How Longtime Avoidance and an Unexpected Pandemic Have Caused Luxury Brands to Accelerate Their Digital Strategies

In the days before the COVID-19 pandemic upended the retail industry, the luxury market experienced a decade-long boom. The democratization of luxury goods, excitement around new categories like high-end sneakers and casual wear, and collaborations between labels were all bolstered by a booming global economy and the relative affluence of Chinese customers, who typically account for 35% of luxury purchases worldwide. This period of growth culminated in 2018 when the luxury market reached an astonishing $1.93 trillion (€920 billion) and was expected to grow another 4.6% per year until 2025. The one thing luxury brands were slow to embrace during this age of prosperity was digital, and it’s a decision that sent them reeling when the pandemic hit earlier this year.

The Detriment of Avoiding Digital

With a reliance on in-store experience and exclusivity, luxury brands have long shirked heavy investment in digital channels. But faced with the unexpected closures of brick-and-mortar stores – some of which may never reopen – coupled with changing customer demographics and newly adopted behaviors, experiential luxury is now facing a decrease of between 40 to 60%, and the personal luxury segment is predicted to drop between 25 to 45% compared to 2019.

The pandemic has hastened many of the changes that were already underway for most retail sectors, and the broad shift to digital sales channels has become significantly more important, particularly for luxury brands. Two overall trends that brands must now contend with include the emergence of Gen Z and their expectations on highly digital experiences, and Unified Commerce, making seamlessness and ease a key differentiator of the luxury shopping experience.

Luxury companies will have to accelerate their digital presence to compensate for the decrease in in-store shopping. They’ll need to create mono-brand online stores if they want greater control and wish to position their products according to their sales strategies.

Luxury’s Big Shift
While luxury can expect heavy losses due to COVID-related closures, online luxury is expected to spike significantly. Even before the pandemic moved more consumers online, analysts had some strong predictions on the importance of eCommerce:

  • Luxury market sales would more than triple by 2025, reaching $91 billion
  • Nearly one-fifth of all personal luxury items would be purchased online
  • Online experiences would influence at least 40% of luxury purchases

For luxury brands, adaptation is inevitable. Companies will need to create the personalized white glove experience discerning customers expect both online and instore. The retail flagship store will ultimately change, no longer a feature of the high-streets, but rather on a brand’s website. The challenge will be to ensure consumers get the same level of luxury service they’re accustomed to in physical locations. Luxury companies will also need to strike a balance between brand experience and the ease of finding products seamlessly.

Adopting an omnichannel approach will allow luxury brands to:

  • Utilize current resources and combine them with innovations to transform their operations
  • Invest in online infrastructure like Click & Collect and appointment shopping that addresses shoppers’ concerns in the post-pandemic world
  • Merge physical and digital worlds to create innovative retail experiences with seamless service consumers expect from luxury retailers
  • Leverage customer data, allowing brands to plan for future targeted marketing events
  • Create more personalized white glove experiences online and in-store that luxury consumers have come to expect
  • Tap into new behaviors and social sales channels like Livestreaming, which addresses a growing cohort of shoppers aged 20 to 40, that accounted for 78% of luxury sales in 2018.

Tales of Digital Luxury Success

  • For its 30th edition, SIHH rebranded as Watches & Wonders and took their show online. The event drew in 800,000 viewers. Brands, including Panerai and Cartier, showed over 100 new models, which were immediately sold online after the Livestream.
  • Gucci launched Gucci Live, a video service from a new faux luxury store with cameras and TV-style lighting for the new remote clienteling. After testing in Europe and gaining “immediate adoption,” the service is now being extended to the entire EMEA region.
  • Alibaba launched Luxury Soho, a platform to sell excess stock at discounted prices. Moschino chose to open a “lite store,” which offered extraordinary exposure for smaller quantities of products and sold out all its stock in a pilot campaign.

Ready for your luxury brand to embrace the digital future? We can help. Contact our team of experts.

esw cross-border ecommerce experts