Accelerate Ecommerce: What Luxury Retailers Can Do with Their Physical Spaces

Mar 31 2021

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Physical Spaces for Luxury Retailers

Most luxury brands were not investing in eCommerce in luxury as a priority before COVID-19. They have been slow to embrace digital because the prime emphasis was on delivering personalized physical experiences. The high-ticket price point and the highly considered nature of luxury ecommerce purchases also made some brands unsure about implementing ecommerce in luxury.

The situation, however, has completely changed after COVID-19. eCommerce in luxury retail is as critical for traditional luxury brands as it is for digital brands. Success of brands like Warby Parker and Louis Vuitton has reconstructed the approach of traditional luxury ecommerce.

The surprising thing in 2021 is that the traffic is not just one way. Digital pure-play brands are also showing great affinity toward opening physical stores. So, the new luxury is focused on personalization - saving time and supplying exclusivity by combining both physical and digital spaces. experience.

Ways Traditional Luxury Brands are Competing Online

Traditional luxury brands were hesitant to go online as it could dilute the luxury brand’s image and exclusivity. Controlling the service and sales quality online to create an exclusive experience was another obstacle for luxury brands.

Increase in digital traffic and customer behavior has led to a shift in the approach of traditional luxury brands. Success of digital pureplay luxury retailers has also played a pivotal role in this. Traditional luxury brands now know that affluent shoppers are willing to spend big on ecommerce for luxury. The shift in online consumer trends has been significant. So much so, that Mckinsey has predicted that 1/5th of luxury sales will be online by 2025.

So, traditional luxury brands are competing to gain customer loyalty online. From brand-owned retails to secondhand retails and multi-brand eCommerce sites, luxury ecommerce wars have heated up in 2021. There are three major ways that luxury brands are targeting online audiences.

The Online Luxury Multi-Brand Retail Model

Leading global luxury goods company, LVMH Moët Hennessy Louis Vuitton launched a multibrand eCommerce portal called 24 S (24Sèvres) in 2017. It is home to almost 200 luxury labels such as Louis Vuitton, Dior, Givenchy, Gucci and Prada. This model is referred to as the online luxury multi-brand retail model.

With robust multibrand stores, the business is good as brands earn exposure and revenue without putting in much effort. Furthermore, multibrand stores can deliver the desired customer experience at every touchpoint.

High-end brands are moving toward multi-brand ecommerce for luxury in recent times. Why?

Because as per Mckinsey, 73% of affluent customers will visit a multibrand site at least once before shopping. So, are there any problems?

Yes. The biggest challenge with the online luxury multi-brand retail model is the dilution of exclusivity. While they can help brands reach a broader audience, they can create conflicts for brands that seek exclusivity as their strength. Lack of control over quality and pricing have also driven traditional luxury brands away from multi-brand retail stores.

The Online Luxury Secondhand Retail Model

According to IMARC, the global secondhand luxury goods market was worth US$ 29.4 Billion in 2019. The growth of secondhand luxury goods is four times more than the primary luxury market. Post COVID-19, online reselling has gained even more traction as people do not have much to spend on fresh arrivals.

Inexpensive pricing is not the only factor that drives online growth of secondhand retailers. The idea of a circular economy has fueled the desire for sustainability well beyond what offline stores usually did before. Luxury goods are a great secondhand buy as they are built to last forever.

The RealReal, an online luxury resale site, is a fitting example of online luxury secondhand retail. Founded 8 years ago, their success can be estimated from the fact that they went public in June 2019.

Even after these benefits, most luxury brands are anxious to optimize their reselling initiatives. They are afraid that promoting secondhand might reduce the sale of new arrivals. The high online sales mean that customers like the concept. So, businesses need to consider the affirmative impact of resale.

An effective way to maintain balance can be to segregate personas based on their spending history. This way brands can maintain exclusivity and quality both at premium and secondhand sales. Helping first-time customers sell their old items on the secondhand market can further strengthen the idea of sustainability.

Direct-to-Consumer Online Retail Model - Selling on Your Own Website

Direct to consumer online retail is model involves luxury brands selling their products directly on their online store. No wholesalers, distributors, or retailers in between. Commonly referred to as DTC, it helps brands deliver omnichannel experience and develop a better customer understanding. DTC also offers more control over brand reputation and increased revenues, which makes it a preferred choice.

Before COVID-19, brands were hesitant to invest in personalized digital solutions. The focus was on social media, third party websites and influencers to drive sales and marketing. Things have changed in 2021. Success of digital pure-play brands like Warby Parker and the COVID-19 pandemic has compelled traditional brands to embrace the changes. The digital playground is more about the customer now. Customers are looking for interactions, experiences and memories rather than just the goods.

A leading art giant, went digital with Viewing Rooms to sell premium art with tickets as high as 1.4 million. They achieved that within a few seconds. So, this use case is a classic example of digitalization and direct-to-consumer implementation in the luxury industry. It was swift, fast and successful in a time when offline sales were completely paused.

How the new Retail Technology is Transforming Luxury

Bottega Veneta is a subsidiary of the Paris-based luxury giant Kering, that owns Gucci, Saint Laurent, Alexander McQueen, and Balenciaga. The fashion luxury leader suffered revenue losses in the second quarter. There was a positive aspect too.

Online sales for Bottega Veneta doubled during that time. Luxury brands such as Bottega Veneta is proof of the success of luxury for ecommerce. With technological advancements, brands can strike conversations and deliver seamless experiences to customers across the globe.

Robust technology is accelerating the digital transformation of luxury retail. Artificial intelligence (AI), augmented reality (AR) and voice-controlled commerce have helped brands optimize new opportunities. There has been a stark shift in consumer profiles as well. Luxury brands were driven by an older demographic earlier. Online transformation has helped brands engage even the millennials and Gen Z to their brand more.

Artificial intelligence is the primary technology that has made it possible for brands to exclusively create and deliver personalized user experiences. From chatbots, virtual rooms, or internal data management, AI has transformed the way brands approach users. Warby Parker uses AI along with AR to enable customers to try glasses using smart mirrors. This helps businesses to enhance their luxury retail experience. It is simple to implement and makes shopping experiences more immersive and user-friendly.

Similarly, voice-controlled commerce makes the buying process simpler by helping customers at digital touchpoints. Users can order from their favorite brands without moving a finger and let Alexa or Siri take care of the clicks. This is referred to as experiential retail and brands like Bitreel and ByndXR are notable examples of experiential retail in action.

Why are Luxury Digital Pure-play Brands Opening Physical Locations?

While traditional luxury brands are rethinking their physical footprints, luxury eCommerce and digital pure-play brands are moving into physical spaces. So, the rise of luxury ecommerce does not imply reduced physical walk-ins.

Customer preferences are evolving, and luxury companies are investing in fashion tech and in-store retail technology to stay relevant. Farfetch, an online luxury retailer partnered with Gucci to create ‘The Store of the Future’ In April 2017.

It combines AI and AR to extract useful customer information for Gucci customers both online and offline. It also enables customers to log in to an app and receive personalized recommendations from the retail staff offline. The staff, on the other hand, can use relevant data to make the experience more individualized.

Affluent consumers expect buying processes to be frictionless and quick. The new luxury is personalization. They need exclusivity which comes through a seamless experience. Inconsistency in this experience in either physical or digital space is unacceptable to the modern consumer. So, brands need to be proactive and engage customers by combining both online and offline resources to maximize gains.

The Future of Online Luxury Retail: Combining Physical and Digital Spaces to Accelerate eCommerce (Conclusion)

2020 has been a year of digital domination even in luxury spaces. So, improving the online luxury retail experience is a top priority for all businesses in 2021. At a stage, when the future is uncertain, it is recommended for luxury brands to create a comprehensive approach.

Customer-centric strategies are what businesses need. The gap between digital and physical needs to be reduced so that customers do not feel the change. The message is as important as the way it is delivered. An omnichannel strategy that supports the needs of the target audience, is essential to convert leads in 2021. So, combining physical and digital spaces to accelerate ecommerce is the mantra for 2021. Contact our digital experts.