Luxury Retail in the Digital Age

The luxury goods market is at an interesting juncture within the retail industry. The luxury sector not only faces all of the challenges the retail industry is enduring but it is also dealing with its own unique set of obstacles. Currently, the retail space is lagging in brick-and-mortar sales while the sectors’ e-commerce presence has weathered the storm. According to Walker Sands, 27 percent of consumers have purchased a luxury item online in the past year– up 17 percentage points from last year and 21 percentage points from 2014.

With the spike in luxury e-commerce sales in mind, there are several key differentiators and strategies that these brands are employing to their advantage.
  • A specialized user experience is key. Whether it means having an interesting yet functional website journey or offering a unique experience in virtual reality, some luxury brands are hitting the nail on the head when it comes to the user experience. Ralph Lauren, for example, is blending brick-and-mortar with digital features by showcasing smart mirrors in the fitting room. The mirrors allow users to request additional sizes and take photos of the outfits to send to family and friends, which they can also immediately share on social media outlets. The innovative feature allows shoppers to share that they are not only wearing Ralph Lauren, but are also having a great in-store experience.
  • Create an online relationship with consumers. Social media allows brands and consumers to connect like never before. Some brands have unique hashtags allowing consumers to show off their style, which may even result with a feature from the company itself. For example, Saks Fifth Avenue owns the hashtag #SaksStyle, asking buyers to “Model your Saks ensembles & tag us on Twitter, Instagram or Tumblr.” If your “Saks Style” makes the cut, your photo might make it to the website.
  • Provide a seamless experience. Whether the brand is selling online or in-store, consumers expect their shopping experience and customer service to be seamless. Often, it’s expected that one can go from store to website to app, all without skipping a beat. Digital serves as the conjoining element between brick and mortar, the internet and the consumer. Burberry has shown that it is mastering this game. It’s ‘click and collect’ feature, where buyers can purchase online and pick up the item in-store, is not only convenient for customers but also makes up 15 percent of its e-commerce sales.
  • Establish a strong digital presence. A strong digital presence allows brands to connect with affluent consumers leading up to and even beyond the purchase. Hermes is one example of a luxury brand with a strong digital presence; spend just a few minutes on the website and you’ll find an incredibly interactive and even fun experience, filled with videos and innovative designs, while searching for the perfect bag for you.
Looking forward, the shifting focus from brick-and-mortar to e-tail goes hand in hand with the changing demographics of luxury consumers. Soon, millennials will hold the largest share of purchasing power and studies suggest that they are participating in the luxury retail market. In the meantime, it would be unwise to discount baby boomers and their current purchasing power as a factor in the state of the luxury goods market. Baby boomers and Gen X-ers spend a combined $215 billion on luxury goods annually, or 4.5 times more than millennials.

The change in consumer preference from in-store to e-commerce has been well documented and the luxury market is not immune. It’s clear that luxury brands must adapt, improving e-commerce and omnichannel capabilities in order to stay relevant among all, especially millennials.

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