Based on the success of our Keynote event series, Luxury Society was thrilled to partner with Google in Paris to discuss the attitudes and behaviors of the Digital Luxury Consumer
Understanding the Digital Luxury Consumer
Over the last decade, collaborations between luxury brands and contemporary artists have gone beyond mere artistic partnerships towards a new kind of luxury branding.
PARIS – Art and fashion have always developed side by side, for fashion, like art, often gives visual expression to the cultural zeitgeist. During the 1920s, Salvador Dalí created dresses for Coco Chanel and Elsa Schiapparelli. In the 1930s, Ferragamo’s shoes commissioned designs for advertisements from Futurist painter Lucio Venna, while Gianni Versace commissioned works from artists such as Alighiero Boetti and Roy Lichtenstein for the launch of his collections. Yves Saint Laurent’s vast art collection, recently auctioned at Christie’s in Paris, testified to his great love of art and revealed the influence of a variety of artists on his own designs.
In the 1980s, relationships between luxury brands and artists were advanced when Alain Dominique Perrin created the Fondation Cartier. In the Fondation Cartier pour l’Art Contemporain, a book marking the foundation’s 20th anniversary, Perrin says he makes “a connection between all the different sorts of arts, and luxury goods are a kind of art. Luxury goods are handicrafts of art, applied art.”
The Fondation Cartier pour l’Art Contemparain building in Paris
Based on the success of our Keynote event series, Luxury Society was thrilled to partner with Google in Paris to discuss the attitudes and behaviors of the Digital Luxury Consumer
Based on the success of our Keynote event series, Luxury Society was thrilled to partner with Google in Paris to discuss the attitudes and behaviors of the Digital Luxury Consumer
On Thursday 27th November 2014, we gathered top executives from Gucci, Kempinski Hotels, Van Cleef et Arpels, Balenciaga, Starwood Hotels, Kenzo, Vacheron Constantin, Shangri-La Hotels and Chopard who shared the below insights into the connected consumer.
Our audience consisted of over 150 leading luxury brand executives based in Paris, London, Geneva, Milan and even Mumbai. We would like to thank all our speakers and delegates who participated and look forward to sharing more details of 2015 Luxury Society Keynote events.
“ Digital now influences 44% of all luxury purchases ”
Penetration
Nicola Sandri, associate partner at McKinsey, confirmed that digital tools and technologies are completely revolutionizing the luxury market, both in terms of transactions and marketing. McKinsey believe that digital now influences 44% of all luxury purchases (online & offline), as 75% of luxury consumers are now connected via smartphone or tablet.
McKinsey also confirmed that online sales represent one of the fastest growth opportunities in the global luxury goods industry. The overall market is expected to grow at 5% between 2012-2018, whereas luxury eCommerce sales are forecast to increase by 18% during the very same period.
So whilst currently eCommerce only represents 4% of all luxury industry sales, this market is growing 3.5 times faster than the industry average. According to research, 80% of luxury consumers have already purchased products online or are actively using eCommerce, whilst only 40% of luxury brands are retailing online.
Attraction
“Something to remember is that when we do digital advertising or marketing, we’re not looking to generate digital sales,” explained Sohrab Ghotbi. “We are looking to generate sales, period. We want people enter the funnel: to discover our brand, research our products and get them to purchase online or instore.”
Indeed this was a constant theme throughout the discussion, in that digital attraction strategies must be devised and measured in a way specific to the platform, audience and strategic objective. Online marketing should no longer be a print strategy ‘cut and pasted’ into the digital world.
Our panelists agreed that each individual channel has its own audience with their own set of expectations and community codes, where you can achieve different outcomes. Messages should be suitably tailored to both the platform and the audience, as should the way return on investment is measured. A link to sales isn’t always what brands are looking for.
Alex Ghotbi, Barbara Houdayer, Maxime Lequint © Genaro Bardy
At Starwood Hotels, sometimes engagement is the key measure, explained Daniel Kerzner, VP of Digital, Loyalty & Partnership Marketing. “I think about something as simple as photography. Over the last ten years at Starwood we’ve generated about twenty to thirty thousand professional pictures, which can be found on our website.”
“This year we partnered with Instagram so that any guest pictures that are correctly tagged will feed through to our website. We now have over 60,000 pictures a month that get uploaded, so when we finish this year we’ll have over a million pictures that are coming through Instagram – versus the 20,000 that we spent ten years building.”
“For us it is a case of fishing where the fish are, and our customers are on Instagram even if it is difficult to see precisely how this impacts our sales. To attract our customers we put the guest in the center of everything that we do and we speak to them on their terms, we speak to them in their language, on their platforms.”
“ Our customers are on Instagram even if it is difficult to see how this impacts our sales ”
Distribution
It was a similar discussion when we explored distribution, in the sense that luxury brands agreed that distribution – namely eCommerce – should not just be seen as a tool to transact. Luxury brands should embrace eCommerce as a discovery tool just as much as a commercial tool, in that consumers can learn just as much (if not more) about brands and products online, as they can instore.
At Balenciaga, Annika Mohr Storfait explained that digital integration was both coming from the top-down (internally) and bottom-up (externally). As consumers continue to come into store with images of products on mobile phones, the brand is forced to have a fully integrated understanding of marketing and distribution both online and offline.
Their strategy is all about empowering staff in their boutiques, allowing them to leverage digital tools to check online inventory, chat online with consumers – and in some cases allow click-and-collect for products purchased on the online store. The point made was that consumers are already very omnichannel and luxury brands must work harder to meet their expectations.
Antoine Lacroix of Van Cleef et Arpels highlighted the need for luxury brands to finally accept eCommerce as a fact of life, as a channel that consumers are already using. Many luxury brands that have long relied on multibrand retailers to distribute their products are concerned about cannibalizing existing business should they launch eCommerce boutiques.
And potentially new online channels will cannibalize other channels, answered the panel. But this is a change in consumers that no brands should ignore, as those that do not retail their products online are missing out on a large-scale, fast-growth opportunity. And missing out on understanding online purchasing behavior of luxury consumers.
© Genaro Bardy
Retention
Customer relationship management has indeed been augmented by digital technologies, but if anything, it has made luxury brands more transparent and accountable for their products and services. Beyond globalizing CRM systems, digital technologies and social media gives brands the opportunity to stay in contact with their customers long after purchase and become part of their daily lives.
This engagement often inspires tribalism in luxury clients where they go out on their own social channels sharing their affection for the brand within social networks. Chopard specifically keeps its eye on #Chopard on Instagram to see how clients are engaging with products and purchases, and how the brand fits into their lifestyle.
The jeweler also often thanks individual consumers virtually when they share products or experiences online. Or will get in contact with specific boutiques to better understand the customer that posted about the brand, or so that staff in boutiques know that this person is sharing their experience online, and can thank them in person during their next visit.
“ Social media gives brands the opportunity to become part of their clients daily lives ”
For the hotel industry, TripAdvisor was inititally thought to represent a challenge for luxury hotels, in that any disgruntled guest now had a global forum to publicly denounce the services or amenitites offered. Maxime Lequint of Shangri La Hotels explained how the brand has actually turned this into an opportunity to improve.
At Shangri La any negative TripAdvisor comment is taken very seriously, where the individual hotel will get in contact with the poster to try and work together on a solution, or better integrate their feedback into their services. When guests complete satisfaction surveys at the end of a stay, they can choose to automatically push the results to TripAdvisor.
Basically it is a case of understanding that these channels exist and are heavily used, therefore luxury brands should find a strategy to deal with them to an advantage. Better the devil they know if you will.
Implications
Though each of our panel discussions tackled the concepts of online attraction, transaction and retention separately, it fast became obvious that the lines between marketing, distribution and CRM have never been so blurred. Engagement should be the priority for luxury brands, who should make sure they are available on the platforms the customer exists, with the right message at the right time.
For this reason company structure is critical. Our luxury brand executives expressed that digital integration was often unsuccessful when separated from the overall functions of the organization. When print marketing was separated from digital marketing, or when eCommerce was separated from brick-and-mortar sales.
Instead the success of digital in a luxury brand will come from understanding that the online and offline revolution must take place together, to create real value for consumers that exist in these two worlds simultaneously. And for that reason, digital must be a strategic priority from the top down.
Culture is also one of the key factors that will drive the success or failure of digital strategy. Companies that refuse to take risks, test ideas or accept the occasional failure are unlikely to achieve digital nirvana. But those that will win the next generation of highly connected luxury consumers are those who embrace innovation and change.
Creative Strategist, Digital
Sophie Doran is currently Senior Creative Strategist, Digital at Karla Otto. Prior to this role, she was the Paris-based editor-in-chief of Luxury Society. Prior to joining Luxury Society, Sophie completed her MBA in Melbourne, Australia, with a focus on luxury brand dynamics and leadership, whilst simultaneously working in management roles for several luxury retailers.