TREND Highlights – How is digital shaping the luxury industry?

One week on, we reflect on the highlights of Trend, which featured a formidable panel formed by Victoria Buchanan; Strategic Researcher at The Future Laboratory, and Henry Kimber; Marketing Manager at IWC Schaffhausen. Chris Donnelly, Founder and Managing Director of Verb Brands, completed the panel, acting as compare to lead the discussion to consider the strategies which luxury brands are using to appeal to millennials.

At the beginning of 2016, the luxury fashion industry saw digitalisation and eCommerce as one of the top opportunities for businesses to utilise. Now in 2017, the luxury industry is focusing on customer engagement, omnichannel integration, product innovation and digitalization of the value chain, according to a report released by McKinsey and Business of Fashion, The State of Fashion 2017.

“62% of Fashion executives continue to see competition from online players as one of their top three challenges for next year”  

Top 6 opportunities

Donnelly began by suggesting that the current state of the market means that if you are part of an eCommerce business, things are moving so quickly that if you are not protecting yourself by investing, you may fall behind.

Some of the trends that represent those opportunities go from marketing automation (facebook chatbots) to the use of advanced materials (Marchesa and IBM’s dress), virtual reality (Piaget Polo Experience) or “See now buy now” concept from brands like Burberry, who were pioneers allowing their clients to buy the collection at the same time as soon as the catwalk finished.

Which digital trends do you think will make a difference for luxury brands?

Victoria Buchanan started the conversation by stating that it’s been very interesting to see how in the last couple of years everyone shifting to having websites and be mobile apps. Everyone was investing a lot on websites and mobile, just because ‘everyone’ was on it.

“I think what’s interesting to see in terms of where digital is going is to look at what’s coming out from Asia” – Victoria stated.

“We should be talking about the whole retail approach, where digital is one part of it. In Asia, we’re seeing this at its most, with apps like the Line and Weibo where everything happens inside of that interface.”

Convenience is becoming the most important factor. Luxury has always been perceived as a slow industry sector throughout the entire process, from the time you order a product until you receive it.

“Increasingly people expect this kind of sense of instant gratification. So when they get that from every other industry, it’s interesting to look at how the luxury sector responding to that” Buchanan concluded.

Henry Kimber agreed with Buchanan, and highlighted the need to make eCommerce a real and great customer experience.

“We are trying to still offer the bespoke and personal touches that our clients expect, no matter whether it’s online or offline. Some luxury products can be complex and the consumer often wants to hear it all about the product itself. They want to know more about it and understand both its technicality and authenticity”

What has positioned Gucci as a leader in digital luxury?

We’ve seen how Gucci has become a luxury digital leader in the last two years. They’ve shifted their focus quite notably in the last few years. They’re focusing much more on the millennial market than any other brand. The company’s revenue YoY rose 12.7% to $4.5 billion,  raising 21.4% to $1.45 billion in the 4th quarter alone.

Victoria mentioned that this was largely due to Gucci’s appointment of a new Creative Director who is really driving this vision. He’s encouraging a very collaborative approach and handing the creative agency to makers, creators and artists who are the ones controlling these digital campaigns.

“It’s really interesting how they’re creating a community and a conversation through those actions. They use influencers like Petra Collins, who was featured on their Snapchat talking to viewers and giving backstage access at events, which make people feel that they are engaging with the brand and their values in a more real way”.

Henry went on to reflect that luxury brands often think they need to be serious and remain in line with the traditional origins and values of their trade. However, they need to realise that they can still be fun and playful with the brand, and use a combined marketing approach to staying up to date with current consumer practices. The accessibility to the brand is key.

“Consumers go on the Gucci site because they want to shop and see the collection. They can see the runway looks from the front and back and shop every single item. It’s all immersive. Their video marketing is very strong with adverts, catwalks and even  short films like ‘The Performers’ in collaboration with British GQ.”

“Digital is not the only focus and traditional marketing is still present. Although there are digital many digital playful campaigns, there is a lot of concierge service and in-store high-end experience that keeps the brand identity at its top” Kimber concluded.

Generation X vs Generation Y

Brands have become obsessed with millennials, and some suggest they are often forgetting that Gen X and baby boomers are the ones that can afford to buy their products. So, why are luxury brands so focused on the millennial market? A lot of brands should really take a step back and think about who should be communicating with, and who is appearing in their campaigns. Using young models shouldn’t be the focus for all brands as they all have different targets.

The power of Influencers

We increasingly see influencers taking a more significant role in marketing as they continue to grow and refine their audience, and we now have more knowledge of how this industry works and luxury is taking advantage of it.

influencers

We asked Kimber if IWC partners with influencers. The answer was an assured yes. On occasions, brands get blinded by the number of followers an influencer has but, if no one is biting on that content, then you know their audience is not right.

“Influencers are very authentic, true to their personality and that’s why their followers commit with their message. The added value is that they give us the opportunity to show the product and associate it with a specific lifestyle.”

In addition, influencer marketing can help to measure whether there is a positive or a negative response from the comments, reactions or engagements.

“You want to learn from the product that you just launched, whether people like it or not. That is a very useful way to measure the impact of it.” Kimber concluded.

To the question, how to measure the impact of influencers, Victoria had a specific vision.

“Engagement, clicks, @…  At the Future Lab we’ve been talking about this idea of the ‘attention economy’ and how it has become the brands’ ultimate goal. I think it may not be a true measure of engagement anymore. A lot of people are talking now about the Dark Social as a way to engage with true fans of the brand. You’ve got people like this nail brand who has WhatsApp groups to respond to her fans and interact on a daily basis with them. You can’t measure that engagement. They recognise that the consumer who is engaging with them in that way, is not necessarily engaging with the influencers who represent that brand. These fans are spreading this message through channels that you cannot actually measure the ROI.”

As Mark Zuckerberg states, “messenger is the new social media” people spend most of their time using these platforms to communicate rather than regular social media.

Another interesting trend Victoria raised in the panel was when influencers with big followings actually create collections for brands. They take them to the Head Office, embrace the brand vision and then create the collections and sharing the process of creation on their social platforms.

“The influencers industry is heading to is to something more collaborative. People like the @manrepeller who has stated what her voice is, I think that’s where we’re heading to.”

Celebrities vs micro-influencers

According to Kimber’s opinion, it’s all about finding creative ways to engage with the brand. If you look at what Dolce & Gabbana did on their last fall/winter runway, they combined social media reach of all of those influences, from well-known celebrities to micro-influencers, their social reach after the show was about 50 million! They gave all of them the opportunity to express themselves. No matter what the type of influencer is.

Chris Donnelly concluded this topic referring to engagement.

“In pure engagement terms, the smaller following gives a much higher ROI. If you’re working with 100 influencers with 1000 followers each your brand could get a huge engagement rate as the followers of this type of influencers really connect with the content of their posts as opposed to celebrities or influencers with much a larger following.”

Today’s consumers are “always on”—better informed, better connected to others, more demanding, and more conscious of values and authenticity. We are seeing a global trend for convenient, on-demand products and services.

As an example, there are a few luxury handbag brands that you have to wait a year to receive the product. Whereas now you have companies like Net-a-porter when you can have same day delivery.

How do you think this will affect the luxury industry?

Victoria Buchanan refers to a sense of disruption in that sense:

“In luxury, people may want slower experiences – that’s what some people say. However, if you think a high-end consumer also wants to be able to order to order a taxi instantly, and order products using Amazon’s Alexa to get next day delivery, that consumer’s profile is now expecting this instant gratification from all other industries.”

However, for every Trend, there is a counter-trend. People want to see the slowness and the craftsmanship. It’s interesting to see how brands are playing with this.

“Karl Lagerfeld for instance, will not have the ‘See now buy now’ feature as Chanel is not buying into the need to provide consumers with instant responses. On the other hand, Burberry created such a hype around the show, and they actually have the manufacturing capability to get the clothes out there, that if people want to buy it, they want to make the collection instantly available for them.”

Henry Kimber reflects on the importance of clarity for luxury products’ availability and production process.

“If you’re walking into a store and you can’t buy the product displayed, there is a contradiction in the consumer’s mind. That applies online as well. Net-a-Porter is doing great by being very transparent with their stock management. If the product itself is sold-out, it’s not online. If a product needs that extra production time, then there needs to be a justification and understanding of how rich is that production process.”

Data from influencer marketing platform MuseFind shows that 92% of consumers trust an influencer more than an advertisement or traditional celebrity endorsement.

Does this mean traditional advertising is coming to an end?

“I don’t see traditional advertising coming to an end, I see it evolving. What Moncler did with their in-store visual campaign or Calvin Klein’s printed ads are simply brilliant. Marketers are just taking traditional to the next level, having better creative direction and expanding on digital channels.” – Kimber added.

Brands will focus on broader marketing channels. Marketing analytics tools allow brands to track absolutely everything online. The progression from this is to assess more accurate results from all different marketing channels. This will allow brands to focus on the marketing channels that give better ROIs.

If you would have to advise a luxury brand on which trend to invest this year, what would it be?

Buchanan concluded with two main points: digitalisation of supply chain and AI.

“I think the biggest trend is not a trend. Digital and technology on catwalks have been overused. It was kind of throwing technology at clothes for technology’s sake. It’s interesting to see that innovation is coming from the systems’ change. It’s coming from brands exploring how they can transform their manufacturing process, allowing the process to deliver the customer experience in a smoother and cohesioned way. So, I believe that innovation is coming from inside brand’s supply chain process. They also want to share how they are empowering local businesses through production.”

“Artificial Intelligence is obviously something to be excited about it. Brands are responding into that by embracing this technology. This will definitely affect the retail experience.”

Kimber also highlighted AI as one of the main trends to invest in:

“The way we’re using robots in production is absolutely brilliant. This new digital trend will massively improve consumers’ experience if we address it in the right direction. For instance, with the apps’ boom, some of them were awesome but were never updated, so they missed an opportunity when the consumer evolved. This is exactly is where brands should be investing, looking at what consumers want to buy, how they want to do it and through which channel. They need to think about how to make the customer’s journey as smooth as possible in both a digital and physical sense”.

Fast fashion, online retailers, everything is moving as quickly as it possibly can. Some brands might be compromising their brand to adapt to it, however, the value of brand identity is something that cannot be overlooked.

Click here to see the event gallery.

If you would like to share your thoughts on social, please use #TRENDbyVERB

SAVE THE DATE FOR NEXT TREND, THURSDAY 20th of JULY 2017