Digital or Die: The Choice for Luxury Brands

Digital or Die: The Choice for Luxury Brands

          
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Digital or Die: The Choice for Luxury Brands

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    Not the Consumers (or Channels) You Thought You Knew

    For evidence of how urgently luxury brands need to shift in the digital direction, look no further than the demographics. Millennials (loosely defined as those in their middle twenties to early thirties) are quickly becoming a huge group of consumers—more than 2.3 billion strong, making up about 32% of the world’s population. And since millennials and other young consumers will be tomorrow’s buyers of luxury goods, it’s important to track their attitudes and behaviors.

    It’s no surprise that these consumers have markedly different values than their parents and grandparents. BCG’s study shows that they place a much higher premium on experiences than on things—the upscale safari rather than the watch or the car—reinforcing the idea that brands must think beyond products. Younger consumers also stand apart in how much the web is part of their shopping behavior and how much they share their opinions online: 60% rate products on the web, 60% upload content about products and services, 45% check prices via mobile (even while in the store), and 43% look for promotions online (likewise while in the store).

    But younger consumers are by no means the only ones pulling luxury brands toward digital. Fully 75% of baby boomers and older people who buy luxury brands say they are ready for omnichannel interactions, compared with 86% of millennials. In some markets—notably Japan and Russia—BCG found that older generations are the heaviest online shoppers for luxury goods and services. In fact, digitization now affects all consumer segments. Overall, more than 40% of consumers expect to be able to have two-way interactions with brands—at the very least, sharing feedback and opinions and, when necessary, speaking with online service reps and getting instant replies to their questions. The consequence for brands: they can no longer rely on “push” marketing alone.

    Our study also showed big geographic variations in the digital “maturity” of luxury consumers. The US and UK are the furthest along: at least two-thirds of luxury shoppers in these two countries bought their last product online, researched it online and purchased it in a store, or viewed it in a store and then bought it (or a similar model) online. Interestingly, Italy and France, the two nations most closely associated with luxury fashion, still strongly emphasize the in-store experience. In France, for instance, only 31% of the shoppers surveyed said that they researched their last luxury purchase online and bought it in a store, compared with 47% who did so in the US and Brazil and 46% who did so in Japan.

    At the same time, consumers are ready for omnichannel interactions with luxury brands; our research indicates that fully 80% of consumers actively expect this. (See Exhibit 3.) Omnichannel does not just mean the option of shopping online rather than in stores, even though e-commerce is indeed surging in most luxury sectors in many countries. Rather, it means a customer experience that is seamlessly integrated across all touch points. Shoppers want integrated delivery service (31% of those surveyed), the same promotions and rewards regardless of channel (24%), and a consistent brand image (22%), among other factors.

    exhibit

    In most cases, the omnichannel world that luxury brands now confront means many more touch points between brand and customer, making the path to purchase more variable and individualized. (See Exhibit 4.) Channel switching is common among many segments of the luxury-buying population. Millennials are not the only ones comparison shopping in the store, capturing QR codes, and sending photos to friends to solicit their opinions.

    exhibit

    Moreover, every touch point contributes to—or detracts from—the customer’s overall perception of the product or service being offered. If a luxury product shows up in oddly irrelevant digital channels, or if additional information about the product is difficult or awkward to obtain online, those experiences will diminish the desirability of the product itself.

    Of course, putting the spotlight on omnichannel does not mean ignoring websites. As the importance of brands’ sites declines (only 29% of consumers surveyed in 2015 who shopped online purchased from a brand website, compared with 38% in 2014) and that of online marketplaces and department stores grows (up 5 and 3 percentage points respectively, over the same 12 months), it is imperative that brands find new ways to improve their websites, using them to make the brand more engaging (with continually updated content, for instance) and ensuring that their customers have equally good experiences on the websites of the brand’s partners.