. ,,I was aware that e-commerce could not deliver the high levels of experience that people expect from bricks and mortar," says Hill.
So, the company - which is chasing high-end consumers buying products from the likes of Gucci and Tiffany - deploys a team of trained stylists who interact with consumers through chat platforms such as Whatsapp and WeChat. Rather like a personal shopper in a major store, the role of the stylists, inspire and ultimately drive sales. Hills believes this approach appeals to the younger audience. ,,78 per cent of Generation Z consumers make decisions at the point of inspiration," she says.The company claims chat commerce is 5 times more effective in terms of driving sales.
But what about the point when a newly acquired designer jacket,handbag or item of jewellery into branded packaging. According to Robert Lockyer, founder of packing company Delta Global online retailers often overlook the fulfilment side of the experience. ,,You have to look at the packaging and consider what message it is sending out," he says. ,,You do see some horrendous offerings and if you don't get the packing right, the care and attention experienced elsewhere on the journey will be compromised. Luxury is an emotional purchase."
So what does getting the packaging right mean? Well in Delta's case - and the company designs and creates bespoke packaging worked for a range of luxury and upper end of the High Street brands, including Tom Ford and Anya Hindmarsh - it's down a mix of design, sustainability - crucial to many younger consumers - and small but important touches, such as handwritten cards. ,,Printed cards are cheaper but less personal," he says.
The pandemic did more than close down stores. It also changed the perception of consumers, arguably sparking a move away from luxury, Peal Kasirye of PR and marketing agency Peal Lemon says brands have to be careful. ,,It's very easy for consumers to perceive the brands as "tone-deaf." Millions of people were disenfranchised by the economic effects of the pandemic that impacted the fashion and luxury goods industry," she says.
So when SEO agency, Pearl Lemon targeted media on behalf of diamond jewellery company Astteria it had to be careful to reach audiences that would be receptive to the idea of buying a £300,000 necklace. ,,There were other niche groups of people that were spending more money than ever on luxury goods. These were often the high-net-worth expatriates living in the UK and the US. Instead of targeting young people who were getting laid off and often read publications like Cosmopolitan, we shifted our gears to more niche publications," she said. The wider point here is that online luxury brands have to find the appropriate audience.
Sam Manning stresses that is also important to design an online strategy that aligns with the desired outcome - and in particular what conversion means. Some luxury brands have struggled with the idea of transacting online - perhaps feeling it cheapens the brand - while others, such as Burgess Yachts know their multi-million dollar products will not be sold through a website. ,,In the case of Burgess, conversions were seen in terms of brochure downloads and inquiries," he says. In other cases, the goal could be sales first and foremost.
Selling luxury online isn't easy. Finding the audience, defining intentions and adding the elements that differentiate for lower-end e-commerce are crucial to success.