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How Tech Is Changing the Face of the Beauty and Luxury Retail Industries | By Adriana Coppola, Digital Strategist

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As the influence of print as an advertising medium diminishes, luxury retail brands have turned to digital to engage with consumers in new ways. However, this transition has been fraught with difficulties. Luxury brand owners have struggled to help people discover products online, connect with exclusive brand ambassadors, and express themselves in a world of unlimited possibility.

The luxury market also long stayed away from digital integration. Overwhelming popularity – especially that triggered by social networks and apps – does not typically align with exclusivity (a struggle exemplified by Michael Kors, one of the first advertisers on Instagram). However, digital integration is no longer an option. The latest projections suggest that by 2020, online is expected to drive 40 percent of sales growth for luxury brands.

And digital integration is long overdue. While luxury retailers fear that technology’s pace of evolution is discordant with their cultures, customers, and in-store experiences, the truth is quite the opposite.

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How Tech Is Changing the Face of the Beauty and Luxury Retail Industries | By Adriana Coppola, Digital Strategist

  1. 1. ADRIANA COPPOLA HOWTECHIS CHANGINGTHEFACE OFTHEBEAUTY ANDLUXURYRETAIL INDUSTRIES
  2. 2. 2OUR PERSPECTIVES As the influence of print as an adver- tising medium diminishes, luxury retail brands have turned to digital to engage with consumers in new ways. This transition, however, has been fraught with difficulties. Luxury brand owners have struggled to help people discover products online, connect with exclusive brand ambassadors, and express them- selves in a world of unlimited possibility. The luxury market also long stayed away from digital integration. Over- whelming popularity – especially that triggered by social networks and apps – does not typically align with exclusiv- ity (a struggle exemplified by Michael Kors, one of the first advertisers on Instagram). However, digital integration is no longer an option. The latest pro- jections suggest that by 2020, online is expected to drive 40 percent of sales growth for luxury brands.1 And this digitization is long overdue. While luxury retailers fear that technol- ogy’s pace of evolution is discordant with their cultures, customers, and in-store experiences, the truth is quite the opposite. Our work and experience show that digital innovation stands to benefit the prestige market and can be deployed in modes that heighten, optimize, and customize the luxury retail experience. Luxury marketers can and are em- bracing digital while maintaining their exclusivity. Breaking beauty In the struggle to unlock the true poten- tial of digital, there are many parallels that the luxury retail industry can draw from the beauty industry. And many key lessons to learn. The beauty industry is worth an estimat- ed $20 billion and continues to grow at a rate of around 3 percent per year, mostly through geographical expansion and the knock-on effect of rising gross domestic products (GDP) across the world.2 However, while some industries are thriving in the digital age, it could be said that, similar to luxury, beauty merely survives. Despite the hands-on nature of the lotions and potions that enhance our external appearance, technology is becoming the key to unlocking growth for this industry. For beauty brands, tangibility and trial barriers have always limited what could be done in the e-commerce space, which was largely considered a discount channel. With face mapping, projection, and personalization technology starting to become viable alternatives to the makeup counter, digital will become an increasingly lucrative discovery channel for consumers. At the intersection of beauty and tech lies the opportunity to give the category a complete makeover, and to unlock major growth by using digital in new ways that enable more personal self-expression. And there are three key ways in which digital integration can be harnessed: breaking the tangibility barrier, enabling smart personalization, and reimagining self-perception. 1 Business of Fashion. “Burberry Remains Digital Luxury Leader, While Céline Trails Industry.” http://www.businessoffashion.com/articles/fashion-tech/burberry-remains-digital-luxury-leader-celine-trails. 2 NPD Group. “U.S. Prestige Beauty Industry Grows 3 Percent in 2014.” https://www.npd.com/wps/portal/npd/us/news/press-releases/2015/us-prestige-beauty-industry-grows-3-percent-in-2014/.
  3. 3. 3OUR PERSPECTIVES 3 Criteo. “State of Mobile Commerce: Leading Mobile Retailers Dominate - and the Gap Is Growing.” Q4, 2015. http://www.criteo.com/media/3750/criteo-state-of-mobile-commerce- report-q4-2015.pdf. 4 Maybelline. “Try on Every Mabelline ColorShow Nail Shade, Virtually!” https://www.youtube.com/watch?v=xtZVy67hRNE. 1Breaking the tangibility barrier Currently, digital only really helps to supplement (rather than to grow) sales in the beauty market. This is because digital purchases are often discount or replenishment purchases, rather than first or experimental purchases. Last year in the U.S., beauty brands saw the largest lift (38%) in mobile share of e-commerce transactions compared to other verticals; many of these purchas- es, however, are driven by discount or repeat-purchase convenience.3 Despite this trend, there’s a future where technologies like augmented reality (AR) and face mapping could revolutionize the way that consumers discover products. In the coming years, these and other breakthrough technologies will transform the way that we shop on mobile for beauty, fashion, and other categories where trial is an issue. To begin with, we’re seeing increasing sophistication in augmented reality, where professional-grade, markerless facial tracking and mapping can be brought to the mass-market consumer. This technology analyzes and adjusts for harsh lighting conditions, diversity of skin tone, ethnicity, and eye shape, all in real time and with one-button calibration (see Figure 1). It allows for a realistic try-on of cosmetics, fashion garments, and accessories on mobile, wherever you are. It can even go as far as predicting the results of cosmetic surgery procedures. Suddenly, consumers are empowered to experiment with products – and self-expression – from the comfort of their own living rooms. A good exam- ple of this is Maybelline, which trialed an AR nail app that allows users to discover new nail shade combinations at home.4 Within the next year and with more sophisticated AR technolo- gy, consumers will be able to discover and trial products in novel, digital ways that still feel tangible enough to drive new purchases. In parallel, this technology will strongly impact the overarching retail industry. Shoppers are currently offered little guidance or assistance when select- ing what they need (think self-service shopping amidst walls and walls of products) or want (think customized consultation regarding high-end products). AR creates the possibility of a seamless and tailored sales process that takes customers on a journey of discovery, which will have huge implica- tions for the luxury sector and its rate of growth both both on- and offline. Markerless facial tracking technology analyzes and adjusts for harsh lighting con- ditions, diversity of skin tone, ethnicity, and eye shape, all in real time and with one-button calibration. It allows for a realistic try-on of cosmetics. FIGURE01
  4. 4. 4OUR PERSPECTIVES 5 Sali Hughes Beauty. “Video: In the Bathroom with Charlotte Tilbury Pt 1.” http://www.salihughesbeauty.com/videos/video-bathroom-charlotte-tilbury-pt-1/. 6 Pixability. “Beauty on YouTube 2015.” http://www.pixability.com/industry-studies/new-beauty/. 2Smart personalization Technology will also lend a helping hand when targeting women who are not confident with makeup (one of the categories with great growth potential for luxury brands). According to make- up artist Charlotte Tilbury, 50 percent of women in the United Kingdom don’t engage with makeup beyond a few staple products.5 With so many prim- ers, pots, and potions available on the market, category apathy is alarmingly high for this segment. Tapping into those potential customers who aren’t actively trying, buying, or using prod- ucts would lead to significant growth for the beauty industry. In this vein, YouTube and its 45.3 billion total beauty video views in 2015 have certainly helped to aid education.6 But new technologies can further help brands with providing customized service and connecting with larger percentages of their target groups. For luxury brands, that niche group is one for which personalization means higher value – a notion relevant not only in the beauty industry (where the competition with often cheaper, beauty-centric brands is commonplace), but across the entire retail board. Another opportunity lies with artificial intelligence (AI). In the future, AI could be used to analyze skin tone, type, and texture, as well as eye shape, hair type, and our color and lifestyle preferences – the latter being sourced from Instagram, Facebook, and other social media channels. Using all of these data points, brands would be able to automate the kind of tailored experiences that consumers could previously only get from visiting a top makeup artist or stylist. Taking this idea further, software that recognizes facial features, coupled with technology such as 3-D printing, could offer consumers the ultimate made- to-match beauty service. For example, technology such as the prototyped Mink, a personal 3-D cosmetics printer, can take identified skin tones and print the exact shade onto foundations, blushers, and lipsticks. And this goes well beyond the beauty sector. In the case of the prestige market, increasing value will be placed on the interactive nature of branded products. Similar to the service side of customized advisory (such as that of- fered by AI), products will be expected to fit seamlessly to body shapes and even allow for real-time customization by those wearing them. of women in the United Kingdom don’t engage with makeup beyond a few staple products. 50% total beauty video views on YouTube in 2015. 45.3B
  5. 5. 5OUR PERSPECTIVES 3Reimagining self-perception To reach potential customers, the beauty industry needs a certain level of person- alization at scale. Today’s technology is enabling more diverse expressions of beauty, as media is being democratized. And future innovations might even allow the selection of new beauty products based on what fits with our DNA. From elaborate hairstyles designed to display wealth to makeup that highlights our best features, throughout the centu- ries, people have worked to shape their outward appearances to fit with their personalities and identities. In today’s world, where consumers spend as much time curating their online presence and appearance as they do their physical selves, digital is forcing a new shaping of identities. And since the psychology of beauty is rooted in our identities, it’s conceivable that brands will take the opportunity to own an entirely new space by taking the concept of the “curated self” and enabling people to bring this new reality into the physical world. It’s a long way off, but through biohacking – the process of bringing together technology and biological processes to optimize how our bodies work – we could effectively alter our physical selves using digital tools. This is a ripe area for digital innovation teams (of beauty and luxury brands alike) to create experiences that are truly unique and personal. While the technol- ogy is years away, we’ve just begun to scratch the surface of what biohacking can achieve. Even the ethics are still being debated. But great potential exists for retail brands looking to enable wom- en to own their identities at a significant- ly deeper level. Future innovations might even allow the selection of new beauty products based on what fits with our DNA.
  6. 6. 6OUR PERSPECTIVES So, what do luxury retail brands stand to gain from this? The beauty industry has used technol- ogy as a catalyst for a step change to the mindset and model of the industry landscape. They have done this by going from “mass” to “individual”, talking to audiences of one rather than mass appeal – a particularly pertinent transformation for luxury brand manag- ers struggling to maintain exclusivity in a mass-market platform. Beauty brands are also starting to shift their focus from product to service by thinking about adjacent experiences for consumers (beyond traditional, physical products). The luxury retail market is seeing a similar disruption with curating services (such as Lyst) that aggregate and present the world’s most stylish brands in a highly-personalized way for the consumer. In an effort to remain relevant, prestige brand owners should consider how digital integration can unlock their own brand’s potential as a service. By connecting tech innovations with consumers’ wants and desires, luxury marketers and the beauty industry are defining the future of their respective industries and creating massive new business opportunities.
  7. 7. Adriana Coppola Digital Innovation Strategist, SapientNitro London acoppola@sapient.com Adriana is a Digital Innovation Strategist at SapientNitro, leading London’s Beauty Strategy offering. She has consulted at a global level on brands such as Dove, L’Oreal, Nivea, TIGI, John Frieda, Jergens, Neutrogena, and Clearasil, doing everything from traditional brand planning to experience innovation and business consultancy. SapientNitro® , part of Publicis.Sapient, is a new breed of agency redefining storytelling for an always-on world. We’re changing the way our clients engage today’s connected consumers by uniquely creating integrated, immersive stories across brand communications, digital engagement, and omnichannel commerce. We call it our Storyscaping® approach, where art and imagination meet the power and scale of systems thinking. SapientNitro’s unique combination of creative, brand, and technology expertise results in one global team collaborating across disciplines, perspectives, and continents to create game-changing success for our Global 1000 clients, such as Chrysler, Citi, The Coca-Cola Company, Lufthansa, Target, and Vodafone, in thirty-one cities across The Americas, Europe, and Asia-Pacific. For more information, visit www.sapientnitro.com. SapientNitro and Storyscaping are registered service marks of Sapient Corporation. COPYRIGHT 2016 SAPIENT CORPORATION. ALL RIGHTS RESERVED. INSIGHTS WHERE TECHNOLOGY & STORY MEET The Insights publication features the marketing intelligence, trend forecasts, and innovative recommendations of boundary-breaking thought leaders. The SapientNitro Insights app brings that provocative collection – now in its digital form – to your on-the-go fingertips. Download the full report at sapientnitro.com/insights and, for additional interactive and related content, download the SapientNitro Insights app.

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