How to achieve the perfect level of synchronicity between the online and offline world is still a hot topic in luxury retail. In today’s competitive environment, brands need to choose their marketing channels wisely, but, which are the right ones and how should they be used? With online luxury sales predicted to triple by 2025, digital strategies should be the top priority for luxury retail brands. Earlier this month we had the pleasure of hosting a roundtable breakfast with some of the key players in the luxury sector in order to identify the current challenges they’re facing with digital today.
1. Meeting the luxury consumer omnichannel expectations.
According to a new study by the International Council of Shopping Centers, the interaction between online and offline channels is called ‘The Halo Effect’. The key finding of this study was the realisation that brick-and-mortar stores serve as the hub of a brand, feeding the rest of the online channels including online sales. Every time a new store is opened, its brand’s website traffic increases by 37%; the same happens vice-versa. In luxury, the decision journey is much longer and research takes a very important part of it, whether it is online or offline.
Luxury brands today need to have a very deep understanding of the markets they operate in so they can design a marketing strategy that will allow them to connect with their consumers. Taylor Dean, E-commerce and Digital Marketing Director at Clive Christian, explained how their customer’s online profile radically differs from the offline one:
“Our customer profile varies a lot depending on whether they are online or offline. The customer who buys online is young, male and loyal who knows exactly what he’s getting. On the opposite site, the one who buys in-store is usually female, a bit older, buying for either herself or someone else as a gift. Both audiences are completely different. Bearing this in mind, we don’t target different age groups but markets instead. Our US and UK markets are incredibly important and we need to understand the type of audience who lives there that could be engaging with the Clive Christian brand.” Taylor Dean, Clive Christian.
However, Sophie Moulin, Head of Digital at Amanda Wakeley, had a different approach to this. “I don’t think the generations are represented by channels anymore. All channels are currently targeting all generations.”
Some digital marketing channels are clearly more attractive to younger generations, for example, Snapchat. Though, as Amanda suggests, this does not mean that they are exclusively used by a single generation – all generations are present across all channels. In order to accurately target the luxury audience effectively, brands should focus more on the type of content shared rather than the platform they use. This content should be sharing the same message on and offline.
The key challenge relies on an internal element of departments structures and in-store teams. On one hand, educating older generations of CEO’s and MD’s to make them understand that all digital channels will feed offline sales is hard to prove due to their attribution model being focused on the last interaction (which is usually the store).
On the other hand, the in-store teams are still rewarded by commission incentives that make them want to compete, not only amongst other stores but also between their own team -making it harder for digital conversion. Some brands believe that online and offline can have different strategies which are the root of omnichannel failure. There shouldn’t be different targets set per store and per location but, instead, a unified sale target that can be achieved by the group overall, with other sorts of KPIs (Key Performance Indicators) that can be implemented per team. Some examples could be measuring customer engagement in-store and data acquisition that would allow the brand to keep in touch with the customer forever. Another measurable KPI would be to track store sales by adding a tracking code that would allow the brand to know who has assisted to complete that sale from the very early stage of the customer journey.
“The challenge today is how to attribute the success of each channel if there’s not a clear KPI for each. Businesses are still struggling with cultural boundaries that are making harder for a company to understand this holistic approach. Technologically, there is a barrier that impedes brands to accurately report each channel’s sales.” – Chris Donnelly, Founder & Managing Director at Verb Brands.
Existing business models should be re-designed in order to allow for teams to be collaborative as well as competitive.
Burberry has traditionally taken the lead in re-defining their business model in order to facilitate the feed of sales with a successful omnichannel strategy. Today, store assistants are armed with iPads to help consumers finalise the sale online. This is the perfect example of merging digital and physical into one single strategy amongst many other initiatives the brand is taking the lead in.
2. Data to Provide Insights, Insights to Provide Personalisation
Data capture is still an issue among many luxury brands today. The challenge is to convince your customer to share as much information with your brand in order to provide them with a personalised suggestion.
Luxury brands have still a long way to go with regards to AI and personalisation. Realistically, most independent brands are not in a position yet to invest in the infrastructure that will enable them to understand their customer fully.
“Yoox Net-a-porter is an example of a brand offering personalisation extraordinarily well, but we need to bear in mind they are a £2 Billion turnover business set up by a tech entrepreneur. It is very difficult for a heritage brand, of which is 150 years old, to be able to fully embrace the potential of AI. I believe once the key infrastructure problems are solved then we will have the opportunity to really take advantage of AI. I think the traditional Digital Director will have to become the Customer Experience director – then we’ll be able to see this integration coming together and the evolution of the current commerce landscape.” Charlotte Keesing, COO at The Walpole
Today’s consumer is demanding convenience and immediacy. Whatever they want, wherever they want it, whenever they want it. AI technology has been around for some time in our day-to-day lives, in places that we haven’t even noticed. Chris Donnelly counteracted Keesing’s statement but highlighting the simplicity of a basic level of machine learning and the low level of investment actually required. He went on to describe the small solutions Verb has put in place to help enable luxury brands to collect data. The hardest part, Chris mentioned, is to accurately track trend forecast to avoid under or overstocking. This level of AI and machine learning implemented by retailers such as Farfetch solves a huge problem and minimises human error by accurately predicting trends to order the right level of stock. This obviously requires a much bigger investment.
Ariane Murphy from JGOO, another experienced digital advisor, also echoed this sentiment. “Finding out what you need to improve, how do you need to do it and how can the machine learn in order to build the tech around it. Building the tech is not complicated, the step of sitting down and agreeing on those objectives and goals, that’s what brands are lacking at the moment.”
The more digitally savvy luxury brand’s CEOs are, the more they will understand that small investments in AI can make a big impact on their business. There is still a long way to go but we believe this is already taking place in most forward-thinking luxury fashion brands.
3. The Truth Behind Successful Influencer Marketing
As mentioned earlier, Instagram has become part of an essential platform to showcase a brand’s portfolio and DNA. According to a recent article by The Business of Fashion, there is an unmistakable correlation between the size of a brand’s Instagram following and its retail sales. Not only that but also, the number of followers a brand has can also serve as an indicator for luxury investors. The big question is, what exactly is the secret to achieving new followers?
At the breakfast, Influencer Marketing was established as playing a huge role in raising brand awareness. Since this new strategy has been adopted, brands have been focusing on learning how to use Influencers effectively – taking into consideration any qualities in alignment with their brand to an individual’s level of interaction with their own followers. However, what is less obvious to those who are not marketers, is quite how much strategic thinking goes into the partnership of a brand and an influencer.
Above all, the influencer has to be authentic. Cecily Baer, Associate Director at Whalar explained that there are many ways in which an influencer can be rewarded:
“Some luxury brands prefer to gift, others understand the power of actively capitalising on them. However, there is only so much that your brand can scale following that strategy. Influencer marketing has become more important and people are trusting the people who they follow – they’ve become authorities in this industry. When consumers see an influencer they trust, they don’t mind seeing an #ad or ‘paid partnership with’ tag because they know the reason the influencer works with that brand is because they genuinely like that brand. For the brand, it then becomes a much committed, deeper strategy.” Cecily Baer, Whalar
The role of the influencer is evolving and even though it is true that there are lots of influencers that are lacking a real purpose, there are lots of fashion influencers who are very informed, educated and they have an authority within their sector. They really understand the market and the brands trust their opinions.
However, it should be noted that influencer marketing for luxury should be undertaken with caution. Brands who fall into a mass market strategy run the risk of devaluing a luxury item by gifting it to too many people. This happened to Dior with the Dior Saddle bag. Earlier this year, Dior decided to re-launch the famous design released in the 2000s by John Galliano with a mass influencer marketing campaign that consisted in gifting thousands of influencers with the bag. Industry leaders have had mixed reactions to this campaign, stating that even though it was a successful campaign, it risked devaluing the brand. In situations like this, the product’s reputation can be damaged and the desire of owning the luxury item can be lost all the sudden.
“Even though the reputation of the brand was put in risk, Dior achieved an incredible level of brand awareness and still made the Saddle bag desired by many. As a long-term strategies, brands should really consider doing this as a one-off to not damage their luxury reputation”. – Cecily Baer, Whalar.
Followers vs Engagement, What Should Brands Measure:
Over the years, digital marketing has played a very important role in eCommerce sales, conversion being one of the most important KPIs for luxury brands today. Some digital marketing channels, such as SEO and PPC, whereby the main objective is to drive traffic to a website and, ultimately, convert that visit into a sale. However, social media and influencer marketing play a slightly different role due to the nature of the channels. Instagram was created with the aim to share personal photos and stories from the people you wanted to follow and brands have desperately tried to change this channel to convert it in a sales tool when in reality, it’s not. Therefore, tracking conversion from a channel like Instagram may not be the most relevant KPI to measure its success – especially for luxury brands. Most consumers browse when they are in ‘discovery mode’ and want to find out more about it. Arguably, community engagement and brand loyalty should be the KPIs to be taken into consideration.
“When the only focus is to achieve more sales, most of the campaign creativity is lost and the role of the influencer loses its meaning and authenticity.” – Cecily Whalar
Brands help influencers build a stronger profile, and influencers help brands to have a bigger name in the industry. We had the chance to speak to Rebecca Nach, Marketing and eCommerce Manager at Kitri who explained how the online brand used a strong influencer marketing strategy to get to the key online luxury retailers such as Net-a-Porter, MatchesFashion.com and Farfetch.
“These retailers need to ensure they are only selling top level brands and one of the ways they have to ensure that is to check which influencers does the brand work with. If the influencers look right, most likely the brand will be aligned with them.” Rebecca Nash, Kitri.
4. Budget Allocation, What Should Go Where?
Even though any luxury brand can benefit from having successful digital strategies in place, the price range of a luxury item can differ a lot, and the willingness to pay and purchase decision time too.
For real luxury like a fine-jewellery firm like Boodles, the price point makes it harder to justify a strong investment in digital. Nina Eadie from Boodles outlined how CEOs and managing directors often tend to be from a demographic who aren’t as familiar with digital. For a product line that can range from the £5,000 to up to £5M with a potential target audience who has low social media activity – how can you justify allocating a bigger part of your budget into digital channels or influencer marketing?
Charlotte Keesing, COO at Walpole stated that one way to look at that is how to invest in the customer of the future.
“Even though your customer today may not be fully online, the next wave of customers certainly is and now is the time to forge a strong relationship with them so that they can have a sense of loyalty with your brand” – Charlotte Keesing, Walpole.
Ben Askins, Commercial Director at Verb Brands explained that all digital touchpoints are very important as the first interaction with potential customers and that should be considered when planning your marketing budget allocation.
“Most luxury purchases are done offline which results into an inaccurate budget allocation towards digital marketing channels that are essential for brand discovery and raising brand awareness” – Ben Askins.
‘Offline’ influencer campaigns should also be considered in high-end luxury. For example, aligning your brand with HNW events and choosing ‘offline’ influencers who can be your brand ambassadors can be more effective and targeted than other online channels. The content creation around these initiatives is also an incredible asset that can help with brand discovery.
5. The Power of Chinese Luxury eCommerce
A recent article by the Financial Times highlighted how luxury brands are being quick to adapt to today’s Chinese consumer online. Richemont recently partnered with Alibaba for a joint venture to see Net-a-Porter and Mr Porter to be launched on Alibaba’s Tmall Luxury Pavilion. This eCommerce platform allows for true luxury brands to have a safe online channel which ensures all brands to be of the highest standards and to fight counterfeiting.
This is only one of the examples of how luxury brands are looking at this market as a key priority in 2019.
China is a hugely influential market and brands must understand the potential of the affluent Chinese who is visiting the UK and eventually returning to China.
Today, companies like Harrods are already implementing the technology that allows Chinese consumers to pay directly through the number one social app in China, WeChat. WeChat has over 1bn active monthly users, and 600 million of those use it to pay for goods. Most retailers in China are now only using WeChat or AliPay, making most traditional credit cards completely redundant.
On top of that, WeChat enables brands to advertise their products on the platform. In the same way brands have Facebook pages or Instagram accounts and advertise on them, brands can do the same on WeChat. What’s also interesting is that the platform enables you to gather much better insight into who the customer is and their behaviour than in Europe, where data protection has reached a high-level of regulation. When used correctly, this level of insight can help a brand to actively and accurately target a new wave of affluent consumers who are ready to engage with luxury brands.
“WeChat presents a unique marketing opportunity for Western brands looking to market to Chinese shoppers both online and in-store. Through JGOO, brands can integrate WeChat Pay enabling a seamless and convenient shopping experience Chinese are familiar with. But not only that, brands can also advertise on the platform, and through official WeChat account attract followers, build a strong online presence and generate one-click sales.” Richard Morecroft, CEO at JGOO.
These are some of the key topics that will be discussed at the upcoming TREND: Luxury Fashion Digital Disruption in April 2019. Get in touch with us if you would like to be notified when tickets go on sale at firstname.lastname@example.org.
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