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- 20 Jul 2015
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Get Wired: Revelations From The Digital Luxury Experience Report 2015


Luxury sales online are expected to generate up to 70 billion euros by 2025 – but there are five key battles brands must win in order to fully capitalise on this growing medium.

We know e-commerce is a trend luxury brands must tap further in order to remain relevant, engaging and profitable. We know that enhancing the digital experience is no longer an option, but a necessity for brands across the board to engage consumers throughout their purchasing journey.

To put this into perspective – 75% of all luxury sales today are influenced by digital. This could go up to 100% by 2025, so luxury brands have no choice but to embrace the digital era and become truly omnichannel.

Hence, the question is no longer if and when luxury brands should embrace these opportunities, but how they should go about doing it.

Here, we have extracted some of those specifics from The latest McKinsey/Altagamma Digital Luxury Experience Report 2015.

 Last year, nearly all of the €5 bn in luxury goods market growth came from e-commerce 

The Bare Facts

According to the figures, luxury sales realised online have accelerated in 2014 reaching €14 bn of a total €224 bn – a 50% rise from 2013. They now represent 6% of the global luxury market for personal goods.

That figure is expected to rise to 18% in 2025 to reach €70 bn of a total €390 bn.

Last year, nearly all of the €5 bn in luxury goods market growth came from e-commerce.

This growth is coming primarily from two places: Luxury brands own websites, which represent one quarter of online luxury sales and are the fastest growing channel, and the online offering of leading department stores. Sales at multibrand full price or off-price sites, on the other hand, have been less dynamic that in the past. Going forward, these these trends are expected to pursue.

Nearly all luxury buyers have at least one smartphone – globally, the figure is 95% – and in most mature countries, it’s 100%.

Luxury consumers are also highly social, in digital sense. Some 80% of these shoppers use social media on a monthly basis, whether it’s Instagram, We-Chat, Facebook or Twitter. Half are weekly users and more than 25% are daily social media users.

It’s not just the Millennials either. Generation Y luxury consumers and Baby Boomers own similar amounts of mobile devices on average and spend approximately the same amount of time on the Internet, around 15 hours per week – in addition to any work-related usage.

The only little generational difference we see is in social media, where 87% of Millennials use it monthly vs. 71% of Baby Boomers.

 For foundational, high-end brands like Dior, Cartier and Chanel, the share of e-commerce is just 3.6 percent 

However, according to the report, there are strong differences in online penetration by country, category and brand price point.

Out of the eight key countries analysed in the report – Brazil, China, South Korea, France, Japan, Italy, the UK, the USA – two countries stood out at both ends of the scale.

The UK experienced the greatest digital shift, with 11 percent online sales penetration, with this figure attributed to a confluence of three elements: a higher than average degree of digital savvy among UK consumers, online purchasing habits that have developed in other categories, and perhaps most importantly, the significant quality and quantity of online offerings.

Luxury sales in Japan came in at 7%, 6% in France, China and the United States, and 5% in Italy.

Interestingly, Brazil bottomed out, with only 2% of luxury sales executed on the web, largely due to the country’s relatively young luxury market and lack of local online offer.

Across price points, there are more significant variations, with online sales decreasing as prices rise.

For foundational, high-end brands like Dior, Cartier and Chanel, the share of e-commerce is just 3.6 percent.

For aspirational brands like Burberry, it jumps to 7.5 percent and for more affordable luxury labels like Michael Kors or Longchamp, it’s even higher – an average of 8.5 percent.

Not all categories are equal either. The most active e-commerce categories are those of beauty products and ready-to-wear apparel, both with 7.2 percent of sales happening online, followed closely by accessories at 6.2 percent and eventually watches and jewellery with only 4.1 percent.

These differences are certainly driven by price differentials but also by the extent to which there have been rich and compelling e-commerce offerings developed in the category. On this front, both beauty brands and fashion retailers have been dynamic in their innovation over the last few years.


Michael Kors

Be First & Be Everywhere In The Online Buying Journey

This is where it gets really interesting.

Since buying a luxury item is often a high involvement endeavor, it’s not surprising that luxury buyers have long and complex decision journeys.

To start, when consumers begin shopping for a particular item, they usually have a pre-selected set of brands in mind at the outset – an initial consideration set.

More than three quarters of luxury purchases came from the few brands present in the initial consideration.

Specifically, the research indicated that brands that are top of mind at the start of the online purchasing journey have a 25% chance of being finally purchased – which is twice the probability of a brand that’s been added during the next phase of the decision journey, the evaluation process.

In luxury, this active evaluation phase is much less relevant than it is for other categories.

 On average, a luxury shopper will be influenced by 9 points of contact with the brand he or she finally purchases 

The report analyzed the decision journeys of luxury consumers across 21 different touchpoints – 11 offline (such as print media or store visits) and 10 online (such as search, social media and the online brand store).

The results indicated that, on average, a luxury shopper will be influenced by nine points of contact with the brand he or she finally purchases.

Across the globe, this figure ranges from only 6 touchpoints in the UK to 13 in China, reflecting differing levels of luxury maturity, ecosystems and shopping habits that have developed over time.

Overall though, each the 21 touchpoints analyzed reaches at least one in five luxury buyers.

The translation is that at least one of every five luxury shoppers will be exposed to every piece of content brands create – or that consumers create on the brand. Two-thirds of the users surveyed generated social media content themselves – photographs, videos, product reviews or re-postings of content created by others – at least once a month. 15% do it daily.

Thus, players should leverage all possible touchpoints in order to increase their presence in the initial consideration set as well as convert customers throughout the course of their complex decision-making before buying a luxury product.

To achieve this, luxury brands need to continue building their preeminence over time in order to be at the top of a consumer’s mind whenever a purchase occasion occurs. This process is more of a marathon than a sprint, requiring long-term building of brand awareness, reputation and category relevancy in a powerful and consistent manner.


Touchpoints: The Five Must-Haves

While brands certainly have their work cut out for them – the report offers some guidelines in the form of five particular touchpoints that are must-wins. These stand out across all geographies, categories and pricepoints.

They are the most qualitative points of customer contact and have a clear impact on the final purchase decision at least two-thirds of the time. In short, they are vital for creating an outstanding luxury customer experience.

1. The city store: * Even in the digital age, luxury customers are heavily influenced by what they see and experience in physical stores, so much so that it is the most important point of contact with luxury customers. Eighty percent of luxury consumers have regular contact with luxury goods stores, giving this touchpoint the highest reach and the greatest impact on sales. Delivering an outstanding in-store experience is a must, and digital offers a great opportunity to modernize and further enhance this critical meeting point between a brand and its customers.

2. Person to person word of mouth: Luxury shoppers care about what their peers think. Such interactions can be traditional conversations with a friend or more modern digital dialogues like emails, texts or Facebook comments. Half of luxury consumers have regular experience with this touchpoint.

3. Online search: Luxury brands invest tremendous effort and resources to create visibility in the offline world, starting with beautiful stores in the best locations. Being visible online is just as important. But since there is no natural traffic to a web site, the job of creating visibility falls into the hands of online search. Technology companies like Google and Amazon have set a high bar for what consumers expect when they hunt for something online. It is not about buying visibility, but earning it. Consistently elegant and reliable search is essential.

4. Sales people: A great experience with a salesperson can have a lasting impact on a customer, and vice versa for a poor one. The question is how digital technologies can help better train associates as well as enhance their interactions with clients.

5. Brand web site: A customer’s experience with a brand’s own site determines a great deal about how they perceive that brand. Does the messaging feel authentic? Is there enough information about products? More than half of luxury consumers interact with brand sites. Yet players still have a lot of progress to make in delivering an online luxury experience that exceeds consumer expectations set by the digital champions, beginning with mobile-enhanced web sites and ease of navigation.

 Luxury players must also proactively address the typical roadblocks of digital acceleration 

Pitfalls To Watch Out For

In addition to tailoring these touchpoints to suit their specific target market and geography, luxury brands must also strive to be impeccable in meeting customer expectations within and across these five touchpoints.

This means not only avoiding the common pitfalls like asking loyal customers who make a purchase in a store if they are registered in the brand’s loyalty program, or having your search land customers on a different web page than the one they were looking for, or not having new products displayed online that are already available in the store. It also requires an understanding of how luxury consumers’ expectations are escalating. Brands will need to be available whenever and wherever their customers want to have access to them.

To successfully transition into the digital era, brands must also bring digital initiatives inside their operating model, and adjust it if needed.The report warns that it is only by bringing it to the core of daily business operations that the true acceleration can happen.

But there will be roadblocks, which luxury players must also move to proactively address.

One challenge is overcoming the natural stickiness of budgets and accepting, for instance, a significant budget reallocation from media buying toward the fixed costs of retaining talented people who can produce high quality marketing and branding content.

Another hurdle is that of simultaneously recruiting and retaining the best digital talents while enhancing the digital skills of the entire organization in order to enable the necessary massive shifts.

 Too often, IT becomes a bottleneck 

The third challenge revolves around technology, which is at the core of the digital revolution. As the report notes – “too often, IT becomes a bottleneck”.

Successful players learn to differentiate the long-term horizon of legacy IT management from the much more agile and short-term focus of the digital IT.

Finally brands need to design the digital acceleration approach that will fit with their culture. There is a natural tension between the luxury industry’s long-term focus and aim for perfection, on one hand, and the short-term trial and error and risk taking necessary for digital development.

Designing the perfectly blended approach that combines the high standards of luxury with the agility of digital is the key to unlocking future success.

To further investigate technology and digital brand innovation on Luxury Society, we invite your to explore the related materials as follows:

- In Conversation With Peter Fitzgerald, UK Sales Director, Google
- 7 Digital Innovations for Luxury Brands
- Integrating Luxury Retail Online & Offline


This year’s edition of the Altagamma-McKinsey Digital Luxury Experience report analysed
the omnichannel decision journeys of about 7,000 luxury shoppers across 8 geographies, 4
products categories and 3 pricepoints.

McKinsey & Company are a global management consulting firm, working with leading organisations across the private, public and social sectors to build their capabilities and leadership skills at every level and every opportunity.