PARIS — The pandemic-induced store closures that swept the globe this year sent the race for luxury groups to boost their digital arsenals into high speed, as they scramble to reach consumers outside traditional store networks. Progress on this front has been eye popping — the challenge pushed companies to surpass even their own aspirations — but now the question is what will be the shape of further advancement on this front.
The notion of a retail apocalypse has been around since before the coronavirus arrived, but the crisis has added urgency to the need for retailers to rethink their business models. At the outset of the coronavirus lockdowns, Kering executives made it clear that while they were drastically implementing cost reductions, they would maintain planned spending on big projects, including new logistics facilities, improved digital and e-commerce capability, and IT. Indicating likely change on this front at Compagnie Financière Richemont, the group’s chairman Johann Rupert told investors ahead of a shareholders’ meeting that distribution channels are changing rapidly and that plans are under way to change the management board to help it better adapt.
“COVID-19 just accelerated that in a massive way, in a way that nobody could have predicted,” said Ian Rogers, chief digital officer of LVMH Moët Hennessy Louis Vuitton, speaking at the 36|86 Festival.
“I think it’s true that we did about four years of digital transformation in the first four months of 2020, with brands just being faced with what the record labels were faced with in 2000,” said the executive, drawing a parallel with the music industry.
“I think start-ups will have a role to play in that,” he said.
Companies that were created out of an opportunity that traditional players failed to see, like Farfetch, which allowed consumers to buy luxury goods online, and Soundcloud, which came as people sought music online, might not be formed nowadays, he suggested, explaining that retail groups have realized the importance of bulking up their expertise in this area.
“People aren’t asleep anymore, they’re awake and they’re investing on their own,” he said.
Describing areas where start-ups may be able to help them, he stressed omnichannel solutions: “Some of the more interesting things might be the less sexy, more behind-the-scenes supply chain things that are going to compete with Amazon.”
Describing efforts by LVMH’s brands to carry out their e-commerce transformation, Rogers said the idea is to keep shopping fluid, whether it be talking to someone in a store or text messaging them, making a purchase online.
There has to be “some sort of fluidity between all those consumer touch points,” he said.
“We also work a lot with data and artificial intelligence — customer data, what do we know about the customers, and how do we use data to serve the customer better, and then product data, as well which is more behind the scenes, about supply chain and operational efficiency,” he said.
“That’s really the investment thesis of LVMH: you add operational efficiency to creativity and that is a value creator,” noted Rogers.
The group leans on other actors to help it build operational efficiency.
“So there’s tons of stuff that we’re trying to do, whether it’s on the marketing side or behind the scenes with supply chain or with artificial intelligence, etc. — it doesn’t make sense for us to build,” he said.
“It actually only makes sense when you amortize the cost of building those tools across the entire industry or across multiple industries — we’re not a software company, we’re going to build very, very, very little, we’re going to have a full ecosystem that we can rely on and sometimes that’s going to be Salesforce or Google, or something like that, but a lot of times that innovation is going to come from below and we want to help those companies,” he said.