Digital luxury customer experience

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Digital is upending the luxury retail landscape, with sales growing at 28%. While a number of leading brands have embraced digital, most companies still have not made digital a core part of their …

Digital is upending the luxury retail landscape, with sales growing at 28%. While a number of leading brands have embraced digital, most companies still have not made digital a core part of their growth strategy. Customers are looking for faster service and more personal experiences - though that doesn't necessarily mean speaking with a sales person. The best performers are investing in digital capabilities and technology, and they are already seeing the rewards. Luxury retailers who do not figure out how to make digital an integral part of their strategy risk losing out to those who have.

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  • 1. Digital Luxury Experience 2012From customer experience to impact
  • 2. Exhibit 1In 2011, online sales hit €6.2 billion and will reach €15 billion in 2016 Online sales € billions 15.0 6.2 4.9 20102 2011 20163 Percent of total luxury1 2.6% 3.2% 5.3% market 1 Personal luxury goods: Apparel, accessories, jewelry and watches 2 Consolidated value vs last year estimate of € 4.5 billion driven by pre-closing data 3 Total market growth 2011-2016 assumed equal to 8%, based on hystorical data SOURCE: McKinsey & Company, Altagamma
  • 3. Exhibit 2Almost 15% of total sales are directly influenced by online channels Impact, 2011 Percent € billions of market Pure online sales 3.2% 6 Offline sales directly generated1 by 10-11% 17-18 online experience Offline sales influenced2 by 20% 34 online experience 1 Researched online, product decision changed online and purchased offline 2 Researched online, product decision confirmed online and purchased offline SOURCE: McKinsey & Company, Altagamma
  • 4. Exhibit 3Digital sales of monobrand websites grew by 37% 2011 vs 2010 growth Percent 37% 32% 28% 25% 28% Average growth rate 17% Mono- Full Off Event Department brand price price stores Multibrand websites SOURCE: McKinsey & Company
  • 5. Exhibit 4Approximately 50% of total market is generated by full price websites 2011 100% = €6.2 billion (total online luxury sales) Department store websites 14% 26% Multibrand Multibrand full price 49% event 18% Full price Monobrand websites 23% 19% Multibrand off price SOURCE: McKinsey & Company
  • 6. Exhibit 5Customers look for personalized pricing and lean processes Respondents to the question “What element would encourage you to buy more luxury items online?” Total respondents: 2,500 in 5 countries Personalized ~40% discount Simpler purchase ~19% process Exclusive ~16% products SOURCE: McKinsey analysis on Digital Luxury Experience market survey 2012
  • 7. Exhibit 6Almost three-quarter of respondents search for product comparison Respondents to the question “What are your key reasons to search online?” Total respondents: 2,500 in 5 countries Compare 72% products Search for specific 57% products See product 54% range SOURCE: McKinsey analysis on Digital Luxury Experience market research 2012
  • 8. Exhibit 7In the same product category companies reach different digitalperformances based on their online-ability index Digital sales1 index 1 Hospitality 0.75 0.60 0.45 Fashion 0.30 0.15 0 1 2 3 4 5 Online-ability index 1 E-commerce + directly generated sales SOURCE: McKinsey analysis on Altagamma questionnaire; expert interviews; company reports
  • 9. Exhibit 8There is a strong correlation between digital sales and investments Indexed numbers Best performer vs market average Digital impact1 3 Digital x4 organization Digital marketing & x 1.5 sales spending 1 Digital x2 touch points Market Best average performer 1 Digital impact defined as e-commerce + in-store sales directly generated by online decisions SOURCE: McKinsey analysis on Altagamma questionnaire; expert interviews; company reports