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Is It Time For Luxury Retail To Fully Embrace eCommerce?

Historically, luxury brands have been slow to embrace digital sales. It’s not that the demand isn’t there. It’s a question of historical markets.

By default, the market for luxury retail tends to skew towards both men and women between the ages of 45 - 54; frequently viewed by marketers as the slowest adopters of digital technology. Even as recently as 2016, it was estimated that luxury brands allocated 73 percent of their marketing budget towards print advertising.

But all that’s changing. According to a recent report from McKinsey & Company, the average consumer over the age of 50 will own 3.5 mobile devices, and spend more than 16.4 hours a week online—only marginally less than the highly coveted millennial generation.

And luxury brands are heeding the call.

Luxury 4.0?

“The Web is not just sales—it’s a way to interact with our customer, it’s a way to create intelligence, it’s a way to create the future…” - Gian Giacomo Ferraris, CEO, Versace

Luxury brands have always relied on a certain heritage and prestige as part of their self image, which has helped foster the notion of exclusivity. It’s not just price that defines luxury, but the implication of uniqueness and craftsmanship. Subsequently, the image of an ivory tower accessible by only a few has emerged.

The digital world is democratic by comparison. It’s a landscape where everyone is connected and everyone has an equal voice. And in the world of eCommerce, the idea of an equal footing where virtually any imaginable product can be purchased safely and conveniently is par for the course.

But it can come at a price. A perceived lack of quality control over both sales and pricing has been one of the chief reasons why luxury brands have shied away from online retail. Physical luxury retail has only reinforced that image of exclusivity, encouraging a one of a kind customer experience unobtainable on Amazon. The difference is stark. For luxury retail, their own image counts for virtually everything. But it’s the customer that drives Amazon, not the brand.

So why did multi-brand stores account for 78 percent of online sales of luxury goods in 2017?

Millennial Clout and Luxury Retail

Millennials aren’t just the fastest growing generation. They also have the lion’s share of spending power in the US, with an estimated $1.4 Trillion in revenue generated by consumers between the ages of 23 and 38 in 2020—a year which saw a 37 percent growth in eCommerce sales in the third quarter alone.

They’re also one of the most impulsive. According to a recent survey from public relations firm 5WPR, 82 percent of Millennials are willing to purchase an item after browsing just once if they like it enough. But impulse isn’t enough for digital marketing in 2021. Marketing has entered an entirely new realm. One where personalization means everything; even more than the legacy of a brand. It’s a realm in which technology, not tradition, dominates. And if it’s a realm which doesn’t cater exclusively to millennials, it’s a realm in which they’re keenly perceptive of. Some 72 percent of Millennials are driven by external marketing sources including advertisements, blogs, Instagram and influencer outreach.

Millennials are predicted to represent 50 percent of the luxury retail market by 2025, representing a growth rate of 130 percent. Subsequently, it should come as no surprise that luxury retail marketing would collide with the under-40 demographic. But it’s not merely a question of targeting. It’s a question of survival.

Luxury Relevance in the Digital Age

In 2017, the aggregate net sales of the top 100 luxury brands in the US was roughly $212 Billion. By 2019, that figure swelled to $247 Billion, representing a composite year over year growth of 10.8 percent. All of which might seem to indicate a relatively stable market. There’s just one dilemma.

The average Millennial consumer is driven by sustainability, not excess income. They’re much more apt to purchase from companies whose values are aligned with their own—a factor which luxury brands have historically struggled with. Millennials want to see a direct impact from companies in both local and global communities. Luxury brands need to indicate they’re driven by a shared mission which Millennials can relate to. And unfortunately, the slow adoption of digital strategies means brands will have difficulty convincing younger consumers of their commitment to sustainability.

Three Digital Strategies for Luxury Retail

Multi-brand Channels

One of the chief reasons for the success of Amazon is choice as well as convenience. As retail shifts towards digital channels, physical outlets are quickly dying. In 2019 alone, a reported 8,600 physical retailers shuttered. But consumers will always demand window shopping; and Amazon will always provide a superior browsing experience. In fact, they’re scheduled to own 16 percent of the apparel market in the US alone in 2021. And if luxury brands hope to position themselves as a new and value-conscious face, they’d better take heed.

Social Media Optimization

It’s not that luxury brands don’t maintain a social media presence. It’s that they fail to optimize it effectively. Simply maintaining a presence on a visually rich social network is no longer enough. Brands need to rely on organic traffic shares if they hope to establish a more inclusive image. An excellent example is Burberry’s now legendary “Art of the Trench” campaign. Initially launched in 2009, the campaign invited users to share photos of themselves modeling their favorite Burberry trench coat in candid, natural settings. The result was a Facebook fan base of over one million followers in less than a year (the largest count in luxury apparel at the time) and an increase in eCommerce sales by over 50 percent by 2011.

Influencer Outreach

The rumors of the death of celebrity brand ambassadors may not be exaggerated, but their presence has been overshadowed by the rise of influencer outreach. It’s hardly a passing trend. Brands are expected to spend more than $15 Billion on brand ambassadorship over the next twelve months for the very reason why luxury brands have been slow to adopt digital marketing: relatability. Consumers no longer want their needs dictated and influenced by a distant fashion icon. But they do want to see new offerings and products as modeled by their peers.

Can eCommerce be a Bridge to the Future for Luxury Retail?

There’s no such thing as certainty in sales, as the events of 2020 have proven. But there is one certainty for strategy and development: the need to adapt.

For any form of retail, eCommerce is no longer optional. It’s integral. That includes luxury brands. Whether or not they’ll succeed is based on their ability to adapt. Consumer expectations are evolving. Market influence is evolving. No one wants to see legacy brands disappear. But they may want to see them as more accessible and less exclusive.

And eCommerce is that bridge.


Color More Lines provides white glove, global account management of your eCommerce platforms so mission-driven companies can focus on new product development, branding and growth strategies. Find out more at Color More Lines.

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