The New Luxury Playbook: Changing the Luxury Market Landscape to Conquer a Post COVID-19 World
The blog post talks about digital transformation in luxury, luxury digital marketing and luxury in a post-COVID world.
It is a fact that COVID-19 has disrupted the market landscape, leaving businesses throughout the globe in massive chaos. Marketers across industries are trying to redesign their business models and the luxury industry is no exception. What is important to focus on is the mindset of the people during times of crisis; people tend to be more conservative in their purchases and adopt a “waste not want not” philosophy. The outbreak of COVID-19 may cause luxury consumers to assess things from a different outlook, moving luxury items lower in their hierarchy of needs.
Dynamic growth is important across all industries, but this is especially true of the present scenario of the luxury industry. The industry as a whole should completely transform itself to fit into a post COVID-19 world. The most important way to achieve this is through digital transformation. While digital transformation presents the world of fashion and luxury with new challenges in navigating the intricate relationship between luxury brands, digital technology and the internet, this is a necessary step for luxury businesses to rebrand themselves. Disruptive innovations driven by technology are forcing luxury fashion brands to adapt and future-proof their business models by making use of digital technologies. Furthermore, e-business concepts, like e-commerce and experience commerce, are key for the luxury industry to adapt to changing consumer behaviour.
However, the very fact of luxury being unique is what creates huge problems for luxury brands to diversify. Strategies that might be seen as obvious for large, multinational companies comes with many challenges for small and medium-sized heritage luxury brands with rich histories, and culture and reputation tied to it. Due to this, luxury as an industry cannot collude to create a seamless digital market for their consumers. Individual strategy is required to help individual brands, but the outcome is well worth the added effort.
What is important to keep in mind about the luxury space is that digital transformation began to make rounds even prior to COVID-19. That is, digital transformation is not being taken up out of sheer necessity, but is also a result of years of carefully thought out strategy. The trajectory of digital in luxury has now come into sharper focus, given our present situation. Digital is a critical source of growth and a powerful way to increase brand equity. It enables companies to reimagine key enterprise processes, both from front and back-end perspectives. The digital model will allow luxury brands and retailers to use data to get closer to customers, capture dynamic preferences and make the process of turning this data into new products seamless. As of 2018, online sales of personal luxury goods account for 8% of the €254 billion global luxury market. Furthermore, we expect online luxury sales to more than triple by 2025, where nearly one-fifth of personal luxury sales will take place online.
Digital is having an even greater impact on how luxury shoppers choose brands and goods. Nearly 80% of luxury sales today are “digitally influenced”: that is, consumers hit one or more digital touchpoints in their luxury-shopping journeys. Although the impact of digital transformation on consumer behavior and luxury purchases varies by product category and price point, nearly all luxury shoppers have embraced the digital lifestyle. This is not restricted to any particular age group.
Now that we have covered the scope for and necessity of digital transformation in the luxury industry, we from Team Luxeveda move on to discuss what tangible solutions could look like in a post-COVID-19 world:
Authentic Engagement with Customers:
In the beginning stages of the digital transformation, your business should keep in mind that its primary target is its existing customers. Once that group has successfully been shifted online, you can expand and diversify to attract a larger consumer base.
Email, social media, and other digital channels like advertising have seen significant spikes in usage during the COVID-19 crisis. To stay relevant, luxury brands must continue to communicate frequently with consumers, even if most consumers are not currently looking to make an expensive purchase. Using digital channels to launch purpose-driven communications regarding health, business continuity and community building will allow your business to have continued engagement with your audience and have them perceive you as a brand that stands for positive ideals. Remember to have a consistent tone throughout your communication endeavours, and be empathetic towards your consumers’ situations. One example of this strategy could be a restaurant hosting an Instagram Live session where they share cooking tips or recipes.
Revamp and Scale Up your Online Presence:
In luxury, delivering excellent customer experience online is crucial. Most customers are used to completing a purchase only after looking, touching and thoroughly checking the product due to the high price. One key element of the digital transformation process would be for your business to reallocate your resources and shift management attention from offline to online. Increasing manpower in the online segment while efficiently working to make sure the offline experience is not dampened will ensure that your core business is not compromised.
To revamp and scale, your business should work to remove friction in the online customer journey: for example, improve your website’s search function, curate the recommended list once a search is completed (perhaps through AI) and expand your online assortment. What has worked for our clients is our suggestion to redeploy store personnel from closed stores to support online fulfillment or to assist consumers via digital call centers. Setting up a two-stage experience commerce model, where brands can emulate the store experience to their best capabilities, is also something that we have leveraged to help luxury businesses.
Technology has opened up new doors of possibility for the luxury space to enter. Brands can now reach customers more frequently and effectively, without either you or your customer having to leave their homes. Using technology to engage and grow customer interactions can nurture the emotional benefits that luxury provides. For this strategy to be effective, luxury should be showcased not as an extravagant purchase, but a necessary one.
Dabbling in new and digital brand engagement strategies will help expose areas in your business that require additional work. Apart from big campaign creatives, brands also need to think about creating additional marketing collaterals that are quick and less expensive to produce. This does not mean a reduction in quality. Instead, it means to use digital media efficiently to create the same quality with lower costs. One avenue that luxury brands can take to this end is to hire a creative team that works on digital media designs along with designs for existing marketing collateral and products. An in-house team will ensure that everyone involved in the shift to digital is already a part of your business and hence understands it well.
Using digital marketing will allow your brand to understand consumer insights through analytics, which will allow you to understand what your customers like and dislike in terms of your content. Your business’ ultimate goal for a complete digital transformation process should be to develop a clear content strategy. If implemented correctly, this will feed customer wants and desires, strengthen the brand and its relationship with its audience.
Diversification will be of utmost importance in a post COVID-19 world.