Massimo Fubini, CEO and Founder of ContactLab, looks at the need for luxury retail brands to implement the omni-channel experience into their customer engagement strategies.
The need to go digital has dominated discussion in the luxury industry during the last two years. Yet with so many brands still lagging behind the curve, 2016 is a critical period as effective digital engagement becomes a necessity. Luxury customers are increasingly demanding the personalisation of services and adaptable modes of engagement they are seeing in other industries. Factor in the rise of millennial purchasers and brands are left scrambling for a solution. The consumer base has become far more varied and unpredictable. Without strong omni-channel engagement, brands will be powerless to respond effectively.
More than any other industry, luxury brands rely on a strong sense of brand heritage and tradition, yet they also face a constant challenge to keeping the brands fresh and modern. With luxury shoppers looking for a unique and tailored experience as well as top quality products, brands need to have a much greater understanding of exactly who they are speaking to and how to adapt to individual preferences. Therefore it is imperative for brands to improve digital engagement to allow for more rounded personalisation strategies. In the past, developing meaningful relationships with these customers meant luxury retailers giving the best possible customer service in-store.
Many luxury retailers have seen digital engagement methods as detrimental to these relationships, diminishing the level of personalisation and the quality of customer service. But with customers able to access any brand of their choice online and at the best prices; their first impression of a retailer is often online and they need to be able to instantly connect with any given brand.
It has become almost clichéd to point out that millennials expect companies to have a strong omni-channel approach to customer engagement. But as this cohort becomes an increasing part of the luxury-buying market, such an approach becomes even more vital in preventing channel blindness and keeping customers connected on all sides. Bringing these distinct channels together means retailers need to leverage technology far more than is currently the case.
Our research shows that for luxury retailers, the highest spending clients are prominent online, showing greater transparency with their purchase preferences. These particular customers represent a quarter of the total expenditure, spend around 20-30% more both online and offline, compared to anonymous or registered customers who are not subscribed to fidelity programs.
Without the ability to identity customers and attract them to register online, which would mean speaking at an individual level to this customer segment, luxury retailers forfeit a veritable goldmine. To understand customer behaviours, you have to rely on advanced profiling systems including personalised emails, A/B testing, website analytics and traffic patterns is essential for understanding online consumer behaviour. Retailers in turn need the ability to then turn this data into actionable insights to actively engage with potential customers.
This need for technology comes at a time where the industry continues to grow in total global revenue every year at an exponential rate, with shoppers from all around the world purchasing high quality brands at premium prices. In Bain & Company’s 2015 Luxury Goods Worldwide Market Monitor report, the overall luxury industry surpassed €1 trillion in retail sales value, with Chinese consumers continuing to make up the largest portion of luxury purchases (31 per cent) globally, followed closely by Americans (24 per cent) and Europeans (18 per cent) respectively.
Wealthy Chinese consumers will continue travelling to buy their luxury goods in 2016, despite the impact of a cooling Chinese economy, but what might change is their destination of choice as well as the total spent whilst abroad. With spending at home likely to increase, markets in North America, Western Europe and Japan could falter. However companies can still reap the benefits of Chinese spending power, and adapt to the constant change in spending trends, with an efficient ecommerce platform and a digital strategy that caters to an individual consumer’s needs.
Luxury brands are now seeing this and the immense potential of the digital world, as well as viewing ecommerce as a valuable service. The objective for luxury brands should not just be to see ecommerce grow but to see an improvement in customer engagement. In order to do so, they need to become far more adept at using data to record customer preferences and respond to the way in which different products sell on the shop floor and online.
However this cannot be achieved alone, luxury brands need the capability of specialists who have vast experience in the luxury retail sector and consistently help brands to revitalize their digital strategies and successfully marry the ease of online retail with the ability to deliver the physical experiences that the high street creates. We are in a time where, due to technology, customers do not have much to lose when shopping, but luxury brands have it all to play for. If the industry does not pull its act together and turn theory into action, brands will miss a clear opportunity to maximize their customer engagement, losing customers in the process.
By Massimo Fubini
CEO and Founder
ContactLab