December 22, 2016

What You Can Learn From Luxury Retailers’ Omnichannel Approach

Younger consumers are acquiring the means to afford expensive purchases, and luxury brands are meeting them on their terms, in their spaces - social media, apps, and mobile sites. As more luxury shoppers research online, some retailers are offering immersive experiences to bring high-end products to life.

To replicate a physical store’s experience of exclusivity and luxe online is a very tall order. Instead, luxury brands should focus on conveying a high level of customer service online.

Affluent consumers are very emotionally connected to brands, making them a part of their lifestyles and their identities. Because of this, they expect to engage with these brands on a regular basis and incorporate their products and services deeply into their daily lives. By watching the digital evolution of this retail sector, one can glean the essential knowledge about how to encourage your own customers to make big-ticket purchases. If your company held back during the first burst of omnichannel disruption, you can now craft your customer experience by following the example of the luxury retail brands. Here’s how these companies are leveraging their digital expertise to maintain their positions at the head of the retail pack.

“Bricks and Clicks” Must Be Combined

A Harvard Business Review (HBR) article by two prominent economists uses the catchy term “bricks and clicks” to describe the type of omnichannel engagement with customers that’s needed by today’s retailers. The HBR report shows that while online sales continue to surge, growing by 15.2 percent between Q1 of 2015 and Q1 of 2016, it’s not yet time to bid farewell to brick-and-mortar sales. As a matter of fact, over 92 percent of retail sales took place in physical stores during the first quarter of 2016.

It’s true that the shopping landscape is shifting, but it’s not going in the direction that financial prophets predicted. While foot traffic in store locations has declined, HBR points out that sales haven’t followed suit. It turns out that many people are shopping more efficiently because they often gather information online before going to the physical store.

Remember: The Invention of TV Didn’t Make Cinema Obsolete

In the early days of the dot-com explosion, dire predictions proclaimed that physical stores would rapidly become obsolete. These forecasts have turned out to be about as accurate as predictions in the 1940s that the invention of television would destroy the movie industry. After everyone bought TV sets, the various forms of entertainment actually ended up complimenting each other. A choice of viewing experiences was available, depending on the consumer’s situation and mood.

Similarly, in the luxury retail world, the digital transformation simply enlarges the potential number of shopping experiences available to the customer. When the data are analyzed, it turns out that consumers who engage with a brand in both the digital and brick-and-mortar retail stores spent 50 percent more than those who shop only in the physical location.

Simultaneous In-Person and Mobile Experiences

Even after you get customers to enter your physical location, they generally walk through the store with a phone in one hand. Their attention is divided between the merchandise in front of them and whatever is happening on their handheld screens.

Augmented Reality (AR) Naturally Merges Different Channels

Augmented reality allows you to continue your digital connection with shoppers while they walk around in the physical retail location. With mobile apps that use AR, you can superimpose additional information and personalized experiences on top of whatever they’re looking at in real life. This gives in-person shoppers a deeper level of information than what they can gain through direct physical experience with your products. Additionally, AR is still a novelty for many customers, and the mere fact of engaging with this experience conveys a cutting-edge thrill. It’s worth taking advantage of the freshness of this technology because the channel itself adds a certain amount of gloss to the product if the user experience is artfully styled.

What if Millennials Aren’t Your Only Target Market?

Because the surging millennial generation is the first to reach adulthood during this era, many digital marketing campaigns are aimed almost exclusively at this age group. This leaves many merchants whose products are not targeted solely toward younger consumers wondering whether it’s worthwhile to invest heavily in digital customer experiences.

Here again, you can follow the example set by luxury brands. Luxury retail consumers tend to skew older because older people simply have more money to spend. Affluent boomers, born between 1946 and 1964, still make up half the current consumer demographic for luxury brands, and analytics show they have more disposable income. Millennials will not reach their peak spending years until the middle of the next decade, from 2026 onward. These affluent younger people are sometimes called “HENRYs,” an acronym for “high earners not rich yet.”

Older Shoppers Enjoy Digital Too

While it’s true that people below the age of 34 are the most engaged in digital commerce, and shoppers between the ages of 18 and 24 spend the largest percentage of their incomes online, those older shoppers with deep pockets are now quite digitally savvy. One out of every four mobile shoppers in the United States is older than 55, and these shoppers are ready to take advantage of the conveniences digital offers them. According to a recent BCG report on a survey of 10,000 people in 10 countries, 85 percent of millennials and 75 percent of baby boomers who buy luxury brands want omnichannel options, such as e-commerce, digital in-store experiences, social media conversations and so on.

Digital Helps You Understand Your Customers

If your products fit into the luxury market, you should be aiming not only to establish your digital status quo, but also to see digital as a significant marketing resource. The same apps that charm your customers and increase their engagement can feed you a valuable stream of data about those customers’ preferences and characteristics.

Luxury consumers, regardless of age, tends to be well aware of the possibilities inherent through digital innovation, and they expect the luxury brands they respect and adore to offer these cutting-edge experiences. Approximately 7 percent of all luxury sales are conducted online, but that percentage is expected to grow by 40 percent between 2013 and 2020.

Some Luxury Brands Doing Omnichannel Right

As you assemble your digital strategy, it’s always helpful to take a look at a few specific examples. The following luxury brands are holding their own in an increasingly crowded sector by providing their customers with a uniquely pleasing, personalized shopping experience:

  • Burberry has been at the forefront of digital innovation in the luxury space, and constantly pushing digital boundaries. It has dedicated significant resources to digital, and its investment has been paying off. In 2012, it renovated its flagship store on Regent Street in London to better connect its physical and online channels. It implemented digital initiatives that included: putting audio- and video-capable screens into fitting rooms, giving salespeople iPads containing customer history and preferences, microchipping products for faster tracking and using portable point-of-sale checkouts. “Click and Collect” has been particularly successful for Burberry as well, representing 15 percent of all e-commerce sales. This sales function allows a customer to digitally reserve a product, and then come into the store and pick it up from a sales associate in order to try it on.
  • Ralph Lauren is (so far) the only brand in the luxury space offering a smart fitting room mirror. Using a RFID system, the mirror can detect what items a shopper takes into the fitting room. With this technology, shoppers are able to share photos of themselves with others and request a different style or size of the item selected. Furthermore, customers can request any one of several lighting choices in the dressing room, so they can see how the garment will look in its most likely setting.
  • Neiman Marcus has created a personalized experience for customers. Most notably, it has a new feature that recognizes a customer’s size and only shows products available in that size. It also launched a “Memory Mirror,” allowing customers in store to record an all-encompassing 360-degree view of themselves wearing their selected products. This image can then be sent as a video to the Neiman Marcus app, letting the customer buy it online or save it for later purchase.

“Webrooming” is a Valuable Concept in the Luxury Space

The concept of “webrooming” is picking up steam in the luxury sector, as more customers are researching products online before going to the store and purchasing them. Simply, webrooming is the concept of researching products online before purchasing them in store. This concept is particularly important when it comes to luxury goods. Given the high price point, customers want to feel and see the product in person before making a purchase.

Here are some steps you can take in the short term to treat your brand like a luxury brand and boost its digital presence:

  • Collect information about your customers, their preferences and their purchasing behaviors. The more clearly you understand their decision-making processes, the more appropriately you can choose and personalize your technological options.
  • Bolster your customer engagement by using different channels in succession. Use social media to initiate the conversation, and then send notifications and promotions via geo-location apps and beacons.
  • Leverage innovative technologies like iBeacon and VR/AR to bridge the gap between physical and digital worlds

To replicate a physical store’s experience of exclusivity and luxe online is a very tall order. Instead, luxury brands should focus on conveying a high level of customer service online. Beautifully designed personalized digital touchpoints need to be backed by human-led, concierge-level customer service.

This is a simple first step to take in the long journey to create a true cohesive omnichannel experience. Successfully marrying online customer experience with high-end in-store experience is a difficult challenge for all luxury brands, but applying digital creativity will position your store and your brand strongly in the minds of consumers for the future.

LATEST POSTS