By James Brooke, CEO and founder, Amplience
For luxury retail, Covid-19 has been an incredible catalyst for change, accelerating the move towards a digital-first, customer-centric approach for many businesses in the sector. For too long, luxury retailers have been cocooned in a high-margin bubble which has seemingly immunised them against change. Covid punctured the bubble, and there is now no room for complacency.
For most luxury retailers, eCommerce has been the only way to survive and we have seen brands rolling out virtual catwalks, e-vents around fashion weeks, virtual after parties, ‘see now, buy now’ eCommerce buttons, and social media-leveraged product drops.
The pandemic has allowed luxury brands to articulate projects in ways that they never thought possible pre-Covid, particularly those focused on digital transformation and the deployment of new technology. It’s also exposed legacy systems, ageing infrastructure, disconnected customer services, and the need for something different.
Which is why digital should now be the foundational bedrock for any luxury experience, even if that means brands must rethink how they operate. They need to be less risk-averse and stop tacking on a digital channel in the hope that it will be enough. Being safe doesn’t buy you anything in the cutthroat luxury market of the post-Covid era.
Eventually, digital will disrupt the entire luxury value chain and there will be much greater emphasis on experiences over products. Modern digital experience platforms, based on MACH (Microservices, API first, Cloud native, and Headless) digital experience-based technologies will be essential at supporting these ecosystems.
But first luxury retailers have to get there.
Drivers of change
Undoubtedly the luxury sector is undergoing a transformation from physical bricks and mortar stores to digital platforms. But there is also a change in how customers are demanding personalised shopping experiences, or new levels of choice, convenience and competitive pricing, along with club lounge style assistance.
Too many luxury retailers fail to put the customer first and don’t work hard enough with their customer data. Instead of leading with opinion from the boardroom, brands should meet customer expectations by using real data that has been recorded, identified, analyzed and translated into key actions. These actions are based on longer term and robust strategies that have been developed with the customer at centre stage. Key strategies should also be underpinned by changing consumer behaviours. The data doesn’t lie.
Brands should be under no illusions that the growth of eCommerce and the seamless blend between online and offline channels is here to stay. While physical stores still have a huge part to play in the long-term future of luxury retail, they need reinventing so they become social, entertainment and leisure facilities mixed in with the shopping experience. They can expect these prized outlets to be used as showrooms that showcase product ranges rather than as cash generating machines.
The audience is changing
Knowing your audience and target markets is a good place to start on the digital journey. The savviest luxury brands are increasingly engaging with younger groups to get a better idea of how Gen Z or Millennials function. Chinese customers will also represent a big chunk of the market moving forward, as the affluent classes are growing at double-digit rates. Brands need to understand which people are customers, as opposed to just visitors, which is less about how much traffic they can drive to a luxury website and more to do with the right kind of traffic. Targeting is essential and knowledge about purchase intent is vital.
Tailoring services to different aged groups, such as ‘buy now, pay later’ options through payment providers such as Klarna, Clearpay, Afterpay, and PayPal has allowed luxury brands to target younger customers with lower disposable incomes.
Brands need to map out the customer journey in their digital environment and consider how to improve engagement, and for this there are many different channels and strategies to consider:
- Paid Search – Many brands are continuing to advertise products in their product shopping feeds on Google, Bing, Facebook and Instagram. Rather than linking to a home page or category listing page, these should go directly to a listing page that includes the product or direct the customer to the product detail page with key cross-selling functions.
- Paid Social Feeds – Again this should direct the potential customer to the most engaging destination webpage and be designed to convert the customer. If it doesn’t — test again, learn and optimize.
- Display Advertising – How will the customer feel when they see or interact with the content of the advertisement? Is it engaging? Targeting look-alike customers and learning from this data can also prove invaluable.
- SMS – We are seeing more brands utilize SMS marketing and notifications to reengage their customers. Mobile APIs and notifications are a popular way to stay in-touch with customers.
- Email Strategies – These are outdated. If a business has something worth sending, send it, if not then don’t do it. Sending emails out to a segmented and targeted audience to drive sales at a precise point in time with discounts, if needed, or to elicit behavior at the right time can work. But not when a customer has purchased the item a few days before at full price or when they have returned the item, saying they didn’t like it. Be smart and be relevant.
- PLAs (Product Listing Ads), DPAs (Dynamic Product Ads) and Product Shopping Feeds – Too many retailers still waste money advertising out of stock products, with no product feed management. Brands must maximize their efforts to make their marketing budgets work better by updating product feeds with relevant and updated information and optimising them.
- Marketplaces and Other Shopping Channels – Luxury brands are starting to see the value of marketplaces such as Amazon, Tmall, eBay, Secret Sales, and OnBuy. They do not degrade or devalue a brand and audiences use these platforms to search for products in a way that is easy to navigate.
- Concession Partnerships – The aim of partnerships is to drive brand awareness, take advantage of a larger or newer audience that the multi-brand retailer commands through their high volumes of traffic, and in the process, generate sales. It is important to manage different feed formats or different processes and procedures that the concession partner has and to maintain control of the costs of bidding on keywords within paid search. Does the ROI warrant the effort?
Once customers arrive at the website, they need to see a single digitized view of the products that are being sold. Missing product information, incorrect sizes, obscure uses of colour, poor spelling, and incorrect materials used in designs are just some of the mistakes that can occur with poor content management.
Continuous consumer engagement involves luxury brands launching new categories of products within a collection frequently. Creating a continuous cycle of hype and valuable social media content is a core part of the luxury sector’s attraction. The power of this process should not be underestimated.
Brands should be tracking to see how customers are navigating their content, which can be done by assessing how long they spend on the site, if they are finding what they are looking for, if they are searching the categories and using filters, and what devices or browsers they use.
Product positioning is also crucial. There are now many opportunities to utilize AI, artificial intelligence, and machine learning in order to achieve greater personalisation. Luxury brands can utilise data, dynamic content, and position products and images across the site for each customer experience at scale. Businesses can test and learn in the process.
When it comes to tracking discounts and promotional activity correctly across physical stores and online, it has been a challenge for some brands due to separate EPOS and eCommerce platforms that are not linked and rely on correct human intervention. One key answer is to develop a unified commerce platform. A single system that captures consumers’ shopping behaviour, interests, and purchase history in full. When data from all channels is collected in one place, it is much simpler to link it and create a complete, 360-degree view of the customer. In an omnichannel retail environment, this is important.
The way luxury brands talk about their products within titles, descriptions and the language used across a website can impact conversion rates by 0.5%. Brands need to describe their products and services based on what customers are searching for. Consumers use real day-to-day terminology and language, not marketing terms. Generation Z might not fully identify with or understand the word ‘complimentary’, for example. Some luxury brands use ‘free’ in their Google ads and then ‘complimentary’ on their websites – a tactic used to increase click through rates for advertisement and to get customer on the site. These terms are not the same and cause confusion.
The main goal for luxury brands should be long-term digital transformation and eventual immersion in a digital-first, customer-centric omnichannel approach to business. This will create opportunities to rethink the playbook on luxury and change interactions with customers. It’s not about replacing bits of technology or upgrading to create capacity, but reimagining the future customer experience through technology.
Many brands are moving in the right direction with large volumes of video, model imagery, product shots and brand storytelling online, bt this is just first base. Interactive, personalised experiences are what will meet the expectations of consumers. Brands that want to create a buzz and gamification around a Fashion Week in which Millennials and Generation Z can interact with social influencers, designers and the products themselves, must have technology stacks that support them.
A successful digital transformation program requires ambitious aspirations, a clear plan, and concrete milestones, as well as strong support from management and the boardroom. The process is about much more than just selling products online. With digital at the heart of a brand’s operating model, luxury brands will have a competitive advantage and strengthen their hand for an omnichannel, digital-first future.