For luxury brands, digital means more than just shopping online.
This story first appeared in the September 22, 2016 issue of WWD. Subscribe Today.
That’s the conclusion from a study called “Digital or Die: The Choice for Luxury Brands” from the Boston Consulting Group. BCG said the study interviewed nearly 10,000 consumers, as well as interviews with luxury industry executives about the role digital plays in the luxury industry. The study said that luxury lags other consumer sectors when it comes to understanding and applying digital technologies.
The study cited Apple Watch Hermès as an example of new partnerships brought about by digital; Birchbox pioneering a new business model in luxury with its subscription service, and Net-a-porter in its creation of a global online luxury e-tailer. It also pointed to Burberry for its mastery of social media marketing and storytelling; Saks Fifth Avenue and Louis Vuitton for digital customer engagement, and Sephora for mastering omnichannel with an array of online and mobile products that create an engaging customer experience.
BCG found that six out of 10 luxury sales are digitally influenced, meaning that consumers are swayed by digital approaches such as researching online before purchasing offline.
Online commerce accounts for 7 percent of the global personal luxury market, but will be 12 percent of that market in 2020. And while it’s not surprising that the U.S. and U.K. are the most digitally mature markets — with more than two-thirds of luxury shoppers who bought their last product online only, or researched it online and purchased it in store — the countries that are synonymous with luxury — Italy and France — are also the least digitally mature, the study found. The report said that only 31 percent of shoppers in France researched their last product online and purchased it in the store. That compares with 47 percent for shoppers each in the U.S. and Brazil, and 46 percent of shoppers in Japan.
Olivier Abtan, partner and managing director at BCG’s Paris office and global leader of the firm’s luxury, fashion and beauty topic area, said, “Digital is the new consumer reality. Digital tools, digital skills and consumers’ rising comfort level with digital are forcing brands to be far more customer-centered in everything they do.”
Abtan explained that digital opens up opportunities for brands to create personalized offers and bespoke service to many more customers. “Brands can reach consumers not reached before and engage online in markets where a brand has no physical stores. However, not all brands are there yet,” the BCG partner said.
The study noted that even though Millennials place a higher premium on experiences than on things, a high proportion, 66 percent, still strongly identify themselves with a brand or brands, compared with just 51 percent of Baby Boomers. The Millennials, at 8 out of 10, were also more likely to be active online advocates, expressing both like and dislike for a product.
But even though the web plays a large role in the Millennial shopping behavior — in addition to rating product, 60 percent upload content about products and services, 45 percent check prices via mobile even while in the store and 43 percent look for promotions online, also while in the store. Older generations in some markets such as Japan and Russia are the heaviest online shoppers for luxury goods and services.
Perhaps the key takeaway for all consumer demographics is that 40 percent of them now expect a “two-way dialog with brands.” BCG said that means that brands can no longer rely on “push” marketing alone because consumers want brand interaction.
More than 85 percent of Millennials and 75 percent of Baby Boomers and older generations who buy luxury are ready for omnichannel interactions, whether e-commerce, social sharing or digital in-store experiences, the study said. Further, while online shopping is surging in most geographies, the report noted that luxury shoppers’ readiness for omnichannel interactions does not mean shopping online instead of in stores. Consumers also want integrated delivery service, 31 percent; same promotions and rewards regardless of channel, 24 percent, and consistent brand image, 22 percent.
BCG concluded that brands must get ready to “meet” their shoppers at many more touch points on the path to purchase and then “strive to orchestrate the overall customer experience.”
Further, 41 percent of luxury shoppers research products and services online and buy offline, while 9 percent practice “showrooming,” checking out products in store and buying online.