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Orderhouse Blog

Why Luxury Brands Are Enjoying the Good Life Online

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“To win in the new consumer landscape, where Red Bull is as powerful a brand as Rolex or Louis Vuitton, brands must think much more innovatively when it comes to how they engage with a changing consumer base.” [Entrepreneur]

Despite a healthy U.S. economy and a low unemployment rate, sales of luxury goods are sluggish. Major department stores selling high-end brands, from Neiman Marcus to Nordstrom’s to Saks Fifth Avenue, are struggling to draw the same numbers as they did in the heyday of American shopping malls.

Luxury brands are one of the last holdouts in the eCommerce space. Going digital could be the opportunity they need to capture new customers and breathe new life into their sales projections.

Why luxury brands have stuck to tradition

There are several reasons many luxury manufacturers of jewelry, clothing, leather goods and other high-end products have resisted going digital. If they sell their products through an online marketplace like Amazon, they worry about counterfeit products infiltrating their inventory and angering customers. They may fear their brand’s exclusivity will suffer from being associated with mainstream retail sites or their products will seem less luxurious when pictured next to cheaper, fast fashion brands. They fret about third party retailers who don’t follow their brand guidelines, who offer deep discounts on their products, or provide subpar customer service.

If the manufacturer sells direct to consumer through a branded eCommerce site, they worry about returns and damaged goods. They question why their customers would shop online when they can have a more personal experience in the brand’s physical store, where they can see and touch the products before buying.

A writer for the U.K. magazine Business Matters concurred. “For many luxury brands, there is a fear that direct online selling to customers will somehow cheapen a brand that has taken great effort — centuries of artisan craftsmanship, or millions in painstaking research and development — to build.” 

Like most fears, there’s a nugget of truth in this concern, but only if the luxury brand enters the eCommerce space without knowledge of digital marketing or a plan for reaching and retaining the new customers they find online.

Why you should take luxury online and direct to your consumer

“More than 60% of luxury good sales are now digitally influenced — meaning shoppers either researched online and bought at the store, shopped in the store but bought online, or purchased online outright — according to recent analysis by the Boston Consulting Group.”[Forbes]

The risk of taking your products online is less than the risk of having no digital presence at all. From Millennials to Baby Boomers, people of all age groups expect their favorite brands and consumer goods to be available online. Whether shoppers are seeking inexpensive, ready-to-wear ‘athleisure’ or a $500 Italian leather handbag is immaterial. The point is they want the option to search anytime, anywhere on their phones or tablets, and they want access to a brand’s website for information, to see new styles, to “pin” their favorite items to their Pinterest wish list, etc. Brands that aren’t online lose out to ones that have embraced digital as an integral part of their overall business plan.

Take Burberry. According to Digiday, Burberry understood early the power online marketing campaigns, social media ad buys and user-generated content could have on their bottom line. In 2006 the iconic trench coat and clothing manufacturer decided they wanted to be “the brand to become the first fully digital luxury company” and now they are the company to emulate for eCommerce success.

Yet Burberry is a rare bird, a plugged-in, omnichannel luxury brand with a command of digital sales. There is an opportunity for smart luxury manufacturers to follow in Burberry’s tartan footprints. Louise Singlehurst, a luxury goods and brand expert, told Forbes, “With low penetration of eCommerce and social media by luxury peers, there is an opportunity to boost direct-to-consumer engagement, particularly as younger consumers spend increasing amounts of time online.”

Where the millennials are

A survey found that younger users were far more likely to have used an online channel for their first luxury purchase. Among those ages 18 to 24, 14% said their first luxury purchase was made online.” [eMarketer Retail]

One of the most compelling reasons to develop an eCommerce strategy for your luxury brand is building relationships with new customers. You need to be where the customers are and you need to know what they expect from their interactions with your brand.

Millennials, the largest demographic since the Baby Boomers, and their younger siblings, Generation Z, interact very differently with consumer goods than their parents and grandparents. According to the millennial consumer survey by Deloitte, “Bling it on: What makes a millennial spend more?”, “the one factor that plays a role in almost every aspect of millennial consumption is the rise of online. They are attuned to luxury brands that are more inclusive, rather than exclusive, but that also can be individualized or personalized.”

How to successfully make the transition to digital

“Tapping into the changing attitudes and behaviors, expectations and aspirations, of existing and new consumers provide opportunities for luxury brands to innovate and grow. By embracing digital technology, luxury retailers can reach their target consumers directly, and perhaps expand their audience to customers who would otherwise struggle to find them.” [Entrepreneur]

Here are some of the must-haves to ensure a superlative digital experience for your customers:

  • Build an eCommerce site that is intuitive, easy to use, and offers solid customer support with live-chat reps who are quick to respond to queries or problems. Make shipping easy and inexpensive, particularly for your higher-ticket items.
  • Incorporate social media sites (Pinterest, Instagram, etc.) into your digital marketing plan and encourage user-generated content with engaging contests and other promotions. Deloitte’s millennial survey found that young luxury shoppers are heavily influenced by their friends’ purchases. They are more likely to buy your product if they see it on their friend’s Instagram page than if they spot it in a glossy magazine spread.
  • Take an omnichannel approach. Combine the established strengths of your brick-and-mortar business with the unique opportunities that selling direct to consumer can afford you. Let customers buy online and pick up in your store. To avoid cannibalizing sales from your traditional retail partners, offer limited edition products to them and make your classics collection available exclusively online, or vice-versa.
  • Make sure you build a strong brand story that reflects your heritage and also intrigues and excites your potential buyer. Be careful to design a unique look for your site that carries over to your packaging, digital and print communications, and all other interactions with your customers.
  • Use the customer data you are able to access through your website to start personalizing products and offerings. When selling through a third party retailer, you usually don’t have access to valuable customer data. You also don’t have control over what items get discounted. Selling direct to consumer changes all that. Make the most of your customer data and use it to delight customers with personalized product designs, emails and offers.

Quick Guide Getting Started in eCommerce

eCommerce and luxury goods: a beautifully lucrative relationship

“McKinsey & Company predicts that online sales of luxury goods will triple in the next 10 years, and that by 2025, the online share of total luxury sales will reach 18%. [Forbes]

Developing an eCommerce strategy for your high-end products makes solid business sense. Brands that refuse to go online are missing out on potential customers. Manufacturers that limit themselves to selling on third-party websites often hand over control of their brand experience to someone else. Finding a trusted eCommerce partner who can help you make the digital leap is one way to protect your e-investment.

Going direct to consumer doesn’t mean abandoning your channel partners or shuttering your physical locations. There are still plenty of shoppers who want to see and touch your products in real time. Many smaller manufacturers depend on their distributors to build brand awareness among a larger audience than they can reach on their own. Consider your eCommerce strategy one of several levers to push to propel your brand forward and keep you competitive into the future.

For more insight on end to end eCommerce strategy visit this resources page.

Topics: ecommerce ecommerce strategy direct to consumer digital commerce digital marketing plan omnichannel