10 keys to mastering superdigitalisation of the luxury sector

Salvador Suárez

26 November 2020

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In recent months, organisations have been forced to make decisions in a highly uncertain environment. These decisions involved changes in the regulation and security of our employees, limitations on travel and alarms of all kinds, which have forced brands to take risks based on intuition rather than data. However, after almost 12 months of a global pandemic, we are now beginning to take for granted certain things that we did not have back in March. 

This was already the case of China in 2003. With the SARS epidemic, usage ratios in digital channels and mobile phones boosted, and this great change in consumer habits -and, consequently, in the digitisation of brands- continued in the years that followed, turning the Asian country into the digital giant that it is today. 

Nowadays, we are witnessing how this pattern is repeated. The process of unstoppable superdigitalisation caused by COVID-19 will change the way consumers buy, and even how they perceive brands and their products. This digital revolution affects all sectors, including the premium or luxury goods and services sector, and is here to stay. In the luxury industry,  which is quite unique in terms of consumer habits, nothing will ever be the same again.

As in other sectors, the pandemic has also led to a decrease in sales of high-value products and services. The good news is, everything seems to suggest we will return to the business figures of previous years. Direct-to- consumer (D2C) sales through eCommerce channels will be an essential lever in the coming years in order to reach pre-COVID levels as soon as possible.

the luxury sector amidst the coronavirus crisis 

However, the changes that superdigitalisation will bring are not related to the rise in electronic commerce only. Undoubtedly, if a company wants to increase the percentage of its online turnover from 10% to 50%, it will have to undergo a deeper reinvention. The role of shops is already changing, and they will very likely become a complement to sales with a very specific function, mostly experiential. We are also facing a new time-to-market, as well as the emergence of new market segments, which forces us to rethink the entire customer journey.

Studies have shown that it takes us 66 days to turn actions into habits that can last for years. Before the pandemic, it was difficult to think anyone would buy high-end cars or luxury jewellery online, without seeing and touching them, without that “special” in-store shopping experience that characterises the sector. However, many consumers have now embraced the purchase of high-value products through digital platforms. 

This is the first major change that will precipitate all others. According to our study “Superdigitalisation of the Mexican luxury industry”, which we have developed in collaboration with L’Officiel, 94% of respondents go through the process of searching for information and making decisions online. Until now, their interaction with premium brands through digital channels was limited to that pre-purchase phase, and the transaction was made in retail 90% of the time. However, in recent months online sales of the most relevant luxury brands have doubled, something unthinkable a few months ago. 

This cascade of changes forces companies in the sector to take action and improve all processes related to their digital channels if they don’t want to be left behind. These are the steps they are taking to achieve that balance between online and retail sales:

1. Adapt to the new context of superdigitalisation

The first step is to analyse the new habits that consumers have acquired during lockdown. This will allow brands to define a new customer journey and act accordingly based on three main drivers: buying through digital platforms, empowering the local market and investing in technology and digital. 

In the short term, these three factors will promote online sales and increase the brands’ digital experience. According to the first edition of our “COVID-19 and Marketing Barometer”, companies will focus most of their investment on sales processes through digital channels. These processes go beyond an eCommerce website, as they impact on the pre-purchase, during-purchase and after-purchase processes, both online and offline.

2. Culture-Organisation

Companies are changing the way they work, based on the adoption of collaborative models, the training of teams and the attraction of specialised talent, as well as boosting corporate efficiency by automating processes.

3. Get to know your consumers through marketing intelligence strategies

Luxury companies need to rethink who their target customer is and how to create awareness of their brand and its premium products. In addition to analysing changes in the customer journey, as we mentioned above, we must also take into account the impact of digitalisation on those journeys.

4. The consumer experience in the luxury sector

Buying luxury products goes beyond the moment of purchase of a given good. It is a special and carefully considered experience, based on retailing and physical shops, that brands must transfer to the digital environment. 

This experience will depend on the development and design of our digital assets. Thus, eCommerce websites and platforms need to evolve significantly, and for this purpose there are market intelligence tools that allow us to better understand our positioning within any geographical area.

5. Content and value proposal

Brands need to generate valuable content, and increase investment in the production of native and relevant content in order to attract their audiences and differentiate from competitors. It is important to understand that mobile phones are the new TV, so we must develop content for this channel accordingly, using appropriate formats.

6. Native Direct-to-Consumer brands

Before the pandemic, we already spotted a trend in the emergence of brands that were born digital and were developing digital direct-to-consumer (D2C) channels from the very beginning.

Now, with COVID-19, all the major brands have taken on the challenge and have started developing direct-to-consumer strategies in order to avoid dependence on third-party distribution, improve their profit margins, achieve greater control over the overall customer experience, and thus be able to improve it and know their consumers better thanks to the collection and analysis of their own data. 

Direct-to-consumer sales also pose great opportunities in the area of premium products. According to our study, “Superdigitalisation of the Mexican luxury industry”, 70% of luxury consumers prefer to buy directly from brands’ eCommerce platforms (as opposed to distributor websites), which highlights the need for brands to activate their D2C strategies.

7. Data oriented brands

In the digital environment, many of the touchpoints between brand and consumer are online, thus providing us with constant data. This poses an opportunity to orient our company towards the management, integration and visualisation of data, both of the brand’s digital assets and of retail, eliminating information silos in order to make real time decisions based on reliable data.

8. Sell more and better

One of the particularities of the luxury sector is the importance of maintaining the customer relationship and developing retention strategies. 20% of the population accounts for 80% of the sales of premium products (Pareto principle), so our entire marketing strategy must be focused on obtaining information and data on the consumers who buy our products and consume our content. By doing so, we would be able to analyse their behaviour in depth and improve their lifetime value, continuing to strengthen our value proposal among the consumers most loyal to our brand.

9. Innovation and technology

The sale of premium products largely depends on information, which is why, when relating to consumers nowadays, it is essential to have the right technology to provide us with this valuable information: from digital assets with integrated marketing automation, CRM tools and transactional analysis to an eCommerce platform allowing for a friction-less shopping experience. The whole process requires integration with different technologies that facilitate access to information and improve the customer experience.

10. And what does the future hold?

The luxury sector is not immune to the trends affecting other industries. Consumers are increasingly aware of sustainable brands, which seek to find a balance between production and natural resources’ consumption. Moreover, the emergence of Amazon’s new marketplace with luxury brands, or the integration of technology to improve the retail shopping experience are trends that are here to stay and could change (even more) the way we understand and approach the luxury sector.

In short, the consumers we are facing are absolutely digitalised, and as such we must address them by adapting their codes and channels to the peculiarities of the sector. Luxury is an industry based on the relationship with the client, so our digital assets must be focused on obtaining data on which to base our strategic decisions. The appropriate development of our digital assets will allow us to improve the shopping experience and therefore maintain our high-end brand status. 

Finally, there is no digital transformation if we don’t understand that the most important thing is the people in our organisation. Therefore, the attraction and retention of talent, and the adoption of an organisational model that facilitates working in an asynchronous manner with tools, training, and the appropriate corporate culture, will be key for success. Welcome to the luxury industry of the 21st century.