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Alba Romero Villa
How to recreate the luxury buying experience online – IMLB 2014
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HOW TO RECREATE THE LUXURY BUYING EXPERIENCE ONLINE
E-COMMERCE AND LUXURY GOODS – FASHION & LEATHER GOODS
Alba Romero Villa
Master Thesis – IMLB 2014 –
2nd
Intake
Alba Romero Villa
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TABLE OF CONTENTS
1. ABSTRACT 3
TOPIC: What are the attributes of a luxury buying experience online?" /
"How to recreate the luxury buying experience online? 3
2. INTRODUCTION 4
3. PART I: LITERATURE REVIEW 8
How Affluent Luxury Buyers Buy Luxury Goods 11
4. PART II: METHODOLOGY 14
INTRODUCTION 14
CASE STUDY: BURBERRY
When the online strategy serves to boost brand value. 15
BEST PRACTICES ONLINE 21
I. Mass Customization and Personalization 21
II. Recreate a sense of exclusivity online: Online Exclusives 25
III. Instant ecommerce of Live stream runway shows pieces 28
5. PART III: ANALYSIS 31
General consumers’ motivations and expectations when buying luxury
online 46
6. CONCLUSION 48
7. BIBLIOGRAPHY 52
	
  
	
  
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1. ABSTRACT
TOPIC: What are the attributes of a luxury buying experience online?" / "How to
recreate the luxury buying experience online?
To date, luxury brands have tended to neglect the potential of the Internet, seeing in it a
risk of damaging their brand image and considering that it was against the very
definition of luxury. However, affluent consumers are all online and actually
purchasing. Moreover, they expect to be able to do so. The Internet is their number one
source of information for luxury products and the arena where they can socially discuss
and exchange experiences concerning their lifestyles.
As a result, luxury brands with a desire to compete in the coming future must create a
close relationship with consumers, which involves impressing upon people the value of
their brand, what new products are available, and giving them an opportunity to
purchase them with ease (Adams, 2013).
As luxury brands start realizing that the management of their digital presence is
essential to their brands in terms of value and image, some questions about how to
integrate ecommerce prevail:
• How can luxury brands successfully recreate their brand essence online?
• What are the elements that conform a luxury buying experience online? How can
they do to recreate the sensorial offline experience of the brand online?
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2. INTRODUCTION:
The demand for global luxury online sales is on the increase. The wealthy are online
and pleased with making online purchases. To date, luxury brands have tended to
neglect the potential of the Internet, seeing in it a risk of damaging their brand image.
However, affluent consumers are actually purchasing luxury goods online and they
expect to be able to do so, especially those who lack the time to physically visit the
stores. Furthermore, the Internet is their number one source of information for luxury
products and the arena where they can socially discuss and exchange experiences
concerning their lifestyles.
On the other hand, luxury brands CEO’s have denied for long e-commerce, considering
that selling their products online was against the very natural definition of luxury. As a
result, most of the brands have started their brand digital strategies late, more in an
attempt to keep up with their competitors and general trends rather out of a certainty in
the need of creating a genuine brand dedicated site. Despite the market data, until very
recently, those CEO’s were reluctant to believe that their core consumers could be
buying luxury goods online or using the internet as their first source of information for
luxury products. And as a result, the digital spaces were targeting a different niche of
consumers: such luxury enthusiasts, fashion lovers or a younger audience. They didn’t
understand why they should place a considerable budget in their digital strategy. That
explains why luxury brands generally fail in delivery when it comes to their Internet
platforms.
They would prefer consumers to come to their stores. It’s like the argument used in
1970’s for those against the stores openings abroad, they claimed that they didn’t need
them because consumers could always come to Paris and buy there.
Personalities such as the chairman of Compagnie Financiere Richemont SA or Chanel’s
President of Fashion, Bruno Pavlovsky; have finally agreed to invest in e-commerce
more as a service to Executive Boards and clients demanding for it rather than anything
else. “It’s an evolution to better serve our clients. It’s more e-service than a pure e-
commerce approach”, said Pavlovsky when announcing that Chanel will finally
surrender to e-commerce sometime in late 2016.
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Still today most of luxury brands are reluctant to open their universe to the online space
or opt for a middle presence online that may end up confusing consumers or even raise
frustration among those that have invested their time navigating online and selecting
carefully products to finally discover that they are not able to buy them right away.
Since 2008, online purchases of luxury good have been increasing annually by 25% in
France and will represent 11 millions euros in value this 2015 (Enora Consulting,
2015). Nevertheless, online sales still represent a marginal part of the luxury sector total
revenues worldwide: according to Forrester’s estimations (Forrester, 2015), more than
90% of all luxury transactions –which some analysts say is a $300 billion industry- are
still made in a store. Nowadays, because online sales represent a shy percentage of 6%
of the total for luxury goods, triple the share in 2009 (2%), (McKinsey Company,
2015). they can survive without e-commerce but it’s a massive missed opportunity
(Strugatz, 2013).
In fact, despite 70% of luxury consumers tending to buy online once they have already
experienced the brand and the products in-store and not before, online luxury sales
mainly take place in ‘pure players’ (often multi-brand e-shops with strictly online
presence) (Enora Consulting, 2015).
By staying offline, these labels are losing a percentage of sales to successful multi-
brands sites such as Yoox or Net-A-Porter, which saw a sales increase of 55% percent
which translates to $613 million in 2013 (according to Daily Mail), including quickly
selling out of $11,500 Valentino coats but also to department-stores sites like Bergdorf
Goodman and Barneys, featuring $6,990 Oscar de la Renta dresses and $7,250
Givenchy sweatshirts for men (Bloomberg, 2014). That is for the official channels of
distribution allowed to sell their products online, but what about vintage e-shops,
second-hand markets and even bidding sites such as eBay? It’s not only a question
about dollars and cents but also about regaining control over the client experience with
the maison products and avoid non-knowledgeable consumers getting fooled online by
offering them the guarantee of an official brand dedicated e-shop.
As a matter of fact, the number of e-commerce players is rocketing with more than
20,300 new sites every year, meaning that a new online shop opens every half hour (E-
commerce Mag, 2012). In value, the apparel industry is the one facing most relevant
increases on the Internet. And every year that passes, the average age of online
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consumers also tends to grow older, according to consumer behavioral studies, when
purchasing online.
Even if well known, prestigious luxury brands are only quite a few, the luxury industry
is relatively small in terms of players -number of companies or conglomerates- and the
danger of newcomers is low –the boundaries are not easy to defeat- the industry has an
enormous influence on society and in terms of consumer behavior, attracting lots of
attention. That explains why most of them have finally accepted the need of a certain
digital presence, embracing the possibility to communicate in-house directly to their
audience without turning to intermediates such as influencers, magazines, actors and
actresses, etc. Some brands have successfully selected social networks to be present in
such as Facebook, Twitter, Instagram or more recently Snapchat; and implemented
periodical marketing newsletters to inform clients about the brand’s latest news.
Nevertheless, most luxury brands are convinced that preserving their brands sense of
rarity and exclusivity implies keeping the digital development to a minimum.
Considering how important the Internet is for their target consumers’ daily lives, it may
seem reckless but still some of them have successfully foregone e-commerce, like for
example Céline, which has neither e-commerce nor a social media presence in any
market and whose creative director, Phoebe Philo, has been quoted saying “I’d rather
walk down the street naked than join Facebook”.
That’s what happens mostly all over the internet with luxury brands: even among those
who have decided to jump into the e-commerce, such Hermès or Louis Vuitton, it’s
very common to find a line under the product description inviting users to visit the
stores in order to get certain or most of their products.
It appears that they have decided to limit, against one of the very basic principles of e-
commerce –the long tail theory- the range of goods available online carefully selecting
to put certain things for sale and not others.
But does it not seem contradictory that luxury brands are happy to run their own
Twitter, Instagram, Facebook and even SnapChat accounts, gratefully rewarding
bloggers followed by millions of people with their products at no cost and live-stream
their runway shows, but still refuse to sell online?
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Until recently, the luxury industry showed low commitment towards integrating
advanced Internet technologies and its accompanying interactive and digital tools in the
sector's marketing and overall business strategies. However, the undeniable truth is that
Internet has become an indispensable channel of modern business. Indeed, Internet and
e-commerce is still spreading very fast, and is becoming part of our daily life as it
already is in several Asian countries, including South Korea, which still has the highest
digital penetration in the world.
There is no doubt that Internet is destined to continue playing a major role in our lives.
And so is e-commerce. Luxury brands with a desire to compete in the coming future
must form a close relationship with consumers that involves impressing upon people the
value of their brand, what new products are available, and giving them an opportunity to
purchase them with ease (Adams, 2013).
The question, then, is: How much time luxury brands would be able to stay out of e-
commerce?
As luxury brands start realizing that the management of their digital presence is
essential to their brands in terms of value and image, some questions about how to
integrate ecommerce prevail:
• How can luxury brands successfully recreate their brand essence online?
• How can they do to recreate the sensorial offline experience of the brand online?
• What are the elements that conform a luxury buying experience online?
To better answer these questions it’s important to note that as any shop and
communication campaign, a digital brand dedicated site is included within the
company’s general strategy. A brand interacts with its audience and consumers at every
point of contact of them with the brand and their approach must pull together all
channels in a 360º degree strategy.
Different authors have covered already the effects that Internet has on the consumer
perception of a given luxury brand, with this thesis the aim it’s to go deeper in a
consumers point of view. What do they expect when it comes to buying luxury online?
What are for them the attributes of a luxury buying experience online?
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3. PART I: LITERATURE REVIEW.
There is no doubt that the invention of Internet had a great impact in our conception of
the world. We were face to a revolutionary mankind invention: such once was the light,
the telephone, the mechanical production or the train.
Before the Internet, the idea of globalization was only prominent in regards to global
trading, foreign investments and international capital flow. But thanks to the Internet
globalization includes today a much bigger scope and society has become more globally
aware.
The above notwithstanding, for many years luxury brands were reluctant to join the
digital era, starring long-lasting debates on whether luxury should be present online or
not; and explaining why high-end luxury fashion retailers have been some of the
slowest to sell their products online.
Truth is that their reservations were founded and rooted in the very essence of luxury.
Even if there is no commonly agreed definition of luxury, exclusive, scare, rare
products reserved to a ‘happy few’ are often acknowledged as core characteristics of
luxury items. As Dimitri Mortelmans stated in Sign Values in Processes of Distinction:
the Concept of Luxury, luxury often fulfills one or more of the following criteria:
scarcity, have an objective or symbolic extra value, a higher standard quality, a design
orientation, and maybe as result, are priced much higher than comparable products.
Kapferer and Bastien identified in their book The Luxury Strategy: Break the Rules of
Marketing to Build Luxury Brands two dimensions on the idea of luxury: a sociological
dimension that “represents and publicly incarnates social stratification” and a
psychological one related to self-rewarding and self-indulgence, luxury “gives oneself
the pleasure and dream of expectation” (Bastien & Kapferer, 2012).
Therefore, luxury products are not just products with high standards of quality and a
hefty price tag sold in an upscale retail environment, they are meant to be desired,
dreamed for, they are exclusive and aspirational products that serve to multiples
symbolic purposes beyond a mere functional aspect.
Luxury is one of the oldest industries and that’s only possible because it relates to the
inherent human nature seeking for self-differentiation while embracing group belonging
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and responding to social climbing stratification. Very often luxury is closely related to
conspicuous consumption. Luxury brands are not just selling us products, but a specific
status: a social positioning and a social class comparison, explaining why consumers are
willing to overlook and pay the exaggerated value of certain products. However, in
order for this to be effective, the process of communication must be recognized,
understood and de-codified by the society, so to a certain extent luxury is a social
agreement. “Luxury exists because just some can access to it (…) luxury must never be
made too accessible if it want to remain the dream of those with growing revenues and
wealth” (Kapferer, 2015).
Luxury depends on a fragile equilibrium between visibility and scarcity.
Nevertheless, most of the characteristics described above are antagonist with respect to
the very principles of the Internet, which thrives on mass appeal, accessibility and
availability. Internet is rooted in democracy and grants an extended mass access to a
vast majority, is inclusive and not exclusive and it stands for transparency.
Given that the bulk of sales take place in the physical stores and that the expansion in
emerging markets –notably China- carried the luxury industry growth, many brands
under-invested in their digital presence.
However, the world and its hot spots for luxury settings are geographically limited.
Renowned luxury brands opportunities to open retail spaces diminish leaving them
without room to continue their expansion and deliver net growth in-house, so
e-commerce is now the main arena left to increase sales and the only division able today
of delivering exponential growth. Indeed, digital is expected to drive, on average, 40%
of projected sales growth from 2013 to 2020, as opportunities to open retail space
diminish and consumers increasingly opt for the convenience of shopping online
(Kansara).
Expected to make up 18% to 20% of luxury sales by 2025 (Chao, 2015), e-commerce
has been pointed out by business experts such as Exane BNP Paribas analyst Luca Solca
as “the next China” (and just in time, as the Yuan currency drops and the China’s
Economy slowdowns).
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Source: Digital IQ. Fashion 2015.
The common credence in the luxury industry until recently was that the internet is a
channel of retail for price-discounted mass products, bargains, second hand products or
damaged goods, or that the online advertising over exposes a brand's image and
damages it's equity, or yet again that luxury clients won't bother with making online
purchases but would always prefer the sumptuous surroundings of a physical stores and
the real human contact with the products.
It is true that selling online is not a lightly decision to make as luxury brands may risk
tarnishing their brand image. When luxury products become easily attainable with a few
mouse clicks they lose to a certain extent, their rarity and mystique appealing.
However there is no doubt that the Internet is here to stay, it plays a major role in our
daily lives, shaping our consumption patterns and impacting greatly our attitudes
towards brands. As Mark Dunhill, CEO Fabergé, acknowledged in its foreword for
Luxury Online: Styles, Systems, Strategies, the influence of Internet in consumers have
been accelerated by the early-twenty-first-century economic crisis, specially among
high net-worth audiences for whom discretion and convenience were becoming
increasingly important considerations. “These trends were enhancing the appeal of the
Internet as the preferred primary point of interaction between the consumer and brand or
retailer, irrespective of the category and price point”.
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How Affluent Luxury Buyers Buy Luxury Goods:
Even if it may not be apparent for the luxury industry yet as most of the luxury
purchases still happen in stores -94% according to Flur Robert, Euromonitor’s head of
luxury goods- affluent consumers make a strong use of Internet when it comes to
luxury. In September 2013, Google and Ipsos published a study entitled “How Affluent
Luxury Buyers Buy Luxury Goods” that showed the importance of Internet in their
purchasing decisions.
In the mentioned study, affluent luxury buyers are those with a high net household
income of more than 100.000 euros / dollars and made a minimum of two luxury
purchases over the past two years in one of the following categories: apparel,
accessories and jewelry/watches. Furthermore, the global version of the study
differentiates between Mature Markets, New Markets and the Japanese Market.
The study makes clear that affluent luxury buyers are extremely tech savvy. As a matter
of fact, every single luxury buyer surveyed was connected to the net somehow and used
a smartphone, tablet or laptop. In average they have three connected devices and the
Internet is their most used media (before TV, newspapers, radio or magazines). They
check it daily.
When making purchasing decisions, affluent turn to Internet more than any other
medium to conduct their research, especially in New Markets (92%) and Mature
Markets (69%). They use search engines to track their favorite brands and products,
look for information in websites and apps, go on social networks or read online reviews.
However, as 65% of them still want to touch and feel the product prior the purchase
they will purchase it in stores. While convenience (53%) and the possibility to find
good deals (48%) are the driving forces of luxury e-commerce, the lack of sensorial
experience online is its main barrier (Google-IPSOS, 2013).
Already in 2008, another studied carried out by Google showed that a great majority
(94%) of millionaires in US believe that making a high-end or luxury brand available
online doesn’t cheapen their opinion on the product or brand, and 91% said that they
would like to see their preferred luxury brands online (Zmuda, 2008).
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It is undeniable that the pace of luxury brands in adopting digital strategies is slower
than what their public is demanding, failing in providing a rewarding experience on the
web. Some brands have managed until very recently to successfully overcome the web:
Céline, Dior and Chanel have all kept their collections offline bristling at the thought of
their otherwise exclusive products being sold on the all-access web.
In an attempt to catch-up and translate the luxury shopping experience, which relies
heavily in senses, into the Internet, luxury brands have tended to create websites that are
too extravagant for their own good. Resulting in slow, not user friendly and chaotic
spaces, difficult to navigate, that are far from the consumer expectations online.
In other cases, hesitant of the digital universe and its rules and as a result of the high
level of concentration in large conglomerates of the luxury industry, heterogeneous
brands have preferred to called upon the same agencies and consultants to design their
dedicated sites and shape an effective digital presence on the net. This, of course, has
resulted in unoriginal spaces that lack of personal signature and creativity and reproduce
the vast major of e-commerce player regardless their brand’s equity, reproducing
identical spaces that the online experience could be mistaken for another.
Every luxury website must be in line with their brand identity given that the latter plays
a major role in engaging consumers to prefer one particular brand over another.
Otherwise, the consumer perception will be detrimental to the brand image. For
example, Chanel relates to an independent woman while Dior is synonym of genuine
beauty. When a brand’s dilutes its brand identity is losing its key differentiation factor
that allows consumers to bond with the brand.
Finally, there are a number of factors that may not necessary refrain consumers from
shopping online but they do dampen the growth of e-commerce:
• Security issues: when buying online there are risks of credit card fraud.
• Lack of human contact and professional advise: online consumers can’t rely on
the expertise of an experiences sales associate and are left alone to a certain
extend to decide which products suit them and respond better to their needs.
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• Tedious purchasing process: there are several steps before completing the
online transactions whilst in stores everything is taken care of by the sales
team.
• Delivery waiting time whereas instant satisfaction.
• Technical problems: possible bank restrictions, processing problems, Internet
connection issues.
• Stock availability: the strategy of most luxury brands that have integrated e-
commerce is based on narrowing the available offer to a selection of items.
Furthermore, due to extremely tough manufacturing processes, certain luxury
brands are unable to keep up with the demand generated by online sales due.
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4. PART II: METHODOLOGY.
INTRODUCTION
Initially, we thought about proceeding to the development of this subject following a
more traditional or conventional method based on interviews and questionnaires.
However, we soon realized that the specificity of this topic, lying notably on the facts
that it refers and concern only a very restrictive segment and percentage of the
population, would have weaken the potential reliability of the poll or questionnaire as
the basis of persons and answers analyzed would not have reached a critical threshold.
There are few wealthy consumers and only a few of them buys online - 6% of the sales -
(McKinsey Company, 2015).
The above, combined with the difficulty to access primary sources such as executives or
top management of luxury goods brands, would have led to a biased outcome and
therefore a false analysis.
Hence, we decided to work on this topic based on a huge amount of publicly available
content such as articles, specialized websites or published interviews as well as through
the business case studies analysis process, forums, blogs or social web input.
By following this methodology, we believe we mitigate the risk of biased outcomes or
misleading results, and reinforce the objectivity of our findings.
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CASE STUDY: BURBERRY:
When the online strategy serves to boost brand value.
“Technology is an intrinsic part of most people’s lives. All we’ve done is
make sure to weave technology into the fabric of the contemporary. This
is how customers live, they wake up with a device in their hand and life
begins”.
Christopher Bailey, Burberry’s Chief Creative and Chief Executive
Office
Burberry traces its origins to the mid-nineteenth century, when 21-year-old Thomas
Burberry opened a draper’s shop in Basingstoke, England. Shortly after he
manufactured the first gabardine, a waterproof and breathable fabric that quickly
became the fabric of choice for anyone venturing out into extreme conditions.
Burberry’s trench coat was chosen to be the official coat of the British Army in World
War I.
The Burberry check pattern first appeared in the 1920 as a lunging to its signature
trench coat and quickly become a registered trademark. Worn often by well-known
adventurers, cinema stars, politicians and even the English Royalty, the brand forged a
legend, and its iconic masterpiece, the trench, was featured in cult movies such as
Casablanca, The Pink Panther or Breakfast at Tiffany’s.
Over the decades, and prior to the arrival of Rose Marie Bravo and Angela Ahrendts
Burberry was a brand heavily reliant on licensing and distribution arrangements with a
narrowed offer of products. As a result, the brand appealing was in serious distress.
Bravo and Ahrendts mitigated the decline in prestige by restricting the number of
clothing and accessories carrying the Burberry check pattern to 10%, minimizing the
damage ubiquitous counterfeits had caused to sales; and buying out of franchises which
was then generating 20% of group revenues to stop its unfettered licensing.
Burberry’s digital strategy over the past decade has proven to be fundamental in the
brand revamping and repositioning. Aiming above all at gaining relevance and engage
consumers with a renovated brand, Burberry second life owes much to its effective
digital strategy which combined with an updated product line and an expanded brand
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portfolio, have succeeded in bringing Burberry back into the hearts of the young and
successful.
Communication campaigns such as Art of the Trench, Burberry Acoustic or Bespoke
had a leading role in the new discourse held by the brand. As Christopher Bailey,
Burberry’s Chief Creative and current Chief Executive Office, puts it: Burberry has
become as much a media-content company as a design company. And both converge
perfectly.
Their actions were not only designed to make money but rather to engage consumers
and spread brand awareness. Burberry aim was to engage an audience to then grow the
company sales. The underlying idea is based in a general marketing principle that is
often applied in larger industries, stating that the mind share equals market share.
Ahrendts called this approach “The million square foot store”; suggesting that every
interaction is as crucial as the next, no matter what channels customer opt to contact the
brand through. In this context the digital strategy is conceived as part of the overall
experience.
Unique digital content:
Burberry was one of the very few and first brands to embrace digital in an industry full
of laggards. They quickly realized their leverage and committed themselves to develop
a digital culture by creating unique original content. After all, digital was called upon to
play a key role in the renovated strategy of the company and allocated resources
accordingly.
Burberry hired employees with a full digital comprehension. More than two thirds of
the employees at Westminster headquarters today would be under 30 years old,
conforming a “fast, flexible, dynamic team open to change” according to Ahrnendts.
Art of the Trench
The Art of the Trench was the fist major digital campaign carried out by the brand. An
independent social networking microsite that invited Burberry trench lovers to take
pictures of themselves and of others wearing the iconic coat on the streets, to then share
them and rate them, allowing the visitors to purchase the product range featured online.
On this special occasion, Burberry partnered with major fashion bloggers like Scott
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Schuman, The Sartorialist, to better immortalize the diverse statements behind the
personal ways to wear such an emblematic piece.
The campaign was a firm success and served to grow Burberry’s Facebook fanbase of
more than one million in 2009 –today the brand hoards more than 17 million followers-
impacting ecommerce growth.
Burberry Acoustic
Within the main Burberry dedicated website, Acoustic gives a voice to new music talent
from across the United Kingdom. Bands and artists playing in Burberry Acoustic do so
while wearing items from Burberry current collection as a way to promote the brand to
a key audience and encourage discussion.
Digitally integrated windows
Burberry partnered last Christmas 2014 with French Department Store Printemps to
create "The Magical Christmas Journey by Burberry” / “Noël, voyage magique par
Burberry” a tale unfolded across 11 windows that told the story of a little boy travelling
with his teddy bear from Burberry's Regent Street flagship store to Printemps in Paris.
Windows, façade and the central atrium of Printemps were all dressed up for the
occasion.
Thus, the French Department Store featured their first interactive digital experience in
decors which let visitors use their smartphones to control the action and interact with
the Christmas themed windows. People were able to access extra content via their
browsers to control specific features of the scenes like the weather as the little boy
crossed the Channel or activated a storm or steer a fleet of boats to finally create their
own virtual postcard showing a festive scene displayed on the windows, which could be
later shared on social media.
This special collaboration also included a pop-up space featuring a limited edition
capsule collection with a mix of prêt-à-porter, accessories, cosmetics and special
collectables.
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Personalization and mass customization: Burberry Bespoke & The Scarf Bar
Personalization is one of the keystones throughout Burberry digital experience. This
made-to-measure effort impacts both: products and communications.
Burberry is one of the very few brands that collect and seek customer data to offer a
bespoke online shopping experience. “The more information that our customers choose
to share with us, the more we are able to provide them with a service that is both unique
and designed to improve their overall experience of us as a brand,” admitted
Christopher Bailey.
Following a more common practice in the luxury business, customization is also present
through products. Earlier, Burberry Bespoke allowed clients to customize and purchase
their own trench coat drawing inspiration from sportswear Nike ID actions: choosing
the colors, sleeves, lining and buttons and adding their own monogram. They could then
buy it online instantly, request an appointment, live chat with customer service or share
their designs across social media.
The recently introduced Scarf Bar allow customers to play an active role in the design
of their classic cashmere scarf from more than 30 different patterns, adding embroidered
initials in a choice of 30 shades of thread.
The use of Social Media
Back in 2006, Ahrendts and Bailey aspired to build the first luxury company “fully
digital” and refund Burberry on the basis of a social enterprise. Thus, Burberry was one
of the first of its kind to launch a Facebbook page in 2009 and use the social networking
to share product campaigns and launches, behind the scenes content, announcements
and store openings, catwalks footage, etc. while educating their fan base on Burberry’s
heritage and milestones of the brand.
Over the years they developed a large visibility in different social media channels such
as Twitter, Instagram, Snapchat, Tumblr, Pinterest and YouTube.
Burberry has managed to create unique brand content and develop a more personal
communication flow thanks to the brand current CEO. Christopher Bailey who is often
featured in Youtube videos introducing the brand latest news. Their YouTube channel
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includes videos and playlist of varied content: product information, advertising
campaigns, music events and behind the scenes content.
Moreover, Burberry is one of the very few high-end fashion brands that have dared to
create an official Burberry Customer Service on Twitter @BurberryService that deals
with customer’s questions and inquires 24/7.
Brick-and-mortar twist to embrace digital integration in store: bringing
Burberry.com to live. Seamlessly blurring physical and digital worlds.
Burberry.com has been acknowledged several times as the finest luxury site online
according to the Digital IQ Index from Luxury Lab’s that benchmarks the digital
performance of top brands across the globe based on their site, digital marketing and
mobile initiatives.
In Burberry.com visitors navigate through e-commerce, learning about the brand
heritage and culture, they can take a look on imagery, promotional pictures and
lookbooks and be redirected to original content such as the Art of the Trend, Burberry
Acoustic or product personalization.
Burberry.com is the brand’s fastest-growing retail channel, and sales on the brand’s
mobile site have tripled since last year, according to Bailey. Burberry launched its
mobile site in 2011.
Not only Burberry is offering a flawless experience across all devices but also has taken
e-commerce a step further, by remodeling its most significant flagship store in London
after its website. Their retail store located in Regent Street is inspired and reproduces
the sit map of Burberry.com, with the layout and architecture mirroring that of the
website. Floor space splits between Bespoke, ready-to-wear, a gallery that features
history and heritage, Acoustic and Experiences.
Products have embedding digital chips that activate short films showing the story of its
creation, sketches or promotional clips; Ipads are integrated in the display and
interactive mirrors transform in personalize screens in a space that embraces Burberry’s
long English tradition above all and doesn’t make interactive features invasive to the
visitor.
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Furthermore, Burberry Regent Street store was meant to recreate the web interactions in
a whole new level by fighting rigid intimidating traditional luxury boutiques.
Christopher Bailey wanted the store at Regent Street to be a space to hang out and
explore the brand: “We realized that we had created a lot of platforms that only existed
online so we decided to bring these to life. Our approach to the store was to make a
bridge between the online and offline experience”. “We know our customers move
seamlessly between our digital and physical worlds,” he said. “The use of digital
technology is a fundamental and integral part of who we are at Burberry and it is central
to our brand, our identity and our way of thinking.”
Burberry commitment towards digital undoubtedly contributed to raise brand value. Not
only Burberry has become one of the most popular and loved bands in the industry
today, but also experiences an exceptional growth above the luxury market average and
a rise of their stock value.
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BEST PRACTICES ONLINE
I. Mass Customization and Personalization
Whereas affluent Baby Boomers and Generation X prefer to spend their wealth on
materialistic entities –cars, stunning houses and luxury items- to show off their wealth,
new generations of consumers that got everything while growing up and have been
greatly influenced by the economical downturn and sustainability, are more likely to
forego traditional conspicuous consumption.
Instead, affluent are craving for experiences and searching for meaning. A study from
Annalect (Omnicom Media Group) pointed at the travel category as the most important
luxury spending. Travels accounted for 45% of affluent consumers spending in the past
year, followed by fashion, which represented 22% of affluent consumers annual luxury
budgets. A life well lived is synonym for Millennials of exotic vacations and once-in-a-
lifetime experiences. They seek authenticity and differentiation.
Affluent are no longer rushing over thousands of euros/dollars handbags, shoes and
smooth scarfs if there is a risk it will be identical to one owned by someone else among
their peers. They are looking for brands able to replicate their personal values and that
take into consideration their individual needs and desires. That’s why the demand of a
personalized touch to truly make that breath-taking product theirs and theirs alone is on
the increase.
Encouraged by technology, many brands jumped on the bandwagon of mass
customization. This trend has taken over the luxury and premium markets as it benefits
both: consumers and brands.
It allows consumers to play a part in the broader narrative of their favorite brands. On
the other hand, with the rising importance of social media and digital platforms, the
consumer has more than ever the power to promote and endorse brands. However,
unless there is a real story behind, there isn’t really much to say. Customization is the
perfect excuse.
Think about a bridal atelier. Still today true bespoke requires hours of one-on-one
interaction with a knowledgeable team of artisans before the production starts and then
regular follow-ups with ongoing consultations, fitting and adjustments. Real custom-
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made is costly and takes time. Whereas mass customization satisfies consumers’ need
for instant gratification while still delivering unique design products at price points that
are accessible to consumers unable to afford traditional bespoke clothing (Judd, 2015).
Furthermore, it also allows brands to pay for products before they are put into
production, eliminating the risk of excess inventory.
Mass customization grants customers with a certain power over the final product and a
level of creative control, everything from the comfort of their own computers and
homes.
Cornered by fast fashion, mass customization enables premium and luxury bands to
make a difference by slowing down the purchase journey to spend more time with
clients and connect with them on a deeper degree.
Nevertheless, mass customization is not rooted in luxury. Nike launched the first mass
customization platform back in 1999 with NikeID: a service that blended the benefits of
traditional craft production with the efficiencies of modern industrial processes. Thanks
to online 3D modeling systems the consumer can view their creation all along the
process toying with details such as stitching and colors.
This trend was rapidly adopted by luxury brands. Today, Salvatore Ferragamo fans can
create their own unique version of the brand’s iconic driving shoe; Burberry clients may
design a classic cashmere scarf from more than 30 patterns and add their embroidered
initials using the Bar Scarf; and Louis Vuitton lovers may choose via Mon Monogram
the inside color of their classic Speedy bag, adding colorful stripes and initials on the
outside.
However, the more sophisticated the process gets, the more expensive and demanding
for the consumer. Burberry Bespoke and Amazon Atelier (Loewe) were born online but
wisely relegated to stores. In the case of Amazona Atelier clients get to fully customize
the iconic Amazona bag: its corner patches, the handles and the leather body. The wide
variety of materials offered with stretches from calf and goatskin to the more exotic
ostrich and crocodile; a color palette that includes skins available in 19 different shades;
and three options for the metalwork -gold, palladium and ruthenium- makes the possible
outcomes number 131,265 in total, way too much for a regular customer alone in its
sofa.
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Attractive product customization is today however beyond offering the client the
possibility of engraving initials in products and should include the client somehow in
the creative process to propose a real added value that will foster brand affinity and
boost loyalty.
About two-thirds of affluent consumers expect a highly customized experience when
shopping for luxury goods and especially when it comes to purchasing fashion. This is
particularly evident for luxury Executive Boards when it comes to customer services in
stores, where sales associates often carry a notebook in which they collect customer
data such as personal details, preferences, lifestyles, etc.
Nevertheless, only a few luxury brands collect data online to create customized
messages. Though 59% of brands capture information at account signup, only 26% of
them use it to personalize their emailing.
The ability to establish and maintain customer relationships via personalization is not
just a best practice; it is becoming “table stakes” for the industry.
As driving traffic towards the site becomes increasingly expensive, successful brands
turn to personalized contextual marketing emails to drive top-line growth and
conversion while raising the conversation with its audience (Monetate, 2014).
The average emails send rate increased 65% over 2015 to 2.8 emails per week versus
1.7 emails per week the previous year, 2014. However the bulk of emailing marketing
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still fail in taking advantage of the customization tools provided by Internet powered
databases and providing innovative content to stand up in the crowd. Most of email
content is either editorial (81%) or promotional (61%) as brands continue to
underutilize customer data to craft customized messages. So far, only 26% of brands
analyzed in the Digital IQ Index used personalized emails and an important percentage
resorted to trigger emails such as Abandoned Shopping Carts (L2, 2015).
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II. Recreate a sense of exclusivity online: Online Exclusives.
By definition luxury should have remained a niche sector and not a $1.1 trillion industry
with a two digits year-on-year net growth and great margins (Zargani, 2015).
Exclusivity is fundamental to luxury as it maintains consumer desire through scarcity
and rarity. However, most of the well-known luxury brands today are no longer family-
owned at human-scale business but members of large luxury conglomerates listed in
stock markets.
In such competitive environment, investors and shareholders are demanding a certain
increase of revenues per year. So brands must decide whether copying with this
pressure by increasing in value or in volume, by appealing to middle-classes trading up
and increasing production levels.
Truth is that only a very few players are able to succeed in the first option, explaining
why most luxury brands have turned to artificial rarity. It’s what business expert Jean-
Noël Kapferer named the “The Art of Artificial Rarity” (Doran, 2015).
This is only possible because luxury benefits from the leverage effect of the brand.
Once a brand has acquired a specific status that is it, it’s legitimated to cover new
product ranges not as luxurious, for example cosmetics, or indulge in large production
volumes and omnipresent channels of distribution.
Exclusivity can be then created online through private member groups, concierge
services, or digitally delivered loyalty perks that are reserved to specific customers
segments.
Translated to e-commerce, online exclusives are pivotal to preserve this artificial sense
or rarity.
On one hand, luxury brands still hesitant to fully immerse in digital e-commerce may
decide to grant their restricted online distribution to a third entitled partner in order to
test the potential of the web before carrying further investments in developing heir own
dedicated e-commerce platforms. Like for example, Dior granted to the American
Department Store Bergdorf Goodman online shop http://www.bergdorfgoodman.com/
the exclusivity to offer a selection of its shoe collection online in a Christmas pop-up
store.
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Coco Crush capsule collection: Chanel exclusive Preview on Net-a-Porter
The week following the announcement that Chanel will finally be operating their own e-
commerce website sometime in 2016, the maison released an unprecedented
collaboration with the popular high-fashion multi-brand retailer Net-a-porter. For three
weeks only, Chanel launched online in exclusive Preview its newest fine jewelry
collection, Coco Crush, in an unprecedented digital pop-up hosted by the leader of
luxury shopping destination.
Chanel kept a tight control over this collaboration, being very present in the conception
and collaborating closely with Net-a-Porter tech team that built the entire application
including 360-degree photography that allowed shoppers to zoom, interact, expand and
examine products as closely as possible to real life; the shopping experience was
accessible in multiple devices: desktop, tablet and mobile.
Chanel was dipping its toes into the digital waters by partnering with a legitimated
luxury independent seller to make its products available to purchase online. As a matter
of fact, it was the first time that Chanel made available to shop online anything other
than its cosmetics but for a limited time-lapse: from April 15 to May 6 before being sold
in Chanel boutiques worldwide.
The six-piece capsule collection comprise five rings and one cuff crafted from 18-karat
white and yellow gold with prices ranging from $2 150 to $20 500. Three of the pieces
including the most expensive one, the cuff priced at $20,500, were sold out in less than
24 hours.
And if the unquestionable success of this initiative was any indication of their future
relevance in e-commerce, there is no doubt that luxury consumers are craving for it.
However, online availability will come at a price as Chanel outlined its plans to
harmonize its global pricing structure before eventually entering online retailing.
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Online Exclusive Limited Editions: Majexclusive
Online Exclusive Limited Editions serve to different purposes: they are key offers to
reproduce artificial scarcity online as the quantities available and the days of sale are
limited. Moreover, an interesting proposal accompanied by the allure of “exclusive
item” may trigger and encourage hesitant offline clients to have a taste of what the
brand has to offer them online. In addition, limited editions create buzz and media
coverage online and offline.
Premium brands have understood the potential of online exclusive limited editions that
have successfully integrated to their collections. For instance, the Parisian brand Maje
launched its first online exclusivity –a fringed suede poncho- during the previous Spring
Summer 2015 Collection with extensive media coverage of both: printed specialized
magazines and online fashion destinations.
Each Majexclusive edition features a different product specially conceived for the e-
commerce which stock is limited to 200 units worldwide. The most recent proposal, the
party dress RIVERA, made it to the top of the list of the company best sellers that week
within a few days online.
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III. Instant ecommerce of Live stream runway shows pieces
Most of the brands broadcast on live their runway shows.
In early 2014, Burberry was, with the Fall Winter 2014 menswear Collection, the first
to introduce the possibility to pre-order an item immediately following the runway
show.
• Shorten the time between presentation and availability on store
This new instant e-commerce possibility was designed to shorten the time
between the introduction of the new Collection and its availability on stores as
there is often a period of months between a runway show and the arrival of items
in stores. Also, it allows the fashion houses to defeat counterfeiting, copies, and
beat fast fashion on their own territory.
As the collective memory gets shorter, it allows brands to benefit from the
communication and interest peak initiated by the runways, which are key events
for a brand and take place twice a year.
It reinforces the feeling for the customers that they belong to the inner circle of
the brand which allows them to order part or the entire Collection on the go and
extend the longevity of the collection’s introduction by increasing the retail
timeline for certain collections through their digital spaces.
Such new way of consuming luxury goods grants the customers an access to the
opportunity of purchasing exclusive runway dedicated pieces that would not be
widely available as many items will never be produced in real collections. On
the other hand, interactivity gives the brands customers’ insights before the
pieces are being produced.
Hence, this initiative targets early high-end fashion adopters and fashion
enthusiasts’ on the go by offering them instant, convenient access to shopping
months before the products hits the store shelves.
A perfect example of the implantation of this new digital strategy is Burberry,
who broadcasted in January 2014 their Fall Winter Menswear fashion show
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directly on its Facebook page and included a link that took the viewers on a site
where the clients could either like it and share it on social networks or “shop-it”.
It allowed Burberry to provide its customers with a new service and unique
experience of owning extraordinary pieces before they even arrived in stores in a
cost-effective way by launching into production only on demand.
Another significant example of a brand taking implementing perfectly this new
instant ecommerce strategy is Versace.
Versace created a dedicated microsite on which it broadcasted on live its runway
show. In order to improve the traffic and drive customers to the live streaming of
the show, Versace used mailing and social networks before the event to redirect
customers to the special purpose website launching the hashtag
“ShowShopParty”.
The website was fed constantly with exclusive content such as interviews of
Designer Donatella Versace, but also through a specific scrollable social feed
updated during the entire presentation, encouraging viewers to comment and
share their opinion on the social networks or by the insertion of ecommerce links
for items that appeared in real time, allowing consumers to purchase the
corresponding look right away and encouraging shopping on-the-go.
However, contrary to Burberry, Versace moved up the production process to
before the show in order to make items available for purchase (to be opposed to
pre-order only), competing directly with fast fashion on their own territory.
Indeed, the Versace Collection was also available in selected Versace boutiques
and flagship’s stores. The purchase of the new Collection could be done either in
real time online or on official boutiques, without having to wait for the next
season is new.
The launch of a dedicated mobile application by Moda Operandi at the
Mercedes-Benz Fashion Week in February 2014 reveals the importance of the
expansion of instant e-commerce strategy and real-time sale and data for the
Luxury goods industry.
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The Moda Operandi app was conceived to help the designers to showcase their
collections right after their runway shows. Following their review of the
Collection, the customers could either preorder or enter their email address to
receive an alert when the Collection would be available.
• Improve Brand loyalty
In addition, these new processes allowed the brands to achieve a greater degree
of personalization by confectioning each piece on an individual basis and
allowing the fans to order a piece that may have never got produced.
Moreover, it is worth noting that anything a brand can do to diversify its
interactions channel to a brand experience such as runway shows is an
opportunity to increase customer engagement.
Hence, implementing instant e-commerce strategy strengthens the position of the
brands, which aim at giving their customers an individualized and personal
experience through clothing. To some extent, it may also result to boost the
brand loyalty by improving the sense of uniqueness.
For instance, the Moda Operandi app was conceived to help the designers to
showcase their collections right after their runway shows, providing both Moda
Operandi and the Designers with immediate information about customers’
insights, behaviors and preferences.
Also, Moschino’s “Watch It, Taste It, Shop It” event was made exclusive
through several means (access code requested, save the date card, hub in the
internet website, etc.) so that the fans will have the feeling to belong to an
exclusive community, to the brand’s inner circle.
Moschino promoted it by encouraging fans to request and obtain an access code
in order to be able to attend to this event. By delivering new layer of interactions
with the brand experience, Moschino improved the customer engagement.
Indeed, requiring user to register and requesting a personal access code is a real
personalized experience improving brand loyalty from engaged users and brand
evangelists.
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5. PART III: ANALYSIS.
There is no doubt that the Internet is not going anywhere anytime soon. We wake up
next to our connected devices and they accompany us in our every day step. Internet has
become an intrinsic part of most people’s lives and this is specially truth for wealthy
consumers. They are all online and expect to purchase goods and services via e-retail
with ease, leaving the brands to accept that they need to be online after long-lasting
discussions on whether they should or shouldn’t integrate ecommerce within their
strategies.
With late adopters jumping the bandwagon of luxury ecommerce, the question is no
longer about why or if luxury brands should be selling their products online but about
how they should do so. Affluent have being purchasing goods and services online for
years now. They have become tech savvy, hyper-connected and care about the shopping
experience online as much as they do in the retail shops.
When it comes to digital luxury brands are not moving as fast and as certain as clients
expect them to do. They are underperforming and generally failing on meeting user
demands in terms of innovation and management online. Wealthy consumers have been
transferring ecommerce expectations from mainstream websites from other sectors and
multi-brand independent retailers that have set up the rules and best practices of the
business online.
Luxury doesn’t have any margin for error left. Despite being conservative about
ecommerce; they’re joining at a time in which a framework, steps and rules have been
drafted on what shapes a satisfying shopping experience online. Looking on the bright
side, there is no need to subdue the brand through a process of trial-and-error in the
worldwide exposed web. E-commerce is nevertheless still a quite recent phenomenon
for luxury, so techniques and technologies to provide “the perfect luxury buying
experience online” are still volatile and in constant evolution. This uncertain territory
explains why some brands were held back so long.
However, the main reason behind the love-hate relation of luxury brands with
e-commerce is rooted in the denial of key brands CEOs to believe that the all access
web could be a suitable space for purchasing their rare, expensive, reserved to a “happy
few” products. They refuse to acknowledge that their core consumers could be ever be
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interested in buying luxury online convinced that they will always prefer the sumptuous
surroundings of their boutiques and the real touch of products.
Firs of all, let’s challenge this mantra with a list of reasons to invest in e-commerce:
“We were impressed by the scalability of an online flagship store open to
the world 24 hours a day seven days a week from day one. We were
attracted by the power of modern CRM software to nurture an enduring
and personal relationship with our customers around the world and
provide them with a level of service difficult to match with a black book
and a telephone alone”.
Mark Dunhill, CEO Faberge (Okonkwo, 2010)
From a consumer point of view:
1. Time efficiency
Because of its nature, luxury and prestige fashion houses target of preference is
placed at the top end of the wealth scale. Truth is, either they earn this money with
hard work or they happen to posses it.
The World Ultra Wealth Report of 2013 not only appointed that the group is getting
younger and richer but more importantly: at least 65% of the world’s wealthiest
families (Heads of Households) are first generation wealth, and depending on how
you define the term “self-made” is over 80%.
Therefore, luxury should focus and cuddle a majority successful executive women
or men indulging in self-reward with a subtle statement: ‘You’ve earned and you
deserve it’. Yet they tend to have less time than financial assets. The rich are no
longer all ladies of leisure or housewives with infinite time to shop.
2. Convenience
Online shopping is rather intuitive and convenient as product comes to you by the
magic of clicking directly from a mobile device or a computer. The offer of products
available is often larger in terms of sizing and styles and the different items are easy
to compare.
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Ease is a key advantage to exploit. Some sites have figured out how to take
advantage of that, for instance Net-a-Porter teamed up with StndAIR’s private
seaplanes to offer same day deliveries to the Hamptons in summer. A service that
the online retailed provides also in New York City to those women in need of a last
minute outfit to attend an event or that simply are impatient to enjoy their purchases.
3. Anonymity
It used to be that a luxury buying experience involved dressing up and going into a
high-end magnificent boutique where a sales assistant will look at you from the
bottom up to then advise you on what to buy while enjoying a glass of champagne.
In fact, some sales assistants are asked to write down descriptions of the outfits
shoppers are wearing when entering into the boutique. But the downsides of such
practices, as Forrester analyst, Sucharita Mulpru, pointed out is that “a lot of
consumers and affluent people are intimidated or annoyed by shopping at luxury
retail stores”. In contrast, Internet allows easy shopping at any time. No dressing up
is required. Furthermore, anonymity and discretion are becoming since the
economical crisis increasingly appreciated values among wealthy consumers.
4. Some changes on shopping behavior are resisting the principle that luxury is
consumed to show status, that is to say that luxury needs to stay exclusive to a
‘happy few’. In addition, recent surveys have shown that luxury buyers are
tending to value more products than the buying experience.
During the last years, the industry has noticed a change in the consumer behavior
regarding the acquisition of luxury goods and services. Luxury is increasingly
enjoyed in intimacy, or its purchase responds to an individual seek of pleasure rather
than a social recognition of status. The director of the ‘art de vivre’ department in
the forecast agency Nelly Rodi, Vincent Grégoire, has observed the arising of a new
generation of luxury consumers that prefer “the luxury for oneself, private and
synonym of a non-tangible welfare”. Only 10% of the satisfied clients in luxury
admit finding in luxury consumption a means to assert their social status.
New intimate and self-centered motivations for consuming luxury may be: pleasure
and hedonism, valorization, a concern for our appearance, a well-being feeling and
the certainty of high quality standards. Lead by these new factors consumers show a
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weak sensibility to prices, since what they are looking for is to reward themselves
with an exceptional product or service. Seen from this perspective, quality and
creativity play an essential role, and so do a certain level of confidentiality and
affinity to the brand.
The high-end experience in store allowed brands to price their products even higher.
As luxury consumers today expertly know their way around advertisement,
publications and reviews, they’re more able to do their own research and decision
making. More and more, they fall in love with products and the luxury buying
experience is far less important than the products itself. Furthermore, nowadays
luxury consumers value easy shopping, and a product experience that actually feels
luxurious. Plus, the new luxury experience is in ownership. Finally, consumers trust
better the advice available via unbiased experts online than the ones coming from a
brand sales team.
People want nice things more than they want nice services. As a matter of fact,
surprisingly luxury products have proven to be a blast in some of the ‘worlds largest
and more varied shops online’ such eBay or Amazon. Even though, luxury brands
fear that these mainstream shopping experiences devalue their image, some have
decided to welcome these incomes. For example, Gucci has made Amazon.com one
of their official authorized online retailers. (Adams, 2013).
From a company point of view:
5. The possibility of engaging with consumers regardless their channel of choice.
The e-shop will not put and end to physical shops, as e-commerce has been
proven to be complementary to shops, not a way to cannibalize their sales.
Both channels online and offline are complementary and reinforce each other. It is
more and more frequent to find ‘multi-channel’ consumers. As a matter of fact in
countries with a high rate of Internet penetration, ‘multi-channel’ consumers have
overcome ‘one-channel’ consumers. In addition, studies have shown that a buyer
that uses indistinctly several channels (such physical stores, e-shops and phone) will
spend twice more than one that only purchases goods in store (Mc Kinsey, 2015)
(SAS, 2015). Seen this way, e-commerce could be perceived as an extra distribution
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channel to approach not only loyal consumers but also new ones, wherever they
shop. Some brands have already noticed that and have decided to start developing
the different channels in a complementary way.
E-retail also influences offline store visits since people look for and exchange
opinions and information on products and brands. The e-commerce site may
constitute a previous step to the purchase in store or may help to conclude an act of
buying. In fact, 70% of European consumers have admitted to look for information
online before purchasing any good in a luxury store. In reverse, as we’ve seen
previously, 70% of online sales are conducted by people that have already
experienced the brand and the products in-store (Google-IPSOS, 2013).
To sum up, an e-commerce site does not cannibalize the traditional points of sales.
On the contrary, it completes and enriches the brand overall proposal. Nevertheless,
customer expectations in both channels differ: the definition and criteria for a good
shopping experience online and offline are different.
6. Growth potential – a shop 24/7
The flexibility of the online stores (24/7) as well as its ubiquity complements the
services delivered in stores. Being able to shop on our own schedule and terms
turned out to be for some clients more convenient and appealing that the obligation
to go in store.
Consequently, the monthly turnover of some e-retail websites is sometimes
equivalent to that of one or several shops, even a country or even surpass the highest
point of sales in revenues. However, online purchases still represent a shy 6% of the
total turnover although is forecasted to account for 18% to 20% of the luxury
turnover annually by 2025 after recently reaching its tipping point (L2, 2015).
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Win-win reasons for both: companies and clients
7. Greater choice of products & Long Tail theory
Since an online e-commerce site is not limited in terms of space in the storehouse as
luxury brand dedicated shops are –don’t forget that they’re located in the most
expensive streets all around the world—designer labels face the ability to offer a
larger choice of goods. Thanks to this strategy, they’re able to give a response to the
demand of a segmented marketplace seeking for rare products. Moreover, usually
these unique goods often justify larger margins. Therefore, niche or specialty goods
can translate into big business for retailers who learn to tap into that end of the
market, commonly referred to as the Long Tail.
Furthermore, some companies such as Hermes found in ecommerce a market to
place their lowest performing lines of products.
Even if gross revenues will remain being generated by generic products, in catering
to the Long Tail consumer, e-retailers have several advantages over traditional ones,
such as infinite shelf space and the ability to change or add to inventory more easily,
allowing them to offer an unlimited selection of high-margin items. Benefiting from
low inventory costs, this model requires strong platforms to make niche content
available to interested buyers.
In addition, e-commerce can indeed be offered to customers as an alternative to
overtake certain stock shortages in store. Consumers may choose to buy on Internet
to take profit from a larger choice of styles, goods, sizes, etc.
8. Web 2.0: access to information about products, reviews, etc.
When making purchasing decisions affluent turn to Internet more than any other
medium to conduct their research -New Markets (92%) and Mature Markets (69%)-.
They use search engines to track their favorite brands and products, look for
information in websites and apps, go on social networks or read online reviews
(Google-IPSOS, 2013).
Luxury clients draw knowledge about the luxury market mainly from the Internet,
where they can discover brands new proposals, learn about the brands essence,
value and heritage and explore and compare different universes. Luxury goods are
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costly and by conducting such researches clients are justify themselves that they’re
making the right choice. Since wealthy consumers are few and they have plenty of
information and options at their disposal, they may use Internet as a tool for
increasing their bargaining power.
9. Online added services: customization & personalization of goods, online
exclusives.
In order to get over the lack of a sensorial relation with products when buying on
Internet and to reproduce a sense of rarity, many brands have decided boost their
online sales by adding value to their e-shops with special benefits such online
exclusives, individual cross-sales proposals or customization and personalization of
goods.
Some leather goods brands offer a service online through which clients can add their
initials to bags and wallets (Louis Vuitton, Bottega Veneta, Gucci, etc.) and even
make-up (Guerlain Rouge G lipstick). However, today’s personalization proposals
can’t be limited to merely engraving initials –a service taken for granted- and should
include the client in the creative process to make him feel valued and foster a sense
of brand belonging. This next step is the mass customization of products described
in the best practices section. Ralph Lauren offers the possibility to customize their
polos online, but also Burberry, Salvatore Ferragamo or even Boucheron have
created customization platforms that the client can interact with. For example,
Boucheron allowed its consumers to personalize their own rings by choosing the
stones or the shape, and later on the client receives an email with the estimated cost
of the jewel. A similar process occurs with some automobile brands such Mercedes
or Citroën: the consumer can navigate online and select different choices of
customization (materials, wheel rims, colors, etc.) while instantly visualizing the
final effect of all the modifications in a digital model of the selected car.
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Opportunities Internet investments could bring to luxury brands
æ From a communication point of view Internet has become indispensable for luxury
brands, granting them the possibility to develop a direct fluid communication flow
towards the audience without the need of turning to intermediates such as
specialized magazines, celebrity endorsement to convey information.
Within the essence of the brand, the presence of luxury maisons online should go
beyond the official website to develop interactions through discussions, exchanges
or by animating a community, a specific social network.
æ High profitability rates at lower investment rates than retail. Some luxury sectors
traditionally focused in the business-to-business or wholesale, such jewelry or
watches industries are increasingly developing a retail network on their own for
selling their products to the end consumer. They are realizing that in order to
compete in the luxury space today they need to adapt to consumer shopping habits
or will suffer decreasing in sales and relevance. They’re creating brand-dedicated
websites, improving their marketing and communication campaigns and opening
their own mono-brand network of retail shops to boost awareness and increase
desirability for their products.
æ From a logistic / supply chain viewpoint, the existence of an e-boutique enables the
company to expand abroad with limited fixed and structure costs in comparison with
a physical extension. In addition, the development of a website can grant access to
luxury to the inhabitants of less urban areas.
æ An online store could serve to conquer new clients, which are used to buy online but
would not dare to enter in luxury stores. The opportunity here for luxury companies
lies in the ability to access new customer segments, not just online but also by
bringing more customers to the stores, while also offering greater convenience to
time-poor entrepreneur-like affluent providing them with a new way to experience
the brand. In addition, the so-called ‘seniors’ (aged 50 to 65) constitute a growing
segment in e-commerce: representing only a 37% of all Internet users, they account
for the 48% of the total revenues online (31 billion of euros) (E-Commerce Mag,
2014).
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æ An online interface allows the company to gather / collect / compile detailed
information on the customers via sign up forms and the use of cookies. Used wisely
this information would help the company to design a more accurate and efficient
Customer Relationship Management programs among existing clients or brand
lovers.
Internet optimizes the management and usage of a brand CRM database. Online
players acquire a great number of information referred not only to existing clients
but also to potential consumers. In agreement with search engines companies such
Google and with social media communities, for example Facebook, the data
available may include habits of navigation and personal detailed information that
enlarges the knowledge that a company has regarding both: their target and existing
clients. With a pertinent management of the referred information, brands are able to
engage consumers thanks to the development of a more pertinent communication
and the customization of messages.
Once luxury brands are increasingly accepting that a digital presence is essential to their
brands, some questions about how to integrate Internet prevail:
• How can luxury brands recreate their brand essence online?
• What are the elements that conform a luxury buying experience online?
• How can they do to recreate the sensorial offline experience of the brand online?
To better answer these questions first of all it’s important to note that as any shop
location and advertising campaign, a digital brand dedicated site should be included
within the company’s general strategy defined by a specific brand positioning, values
and tradition.
Let’s not forget that a brand interacts with its audience and consumers at every point of
contact of them with the brand. Therefore, luxury brands must examine their global
strategy to convey all channels together. Equity and coherence should drive the
complementarity of each channel representing the different parts of a whole 360º brand
extension.
The need of coherence within the brand strategy supposes that a perfect digital strategy
respond to a case-by-case basis.
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Before developing a right e-commerce platform a brand should develop a relevant
digital presence online by developing a strong brand digital culture, which involves
e-branding, online communications and marketing, interactions and monitoring of the
social web as well as the development of advanced client relationship management
techniques.
The brand dedicated website is only one of the several aspects of the brand’s digital
presence online. But it is also the one on which the brand can leverage the most. The
appropriate website is key to validate what the brand represents for existing clients and
appeal new clients or fashion enthusiasts.
A luxury online buying experience must convey innovation, creativity and a specific
know-how that luxury companies may not have in house. Since luxury brands do not
master yet the channel and its specificities; and consumers are purchasing luxury online
with certain expectations that brands are obliged to meet, some brands may decide to
externalize or license the e-commerce service as they’ve done in the past to enter more
specific and technical industries such beauty products and perfumery or watch making.
Even this is a valid approach; brands must be involved and supervise the whole process.
Despite the above, in the medium run, the strategy should be always to integrate the
e-commerce platform into the company general management.
Unfamiliar with the digital universe and its grounds, many brands externalized the
design of their websites to the same consulting firms, resulting in identical spaces which
navigation experience could be mistaken for another. However, and even though most
fashion luxury brands offer today identical product categories and ranges, the brand
essence remains their most important source of originality and equity. This specific
positioning and differentiation is even more important online, where it is easier to jump
from brand to brand and which represents the first touch-point of new luxury clients
with brands worldwide, specially in countries with a relative recent luxury market such
as Brazil or China.
Due to the sensory nature of the products, and given the fact that the Internet is mainly
driven by sight, luxury spaces should focus on aesthetics. Nevertheless, this should not
be confounded with the integration of unbalanced and incongruent animations such as
heavy flash, different website concepts and inconsistent features that have little to offer
to the overall experience.
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Usability and functionality of the elements used are as important as the webpage
concept and design. Usability represents a user friendly space defined by its ability to
easily provide the visitor with what he’s looking for.
A navigation flow should be defined as the traffic of the store so the visitor discovers
and apprehend what the brand has to offer online. A functional website is efficient
regarding the tools implemented, providing a harmony in which visitors feel
comfortable to extend their time.
Contrary to the general believe e-commerce does not devaluate the brand image. As a
matter of fact, it could reinforce the brand leading to higher rates of clients’ acquisition
and retention. After all, even if the latest Bamboo Shopper Crocodile Gucci bag is
available online to everyone at anytime, truth is that you still need to be able to invest
$29 000 to buy it right away.
Different models prevail today and a brand should define which form of presence suits
them better:
1) No e-commerce presence at all.
2) Should ‘brand X’ sell its product in a mono-brand and dedicated e-commerce
website, or on the contrary, sign agreements officially authorizing pure (or not) multi-
brand players to sell its products online?
a. E-commerce presence through third party websites.
b. E-commerce presence through a dedicated e-commerce space integrated within the
official webpage.
c. The friend (‘compagnon’) site.
d. The twin (‘jumeau’) site.
e. The partner (‘partenaire’) site.
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PRODUCTS PROPOSED
TO SALE
OBJECTIVE OF THE
WEBSITE
EXAMPLES
FRIEND SITE Limited selection
To develop notoriety and
brand image
Hermès, Jean-Paul
Gauthier, Isabel Marant
TWIN SITE
Wide offer, most of the
references are available
To propose an alternative to
the clients and increase
turnover
Louis Vuitton, Christian
Dior, YSL
PARTNER SITE
The whole references sold
in stores and eventually
exclusive products
Create a new distribution
channel, generating activity
Thierry Muggler, Gucci,
Coach
Source: (Consulting, 2012)
Once the concept of the site is settled, the next dimension to plan refers to the
assortment of products. To define it correctly, the question that a given brand must
answer is: Who is the ‘brand X’ targeting at in the e-shop? If the brand is aiming to
foster loyalty by offering a complementary channel of distribution to their core and
regular consumers it will sell online its ‘full line’ of goods and services. On the other
hand, if a brand is integrating e-retail strictly to recruit new consumers, ‘trading up’
consumers, aspirational ones or a younger audience will more likely decide to select a
range of products within the catalog, usually the so-called ‘accessible luxury’, ‘entry
products’ or low-performing lines in stock.
Notwithstanding, brands opting for this middle presence online may end up confusing
consumers or raise frustration among clients investing their time navigating online and
selecting carefully products to finally discover that they are unable to buy them right
away. As the Business Week comically described in the article Luxury brands are stupid
to snub the Internet:
Imagine, if you can, the following Champagne tragedy: You’re wealthy
and stylish and have decided to buy a handbag after a tough day at the
office. You pour yourself a glass of red wine, flip open your laptop, and
head to chanel.com. After clicking around for a few minutes, you’re
annoyed to discover that cosmetics are the only thing for sale. Next you
visit dior.com, where you can enjoy runway footage, browse product
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images, and even learn that some of its shoes embody, as the French
couture house puts it, “all the modernity of Dior”. Except you can’t
actually buy them using modern technology.
Source: (Soller, 2014)
A different question is the online availability of iconic best products, which stocks are
very limited –for example the Kelly bag- and which inaccessibility fuels the luxury
dream and the brand promise.
Regarding prices, a brand-dedicated e-shop should seek the mentioned coherence
between online and offline. Therefore, prices should be alike in both channels, as many
consumers will look for information online before going to the stores to buy and vice
versa. It’s true that some consumers relate e-commerce to discounts and deals, but that’s
not the future nor is the objective of a luxury brand-dedicated e-shop.
Furthermore, as Internet is global, this allows customers to have a worldwide access to
their different platforms. Thus, they are able to analyze the different price policies.
Some brands are addressing this issue before moving forward with e-commerce. For
instance, Chanel will harmonize its prices before opening their e-commerce platform
sometime in current 2016.
A third dimension involves defining a specific logistics procedure (delivery, exchange
and return of the goods sold online). In order to provide an impeccable logistic service
luxury brands must partner with a performing and professional supplier. The logistic
procedure is key: it encourages or discourages consumers to shop online. The golden
rule is transparency: every e-shop must provide an accessible FAQ section for
consumers to get information on how much time the delivery of their products
approximately is going to take, how can they return purchased goods and what’s the
process and conditions to do so as well as to receive a reimbursement if they are not
satisfied, or how they can exchange products if they don’t suit them. A good logistics
policy will reassure and retain consumers.
As far for the communication online: by their nature luxury brands attract audience
attention, so they can easily overcome the online challenge that many e-players face:
drawing visitors to their sites. Offline, the foot traffic is defined by the store location but
online brands must promote their sites differently by using specific tools such as SEO
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and SEM techniques. However, a luxury brand online must focus its communication in
building brand notoriety and visibility; improve the brand awareness, and recruit and
create customer loyalty. This way, luxury brands will reinforce their status, since an e-
commerce website cannot be limited to its sales but needs to serve as a tool to diffuse
the brand history, educate the audience on the brand milestones, heritage and specific
know-how, present new proposals, current events…
Thanks to Internet, luxury brands have the opportunity to directly interact with its
audience and the possibility to recreate a sense of group belonging –thanks to social
media, community events...-. Often based on storytelling or an invoked heritage, brands
online should recreate an atmosphere and a consumption scenario. In order to recruit
and retain customers a brand may use affiliation techniques and emailing. Social media
can either be used to boost the brand image or to develop a customer service platform. It
is important to keep in mind that often the social web is the previous step before
finalizing a purchase of high priced items.
Finally, it’s time to cover the luxury buying experience online since recreating the
offline experience online represents the major obstacle for brands that hesitate to sell
their products online. The following chart helps to match the client’s level of
expectations in store through an equivalent online. Therefore, based on this chart, it is
possible to determine what should be implemented to transpose the store experience
into a successful online experience (Consulting, 2012):
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The principle is to create an ‘e-ritual’ by understanding the store experience to recreate
it online. Determining the store experience means identify what the customer feels when
he/she enters in the store: the welcoming, the atmosphere, the visual merchandising, the
history of the place and of the brand, but also the magic of the sensorial experience
when interacting with the products: the touch of the leather, the smell of a corporative
perfume or holding a piece of jewelry.
Recurring to visual effects that appeal to the same senses compromised in stores could
overcome the lack of sensorial interaction with products online. Online strategies should
include visualization, detailed information, and atmosphere of the website, an
ergonomic website and high quality content. For instance, it is possible to upload HQ
photos or assemble products to create a “window” effect.
However, it would remain difficult for the customer to imagine the product through an
online store. It is necessary to move from e-shopping to feel-shopping to allow the
customer to feel the product as if he/she could touch it. As such, one can use 360
videos, 3D or anything else that is offer or will be offered by the implementation of new
technologies.
Another important aspect relates to support. As a traffic flow is defined in store, a clear
navigation flow must be also defined online to help the consumers visiting the website,
allowing them to know the whole range of products and facilitate a quick purchase of
pre-selected products. Broadcrumbs tracing our path in online shopping are a functional
tool that allows client to trace their digital footsteps to easily come backwards. Intuition,
easy access and explicitly are the three core characteristics that any online shop must
accomplish.
Furthermore, innovation, invention and creativity should be core competences defining
the e-commerce strategy of luxury brands, as they are offline.
However, when integrating technologies brands need to ensure that clients are familiar
with them to a certain extend to make it usable for users online. They all should come
up with a personal and recognizable tradition online, to differentiate themselves from
non-luxury players by bringing some renewal to the business. Some brands are
experimenting and promoting additional services and online events to retain customers
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and encourage sales on their Internet channels. The most used ones in luxury are:
personalization & customization of products and services, additional offers such bonus
points or special deals such 24/48h deliveries, free trials, etc.
General consumers’ motivations and expectations when buying luxury online:
MOTIVATIONS EXPECTATIONS OBSTACLES & FEARS
Convenience
Price
Larger choice of
products, styles and
sizes.
A growing habit to
purchase goods online.
A certain degree of interaction
Detailed and transparent information regarding
products, prices, logistics, after sales services
and services.
Added value strategies online (online
exclusives, customization…).
Price appealing
Security and confidence
Coherence between e-shop and shop.
Company’s responsibility and availability.
Sense of community belonging
Master of the online universe and logistics.
Support while shopping & After-service
solutions
The risk of counterfeits
Technical issues
Delivery problems
The difficult to return, change
goods
The need of human and
sensorial interaction when
buying high priced goods.
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Luxury brands should aspire to implement a ‘360º strategy’ by bringing and
complementing all channels of distribution together. Online and offline should be
considered as parts of a ‘global multi-channel retail strategy’. In addition, as consumers
are getting more and more used to shop in different channels, CRM database should be
integrated as well.
Regarding how to complement channels, an ultimate approach consists in intertwining
them to offer services characterized by their high added value. Some of the initiatives
could be: allow clients to book online products and pick them in store; give them the
choice of paying online or in store; set up a service online where consumers can check
where a given product in a specific size can be found among the brand’s stores network;
give the choice for online purchases to be delivered to the nearest brand’s retail store
(especially useful if the costumer needs to try on the products) facilitating exchanges
and returns of goods in place; or integrate the after sales services for goods purchased
online in stores (guaranties, follow up…).
By interconnecting channels a brand will be reaching ‘click and mortar’ business model
–putting together a number of operations that include online and offline processes,
intended typically for a website and a physical store-. A click-and-mortar company can
offer customers the benefits of fast online transactions and traditional face-to-face
service.
DIGITAL
STRATEATEGY
(coherence between
offline and online
strategy)
STRONG
CONCEPT
USABILTY AND
PERFORMANCE
ASSORTMENT
BUYING EXPERIENCE
PRICELOGISTICS
SECURITY
COMMUNICATION
SOCIAL
WEB
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6. CONCLUSION
As the most powerful marketing tool that will drive luxury businesses forward in the
next century, the Internet has become indispensable for luxury to reinforce brand
presence, break into new territories, engage clients on a higher level and demonstrate
overall value.
The economical downturn and the influence of the social web have increased the
bargaining power of luxury consumers that have been placed in the center of the
relation with luxury brands. The traditional superior position of luxury brands
responsible for dictating tastes and trends to clients in the past has been challenged.
Empowered by their constant use of Internet, wealthy consumers have become experts
on scanning the web and looking for websites that provide real value and those that
have little to offer. They evolved along with certain pages, building specific
expectations that lead them to easily discard websites that fail to meet them. More than
brand loyal, shoppers online have become more web loyal. For instance: Amazon
Premium users.
They’re mastering the channel and have a total control on the information and news
they receive online, carefully filtering and choosing what to see and what to ignore to
then interact with the information, create or co-create their own content, share, discuss it
or endorse influencing others purchasing decisions.
“They are looking for an exceptional experience that will appeal to their senses,
enhance their mood, recognize their present and engage their minds away”
(Okonkwo, 2010).
Until very recently high luxury brands have been distrustful and excessively cautious
for their own sake about the integration of e-commerce into the sector, fearing that
enlarged digital strategies could diminish brand integrity and believing that customers
would be unlikely to buy expensive items online without seeing and touching them first.
After all, the in-store purchase ceremony is an in intrinsic part of the value proposition.
However, against their odds, it would appear that clients are getting confortable and
used to buy all sorts of items online, regardless price points. Furthermore, relevant and
dynamic digital strategies have proven to boost engagement and sentiments towards the
brands with a strong effective presence online.
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By staying offline, right now labels are losing a percentage of sales to successful multi-
brands online retailers and department-stores sites; but also to unofficial channels of
distribution such as vintage e-shops, second-hand e-markets and even bidding sites such
as eBay. In this context, brands should fight for regaining control over the client
experience with the brand.
In that regard, the objective should be to adopt an equal, coherent and comparable
strategy online and offline to correspond to their offline brand positioning and values.
Preserving a brand allure involves to remain loyal to a coherent 360º global strategy.
Brands must ensure that their brand identity is well represented at every point of contact
with its audience.
Nevertheless, it’s worth noting that the digital presence of a brand is not limited to their
institutional webpage online. Brands should interact to a certain level wherever their
clients are present online, by creating interactive and engaging content that boosts the
digital brand experience and by maximizing the use of search engines to better direct
consumers to their brands regardless if they tape the brand name directly on Google or
not.
The official webpage of a brand is a key driver of a company offer online and the one
on which the brand can leverage the most. An appropriate website is key to validate
what the brand represents for existing clients while appealing to new clients and fashion
enthusiasts. Every brand should draw inspiration from their essence and values to define
to a certain extent a unique original presence online. The brands itself is the key source
of value for luxury companies and this shouldn’t be compromised by webpages that
look just alike everyone elses in the competence.
A winning official webpage should be based in a strong harmonious concept –rich in
creativity and aesthetics- but first and foremost functional, user-friendly and
performing. Its content owes to be original, compelling and attractive but relevant and
interesting. Texts and descriptions featured online should be concise, thorough,
consistent and coherent in the choice of words used and expression and tones adopted.
Interactive engaging formats such as video, powerful zoom tools, real mannequins in
movement and HD or 360º degrees imaginary enhance the navigation experience
provided that they serve a purpose and they’re used in the right doses.
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Moreover, as affluent shoppers rely on multiple devices, the luxury websites should
assure a flawless experience no matter which screen their clients are using. Smartphones
drive half of search volume (L2, 2015) doing of the mobile optimization a given today
and no longer a point of differentiation among the industry.
In a context of multichannel clients linking offline and online channels efforts is a must.
Online Customer Relationship Management techniques should encourage consumers to
visit the physical stores while sales assistants should encourage them to visit the
company’s webpage and social networks profile as well.
Brands can’t afford the luxury of considering e-commerce and retail separately within
the company or promote both channels as competing stores. This is especially true for
the Client Relationship Management Department, which a luxury brand should be
responsible for.
Empowered by their ability to influence others and master their experiences online,
clients are playing an active role in their interaction with brands. They except to be
remembered, recognized and acknowledge and there is no better way of doing so than
providing an elevated custom made service through all platforms.
With the significant advances in data collection online, the amount and quality of data
collected should be considered as a top asset and crossed online and offline. Well
managed, wisely customization tools could become an important driver of sales leading
to customer loyalty. Gathering personal data includes an ethical dimension that must be
approached by the brand. However, wouldn’t be worth developing CRM programs with
experts that could follow-up the top segment of a luxury brand to tailor messages,
recommendations and communications specially dedicated to them? This new approach
could constitute the latest black notebook powered by CRM departments in-house.
Luxury brands are no longer defined solely in terms of rarity and high prices only
accessible to a happy few where access to goods and services is often a click of the
mouse away from most. Time has become the real luxury with customers deriving
pleasure and satisfaction from the moments of interaction with brand world, not just the
product themselves. For brands this means delivering relevant experiences, seamlessly
at every point in the customer journey.
How to recreate the luxury buying experience online: e-commerce and luxury goods
How to recreate the luxury buying experience online: e-commerce and luxury goods

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How to recreate the luxury buying experience online: e-commerce and luxury goods

  • 1. Alba Romero Villa How to recreate the luxury buying experience online – IMLB 2014 Page  |  1         HOW TO RECREATE THE LUXURY BUYING EXPERIENCE ONLINE E-COMMERCE AND LUXURY GOODS – FASHION & LEATHER GOODS Alba Romero Villa Master Thesis – IMLB 2014 – 2nd Intake
  • 2. Alba Romero Villa How to recreate the luxury buying experience online – IMLB 2014 Page  |  2             TABLE OF CONTENTS 1. ABSTRACT 3 TOPIC: What are the attributes of a luxury buying experience online?" / "How to recreate the luxury buying experience online? 3 2. INTRODUCTION 4 3. PART I: LITERATURE REVIEW 8 How Affluent Luxury Buyers Buy Luxury Goods 11 4. PART II: METHODOLOGY 14 INTRODUCTION 14 CASE STUDY: BURBERRY When the online strategy serves to boost brand value. 15 BEST PRACTICES ONLINE 21 I. Mass Customization and Personalization 21 II. Recreate a sense of exclusivity online: Online Exclusives 25 III. Instant ecommerce of Live stream runway shows pieces 28 5. PART III: ANALYSIS 31 General consumers’ motivations and expectations when buying luxury online 46 6. CONCLUSION 48 7. BIBLIOGRAPHY 52    
  • 3. Alba Romero Villa How to recreate the luxury buying experience online – IMLB 2014 Page  |  3         1. ABSTRACT TOPIC: What are the attributes of a luxury buying experience online?" / "How to recreate the luxury buying experience online? To date, luxury brands have tended to neglect the potential of the Internet, seeing in it a risk of damaging their brand image and considering that it was against the very definition of luxury. However, affluent consumers are all online and actually purchasing. Moreover, they expect to be able to do so. The Internet is their number one source of information for luxury products and the arena where they can socially discuss and exchange experiences concerning their lifestyles. As a result, luxury brands with a desire to compete in the coming future must create a close relationship with consumers, which involves impressing upon people the value of their brand, what new products are available, and giving them an opportunity to purchase them with ease (Adams, 2013). As luxury brands start realizing that the management of their digital presence is essential to their brands in terms of value and image, some questions about how to integrate ecommerce prevail: • How can luxury brands successfully recreate their brand essence online? • What are the elements that conform a luxury buying experience online? How can they do to recreate the sensorial offline experience of the brand online?
  • 4. Alba Romero Villa How to recreate the luxury buying experience online – IMLB 2014 Page  |  4         2. INTRODUCTION: The demand for global luxury online sales is on the increase. The wealthy are online and pleased with making online purchases. To date, luxury brands have tended to neglect the potential of the Internet, seeing in it a risk of damaging their brand image. However, affluent consumers are actually purchasing luxury goods online and they expect to be able to do so, especially those who lack the time to physically visit the stores. Furthermore, the Internet is their number one source of information for luxury products and the arena where they can socially discuss and exchange experiences concerning their lifestyles. On the other hand, luxury brands CEO’s have denied for long e-commerce, considering that selling their products online was against the very natural definition of luxury. As a result, most of the brands have started their brand digital strategies late, more in an attempt to keep up with their competitors and general trends rather out of a certainty in the need of creating a genuine brand dedicated site. Despite the market data, until very recently, those CEO’s were reluctant to believe that their core consumers could be buying luxury goods online or using the internet as their first source of information for luxury products. And as a result, the digital spaces were targeting a different niche of consumers: such luxury enthusiasts, fashion lovers or a younger audience. They didn’t understand why they should place a considerable budget in their digital strategy. That explains why luxury brands generally fail in delivery when it comes to their Internet platforms. They would prefer consumers to come to their stores. It’s like the argument used in 1970’s for those against the stores openings abroad, they claimed that they didn’t need them because consumers could always come to Paris and buy there. Personalities such as the chairman of Compagnie Financiere Richemont SA or Chanel’s President of Fashion, Bruno Pavlovsky; have finally agreed to invest in e-commerce more as a service to Executive Boards and clients demanding for it rather than anything else. “It’s an evolution to better serve our clients. It’s more e-service than a pure e- commerce approach”, said Pavlovsky when announcing that Chanel will finally surrender to e-commerce sometime in late 2016.
  • 5. Alba Romero Villa How to recreate the luxury buying experience online – IMLB 2014 Page  |  5         Still today most of luxury brands are reluctant to open their universe to the online space or opt for a middle presence online that may end up confusing consumers or even raise frustration among those that have invested their time navigating online and selecting carefully products to finally discover that they are not able to buy them right away. Since 2008, online purchases of luxury good have been increasing annually by 25% in France and will represent 11 millions euros in value this 2015 (Enora Consulting, 2015). Nevertheless, online sales still represent a marginal part of the luxury sector total revenues worldwide: according to Forrester’s estimations (Forrester, 2015), more than 90% of all luxury transactions –which some analysts say is a $300 billion industry- are still made in a store. Nowadays, because online sales represent a shy percentage of 6% of the total for luxury goods, triple the share in 2009 (2%), (McKinsey Company, 2015). they can survive without e-commerce but it’s a massive missed opportunity (Strugatz, 2013). In fact, despite 70% of luxury consumers tending to buy online once they have already experienced the brand and the products in-store and not before, online luxury sales mainly take place in ‘pure players’ (often multi-brand e-shops with strictly online presence) (Enora Consulting, 2015). By staying offline, these labels are losing a percentage of sales to successful multi- brands sites such as Yoox or Net-A-Porter, which saw a sales increase of 55% percent which translates to $613 million in 2013 (according to Daily Mail), including quickly selling out of $11,500 Valentino coats but also to department-stores sites like Bergdorf Goodman and Barneys, featuring $6,990 Oscar de la Renta dresses and $7,250 Givenchy sweatshirts for men (Bloomberg, 2014). That is for the official channels of distribution allowed to sell their products online, but what about vintage e-shops, second-hand markets and even bidding sites such as eBay? It’s not only a question about dollars and cents but also about regaining control over the client experience with the maison products and avoid non-knowledgeable consumers getting fooled online by offering them the guarantee of an official brand dedicated e-shop. As a matter of fact, the number of e-commerce players is rocketing with more than 20,300 new sites every year, meaning that a new online shop opens every half hour (E- commerce Mag, 2012). In value, the apparel industry is the one facing most relevant increases on the Internet. And every year that passes, the average age of online
  • 6. Alba Romero Villa How to recreate the luxury buying experience online – IMLB 2014 Page  |  6         consumers also tends to grow older, according to consumer behavioral studies, when purchasing online. Even if well known, prestigious luxury brands are only quite a few, the luxury industry is relatively small in terms of players -number of companies or conglomerates- and the danger of newcomers is low –the boundaries are not easy to defeat- the industry has an enormous influence on society and in terms of consumer behavior, attracting lots of attention. That explains why most of them have finally accepted the need of a certain digital presence, embracing the possibility to communicate in-house directly to their audience without turning to intermediates such as influencers, magazines, actors and actresses, etc. Some brands have successfully selected social networks to be present in such as Facebook, Twitter, Instagram or more recently Snapchat; and implemented periodical marketing newsletters to inform clients about the brand’s latest news. Nevertheless, most luxury brands are convinced that preserving their brands sense of rarity and exclusivity implies keeping the digital development to a minimum. Considering how important the Internet is for their target consumers’ daily lives, it may seem reckless but still some of them have successfully foregone e-commerce, like for example Céline, which has neither e-commerce nor a social media presence in any market and whose creative director, Phoebe Philo, has been quoted saying “I’d rather walk down the street naked than join Facebook”. That’s what happens mostly all over the internet with luxury brands: even among those who have decided to jump into the e-commerce, such Hermès or Louis Vuitton, it’s very common to find a line under the product description inviting users to visit the stores in order to get certain or most of their products. It appears that they have decided to limit, against one of the very basic principles of e- commerce –the long tail theory- the range of goods available online carefully selecting to put certain things for sale and not others. But does it not seem contradictory that luxury brands are happy to run their own Twitter, Instagram, Facebook and even SnapChat accounts, gratefully rewarding bloggers followed by millions of people with their products at no cost and live-stream their runway shows, but still refuse to sell online?
  • 7. Alba Romero Villa How to recreate the luxury buying experience online – IMLB 2014 Page  |  7         Until recently, the luxury industry showed low commitment towards integrating advanced Internet technologies and its accompanying interactive and digital tools in the sector's marketing and overall business strategies. However, the undeniable truth is that Internet has become an indispensable channel of modern business. Indeed, Internet and e-commerce is still spreading very fast, and is becoming part of our daily life as it already is in several Asian countries, including South Korea, which still has the highest digital penetration in the world. There is no doubt that Internet is destined to continue playing a major role in our lives. And so is e-commerce. Luxury brands with a desire to compete in the coming future must form a close relationship with consumers that involves impressing upon people the value of their brand, what new products are available, and giving them an opportunity to purchase them with ease (Adams, 2013). The question, then, is: How much time luxury brands would be able to stay out of e- commerce? As luxury brands start realizing that the management of their digital presence is essential to their brands in terms of value and image, some questions about how to integrate ecommerce prevail: • How can luxury brands successfully recreate their brand essence online? • How can they do to recreate the sensorial offline experience of the brand online? • What are the elements that conform a luxury buying experience online? To better answer these questions it’s important to note that as any shop and communication campaign, a digital brand dedicated site is included within the company’s general strategy. A brand interacts with its audience and consumers at every point of contact of them with the brand and their approach must pull together all channels in a 360º degree strategy. Different authors have covered already the effects that Internet has on the consumer perception of a given luxury brand, with this thesis the aim it’s to go deeper in a consumers point of view. What do they expect when it comes to buying luxury online? What are for them the attributes of a luxury buying experience online?
  • 8. Alba Romero Villa How to recreate the luxury buying experience online – IMLB 2014 Page  |  8         3. PART I: LITERATURE REVIEW. There is no doubt that the invention of Internet had a great impact in our conception of the world. We were face to a revolutionary mankind invention: such once was the light, the telephone, the mechanical production or the train. Before the Internet, the idea of globalization was only prominent in regards to global trading, foreign investments and international capital flow. But thanks to the Internet globalization includes today a much bigger scope and society has become more globally aware. The above notwithstanding, for many years luxury brands were reluctant to join the digital era, starring long-lasting debates on whether luxury should be present online or not; and explaining why high-end luxury fashion retailers have been some of the slowest to sell their products online. Truth is that their reservations were founded and rooted in the very essence of luxury. Even if there is no commonly agreed definition of luxury, exclusive, scare, rare products reserved to a ‘happy few’ are often acknowledged as core characteristics of luxury items. As Dimitri Mortelmans stated in Sign Values in Processes of Distinction: the Concept of Luxury, luxury often fulfills one or more of the following criteria: scarcity, have an objective or symbolic extra value, a higher standard quality, a design orientation, and maybe as result, are priced much higher than comparable products. Kapferer and Bastien identified in their book The Luxury Strategy: Break the Rules of Marketing to Build Luxury Brands two dimensions on the idea of luxury: a sociological dimension that “represents and publicly incarnates social stratification” and a psychological one related to self-rewarding and self-indulgence, luxury “gives oneself the pleasure and dream of expectation” (Bastien & Kapferer, 2012). Therefore, luxury products are not just products with high standards of quality and a hefty price tag sold in an upscale retail environment, they are meant to be desired, dreamed for, they are exclusive and aspirational products that serve to multiples symbolic purposes beyond a mere functional aspect. Luxury is one of the oldest industries and that’s only possible because it relates to the inherent human nature seeking for self-differentiation while embracing group belonging
  • 9. Alba Romero Villa How to recreate the luxury buying experience online – IMLB 2014 Page  |  9         and responding to social climbing stratification. Very often luxury is closely related to conspicuous consumption. Luxury brands are not just selling us products, but a specific status: a social positioning and a social class comparison, explaining why consumers are willing to overlook and pay the exaggerated value of certain products. However, in order for this to be effective, the process of communication must be recognized, understood and de-codified by the society, so to a certain extent luxury is a social agreement. “Luxury exists because just some can access to it (…) luxury must never be made too accessible if it want to remain the dream of those with growing revenues and wealth” (Kapferer, 2015). Luxury depends on a fragile equilibrium between visibility and scarcity. Nevertheless, most of the characteristics described above are antagonist with respect to the very principles of the Internet, which thrives on mass appeal, accessibility and availability. Internet is rooted in democracy and grants an extended mass access to a vast majority, is inclusive and not exclusive and it stands for transparency. Given that the bulk of sales take place in the physical stores and that the expansion in emerging markets –notably China- carried the luxury industry growth, many brands under-invested in their digital presence. However, the world and its hot spots for luxury settings are geographically limited. Renowned luxury brands opportunities to open retail spaces diminish leaving them without room to continue their expansion and deliver net growth in-house, so e-commerce is now the main arena left to increase sales and the only division able today of delivering exponential growth. Indeed, digital is expected to drive, on average, 40% of projected sales growth from 2013 to 2020, as opportunities to open retail space diminish and consumers increasingly opt for the convenience of shopping online (Kansara). Expected to make up 18% to 20% of luxury sales by 2025 (Chao, 2015), e-commerce has been pointed out by business experts such as Exane BNP Paribas analyst Luca Solca as “the next China” (and just in time, as the Yuan currency drops and the China’s Economy slowdowns).
  • 10. Alba Romero Villa How to recreate the luxury buying experience online – IMLB 2014 Page  |  10       Source: Digital IQ. Fashion 2015. The common credence in the luxury industry until recently was that the internet is a channel of retail for price-discounted mass products, bargains, second hand products or damaged goods, or that the online advertising over exposes a brand's image and damages it's equity, or yet again that luxury clients won't bother with making online purchases but would always prefer the sumptuous surroundings of a physical stores and the real human contact with the products. It is true that selling online is not a lightly decision to make as luxury brands may risk tarnishing their brand image. When luxury products become easily attainable with a few mouse clicks they lose to a certain extent, their rarity and mystique appealing. However there is no doubt that the Internet is here to stay, it plays a major role in our daily lives, shaping our consumption patterns and impacting greatly our attitudes towards brands. As Mark Dunhill, CEO Fabergé, acknowledged in its foreword for Luxury Online: Styles, Systems, Strategies, the influence of Internet in consumers have been accelerated by the early-twenty-first-century economic crisis, specially among high net-worth audiences for whom discretion and convenience were becoming increasingly important considerations. “These trends were enhancing the appeal of the Internet as the preferred primary point of interaction between the consumer and brand or retailer, irrespective of the category and price point”.
  • 11. Alba Romero Villa How to recreate the luxury buying experience online – IMLB 2014 Page  |  11       How Affluent Luxury Buyers Buy Luxury Goods: Even if it may not be apparent for the luxury industry yet as most of the luxury purchases still happen in stores -94% according to Flur Robert, Euromonitor’s head of luxury goods- affluent consumers make a strong use of Internet when it comes to luxury. In September 2013, Google and Ipsos published a study entitled “How Affluent Luxury Buyers Buy Luxury Goods” that showed the importance of Internet in their purchasing decisions. In the mentioned study, affluent luxury buyers are those with a high net household income of more than 100.000 euros / dollars and made a minimum of two luxury purchases over the past two years in one of the following categories: apparel, accessories and jewelry/watches. Furthermore, the global version of the study differentiates between Mature Markets, New Markets and the Japanese Market. The study makes clear that affluent luxury buyers are extremely tech savvy. As a matter of fact, every single luxury buyer surveyed was connected to the net somehow and used a smartphone, tablet or laptop. In average they have three connected devices and the Internet is their most used media (before TV, newspapers, radio or magazines). They check it daily. When making purchasing decisions, affluent turn to Internet more than any other medium to conduct their research, especially in New Markets (92%) and Mature Markets (69%). They use search engines to track their favorite brands and products, look for information in websites and apps, go on social networks or read online reviews. However, as 65% of them still want to touch and feel the product prior the purchase they will purchase it in stores. While convenience (53%) and the possibility to find good deals (48%) are the driving forces of luxury e-commerce, the lack of sensorial experience online is its main barrier (Google-IPSOS, 2013). Already in 2008, another studied carried out by Google showed that a great majority (94%) of millionaires in US believe that making a high-end or luxury brand available online doesn’t cheapen their opinion on the product or brand, and 91% said that they would like to see their preferred luxury brands online (Zmuda, 2008).
  • 12. Alba Romero Villa How to recreate the luxury buying experience online – IMLB 2014 Page  |  12       It is undeniable that the pace of luxury brands in adopting digital strategies is slower than what their public is demanding, failing in providing a rewarding experience on the web. Some brands have managed until very recently to successfully overcome the web: Céline, Dior and Chanel have all kept their collections offline bristling at the thought of their otherwise exclusive products being sold on the all-access web. In an attempt to catch-up and translate the luxury shopping experience, which relies heavily in senses, into the Internet, luxury brands have tended to create websites that are too extravagant for their own good. Resulting in slow, not user friendly and chaotic spaces, difficult to navigate, that are far from the consumer expectations online. In other cases, hesitant of the digital universe and its rules and as a result of the high level of concentration in large conglomerates of the luxury industry, heterogeneous brands have preferred to called upon the same agencies and consultants to design their dedicated sites and shape an effective digital presence on the net. This, of course, has resulted in unoriginal spaces that lack of personal signature and creativity and reproduce the vast major of e-commerce player regardless their brand’s equity, reproducing identical spaces that the online experience could be mistaken for another. Every luxury website must be in line with their brand identity given that the latter plays a major role in engaging consumers to prefer one particular brand over another. Otherwise, the consumer perception will be detrimental to the brand image. For example, Chanel relates to an independent woman while Dior is synonym of genuine beauty. When a brand’s dilutes its brand identity is losing its key differentiation factor that allows consumers to bond with the brand. Finally, there are a number of factors that may not necessary refrain consumers from shopping online but they do dampen the growth of e-commerce: • Security issues: when buying online there are risks of credit card fraud. • Lack of human contact and professional advise: online consumers can’t rely on the expertise of an experiences sales associate and are left alone to a certain extend to decide which products suit them and respond better to their needs.
  • 13. Alba Romero Villa How to recreate the luxury buying experience online – IMLB 2014 Page  |  13       • Tedious purchasing process: there are several steps before completing the online transactions whilst in stores everything is taken care of by the sales team. • Delivery waiting time whereas instant satisfaction. • Technical problems: possible bank restrictions, processing problems, Internet connection issues. • Stock availability: the strategy of most luxury brands that have integrated e- commerce is based on narrowing the available offer to a selection of items. Furthermore, due to extremely tough manufacturing processes, certain luxury brands are unable to keep up with the demand generated by online sales due.
  • 14. Alba Romero Villa How to recreate the luxury buying experience online – IMLB 2014 Page  |  14       4. PART II: METHODOLOGY. INTRODUCTION Initially, we thought about proceeding to the development of this subject following a more traditional or conventional method based on interviews and questionnaires. However, we soon realized that the specificity of this topic, lying notably on the facts that it refers and concern only a very restrictive segment and percentage of the population, would have weaken the potential reliability of the poll or questionnaire as the basis of persons and answers analyzed would not have reached a critical threshold. There are few wealthy consumers and only a few of them buys online - 6% of the sales - (McKinsey Company, 2015). The above, combined with the difficulty to access primary sources such as executives or top management of luxury goods brands, would have led to a biased outcome and therefore a false analysis. Hence, we decided to work on this topic based on a huge amount of publicly available content such as articles, specialized websites or published interviews as well as through the business case studies analysis process, forums, blogs or social web input. By following this methodology, we believe we mitigate the risk of biased outcomes or misleading results, and reinforce the objectivity of our findings.
  • 15. Alba Romero Villa How to recreate the luxury buying experience online – IMLB 2014 Page  |  15       CASE STUDY: BURBERRY: When the online strategy serves to boost brand value. “Technology is an intrinsic part of most people’s lives. All we’ve done is make sure to weave technology into the fabric of the contemporary. This is how customers live, they wake up with a device in their hand and life begins”. Christopher Bailey, Burberry’s Chief Creative and Chief Executive Office Burberry traces its origins to the mid-nineteenth century, when 21-year-old Thomas Burberry opened a draper’s shop in Basingstoke, England. Shortly after he manufactured the first gabardine, a waterproof and breathable fabric that quickly became the fabric of choice for anyone venturing out into extreme conditions. Burberry’s trench coat was chosen to be the official coat of the British Army in World War I. The Burberry check pattern first appeared in the 1920 as a lunging to its signature trench coat and quickly become a registered trademark. Worn often by well-known adventurers, cinema stars, politicians and even the English Royalty, the brand forged a legend, and its iconic masterpiece, the trench, was featured in cult movies such as Casablanca, The Pink Panther or Breakfast at Tiffany’s. Over the decades, and prior to the arrival of Rose Marie Bravo and Angela Ahrendts Burberry was a brand heavily reliant on licensing and distribution arrangements with a narrowed offer of products. As a result, the brand appealing was in serious distress. Bravo and Ahrendts mitigated the decline in prestige by restricting the number of clothing and accessories carrying the Burberry check pattern to 10%, minimizing the damage ubiquitous counterfeits had caused to sales; and buying out of franchises which was then generating 20% of group revenues to stop its unfettered licensing. Burberry’s digital strategy over the past decade has proven to be fundamental in the brand revamping and repositioning. Aiming above all at gaining relevance and engage consumers with a renovated brand, Burberry second life owes much to its effective digital strategy which combined with an updated product line and an expanded brand
  • 16. Alba Romero Villa How to recreate the luxury buying experience online – IMLB 2014 Page  |  16       portfolio, have succeeded in bringing Burberry back into the hearts of the young and successful. Communication campaigns such as Art of the Trench, Burberry Acoustic or Bespoke had a leading role in the new discourse held by the brand. As Christopher Bailey, Burberry’s Chief Creative and current Chief Executive Office, puts it: Burberry has become as much a media-content company as a design company. And both converge perfectly. Their actions were not only designed to make money but rather to engage consumers and spread brand awareness. Burberry aim was to engage an audience to then grow the company sales. The underlying idea is based in a general marketing principle that is often applied in larger industries, stating that the mind share equals market share. Ahrendts called this approach “The million square foot store”; suggesting that every interaction is as crucial as the next, no matter what channels customer opt to contact the brand through. In this context the digital strategy is conceived as part of the overall experience. Unique digital content: Burberry was one of the very few and first brands to embrace digital in an industry full of laggards. They quickly realized their leverage and committed themselves to develop a digital culture by creating unique original content. After all, digital was called upon to play a key role in the renovated strategy of the company and allocated resources accordingly. Burberry hired employees with a full digital comprehension. More than two thirds of the employees at Westminster headquarters today would be under 30 years old, conforming a “fast, flexible, dynamic team open to change” according to Ahrnendts. Art of the Trench The Art of the Trench was the fist major digital campaign carried out by the brand. An independent social networking microsite that invited Burberry trench lovers to take pictures of themselves and of others wearing the iconic coat on the streets, to then share them and rate them, allowing the visitors to purchase the product range featured online. On this special occasion, Burberry partnered with major fashion bloggers like Scott
  • 17. Alba Romero Villa How to recreate the luxury buying experience online – IMLB 2014 Page  |  17       Schuman, The Sartorialist, to better immortalize the diverse statements behind the personal ways to wear such an emblematic piece. The campaign was a firm success and served to grow Burberry’s Facebook fanbase of more than one million in 2009 –today the brand hoards more than 17 million followers- impacting ecommerce growth. Burberry Acoustic Within the main Burberry dedicated website, Acoustic gives a voice to new music talent from across the United Kingdom. Bands and artists playing in Burberry Acoustic do so while wearing items from Burberry current collection as a way to promote the brand to a key audience and encourage discussion. Digitally integrated windows Burberry partnered last Christmas 2014 with French Department Store Printemps to create "The Magical Christmas Journey by Burberry” / “Noël, voyage magique par Burberry” a tale unfolded across 11 windows that told the story of a little boy travelling with his teddy bear from Burberry's Regent Street flagship store to Printemps in Paris. Windows, façade and the central atrium of Printemps were all dressed up for the occasion. Thus, the French Department Store featured their first interactive digital experience in decors which let visitors use their smartphones to control the action and interact with the Christmas themed windows. People were able to access extra content via their browsers to control specific features of the scenes like the weather as the little boy crossed the Channel or activated a storm or steer a fleet of boats to finally create their own virtual postcard showing a festive scene displayed on the windows, which could be later shared on social media. This special collaboration also included a pop-up space featuring a limited edition capsule collection with a mix of prêt-à-porter, accessories, cosmetics and special collectables.
  • 18. Alba Romero Villa How to recreate the luxury buying experience online – IMLB 2014 Page  |  18       Personalization and mass customization: Burberry Bespoke & The Scarf Bar Personalization is one of the keystones throughout Burberry digital experience. This made-to-measure effort impacts both: products and communications. Burberry is one of the very few brands that collect and seek customer data to offer a bespoke online shopping experience. “The more information that our customers choose to share with us, the more we are able to provide them with a service that is both unique and designed to improve their overall experience of us as a brand,” admitted Christopher Bailey. Following a more common practice in the luxury business, customization is also present through products. Earlier, Burberry Bespoke allowed clients to customize and purchase their own trench coat drawing inspiration from sportswear Nike ID actions: choosing the colors, sleeves, lining and buttons and adding their own monogram. They could then buy it online instantly, request an appointment, live chat with customer service or share their designs across social media. The recently introduced Scarf Bar allow customers to play an active role in the design of their classic cashmere scarf from more than 30 different patterns, adding embroidered initials in a choice of 30 shades of thread. The use of Social Media Back in 2006, Ahrendts and Bailey aspired to build the first luxury company “fully digital” and refund Burberry on the basis of a social enterprise. Thus, Burberry was one of the first of its kind to launch a Facebbook page in 2009 and use the social networking to share product campaigns and launches, behind the scenes content, announcements and store openings, catwalks footage, etc. while educating their fan base on Burberry’s heritage and milestones of the brand. Over the years they developed a large visibility in different social media channels such as Twitter, Instagram, Snapchat, Tumblr, Pinterest and YouTube. Burberry has managed to create unique brand content and develop a more personal communication flow thanks to the brand current CEO. Christopher Bailey who is often featured in Youtube videos introducing the brand latest news. Their YouTube channel
  • 19. Alba Romero Villa How to recreate the luxury buying experience online – IMLB 2014 Page  |  19       includes videos and playlist of varied content: product information, advertising campaigns, music events and behind the scenes content. Moreover, Burberry is one of the very few high-end fashion brands that have dared to create an official Burberry Customer Service on Twitter @BurberryService that deals with customer’s questions and inquires 24/7. Brick-and-mortar twist to embrace digital integration in store: bringing Burberry.com to live. Seamlessly blurring physical and digital worlds. Burberry.com has been acknowledged several times as the finest luxury site online according to the Digital IQ Index from Luxury Lab’s that benchmarks the digital performance of top brands across the globe based on their site, digital marketing and mobile initiatives. In Burberry.com visitors navigate through e-commerce, learning about the brand heritage and culture, they can take a look on imagery, promotional pictures and lookbooks and be redirected to original content such as the Art of the Trend, Burberry Acoustic or product personalization. Burberry.com is the brand’s fastest-growing retail channel, and sales on the brand’s mobile site have tripled since last year, according to Bailey. Burberry launched its mobile site in 2011. Not only Burberry is offering a flawless experience across all devices but also has taken e-commerce a step further, by remodeling its most significant flagship store in London after its website. Their retail store located in Regent Street is inspired and reproduces the sit map of Burberry.com, with the layout and architecture mirroring that of the website. Floor space splits between Bespoke, ready-to-wear, a gallery that features history and heritage, Acoustic and Experiences. Products have embedding digital chips that activate short films showing the story of its creation, sketches or promotional clips; Ipads are integrated in the display and interactive mirrors transform in personalize screens in a space that embraces Burberry’s long English tradition above all and doesn’t make interactive features invasive to the visitor.
  • 20. Alba Romero Villa How to recreate the luxury buying experience online – IMLB 2014 Page  |  20       Furthermore, Burberry Regent Street store was meant to recreate the web interactions in a whole new level by fighting rigid intimidating traditional luxury boutiques. Christopher Bailey wanted the store at Regent Street to be a space to hang out and explore the brand: “We realized that we had created a lot of platforms that only existed online so we decided to bring these to life. Our approach to the store was to make a bridge between the online and offline experience”. “We know our customers move seamlessly between our digital and physical worlds,” he said. “The use of digital technology is a fundamental and integral part of who we are at Burberry and it is central to our brand, our identity and our way of thinking.” Burberry commitment towards digital undoubtedly contributed to raise brand value. Not only Burberry has become one of the most popular and loved bands in the industry today, but also experiences an exceptional growth above the luxury market average and a rise of their stock value.
  • 21. Alba Romero Villa How to recreate the luxury buying experience online – IMLB 2014 Page  |  21       BEST PRACTICES ONLINE I. Mass Customization and Personalization Whereas affluent Baby Boomers and Generation X prefer to spend their wealth on materialistic entities –cars, stunning houses and luxury items- to show off their wealth, new generations of consumers that got everything while growing up and have been greatly influenced by the economical downturn and sustainability, are more likely to forego traditional conspicuous consumption. Instead, affluent are craving for experiences and searching for meaning. A study from Annalect (Omnicom Media Group) pointed at the travel category as the most important luxury spending. Travels accounted for 45% of affluent consumers spending in the past year, followed by fashion, which represented 22% of affluent consumers annual luxury budgets. A life well lived is synonym for Millennials of exotic vacations and once-in-a- lifetime experiences. They seek authenticity and differentiation. Affluent are no longer rushing over thousands of euros/dollars handbags, shoes and smooth scarfs if there is a risk it will be identical to one owned by someone else among their peers. They are looking for brands able to replicate their personal values and that take into consideration their individual needs and desires. That’s why the demand of a personalized touch to truly make that breath-taking product theirs and theirs alone is on the increase. Encouraged by technology, many brands jumped on the bandwagon of mass customization. This trend has taken over the luxury and premium markets as it benefits both: consumers and brands. It allows consumers to play a part in the broader narrative of their favorite brands. On the other hand, with the rising importance of social media and digital platforms, the consumer has more than ever the power to promote and endorse brands. However, unless there is a real story behind, there isn’t really much to say. Customization is the perfect excuse. Think about a bridal atelier. Still today true bespoke requires hours of one-on-one interaction with a knowledgeable team of artisans before the production starts and then regular follow-ups with ongoing consultations, fitting and adjustments. Real custom-
  • 22. Alba Romero Villa How to recreate the luxury buying experience online – IMLB 2014 Page  |  22       made is costly and takes time. Whereas mass customization satisfies consumers’ need for instant gratification while still delivering unique design products at price points that are accessible to consumers unable to afford traditional bespoke clothing (Judd, 2015). Furthermore, it also allows brands to pay for products before they are put into production, eliminating the risk of excess inventory. Mass customization grants customers with a certain power over the final product and a level of creative control, everything from the comfort of their own computers and homes. Cornered by fast fashion, mass customization enables premium and luxury bands to make a difference by slowing down the purchase journey to spend more time with clients and connect with them on a deeper degree. Nevertheless, mass customization is not rooted in luxury. Nike launched the first mass customization platform back in 1999 with NikeID: a service that blended the benefits of traditional craft production with the efficiencies of modern industrial processes. Thanks to online 3D modeling systems the consumer can view their creation all along the process toying with details such as stitching and colors. This trend was rapidly adopted by luxury brands. Today, Salvatore Ferragamo fans can create their own unique version of the brand’s iconic driving shoe; Burberry clients may design a classic cashmere scarf from more than 30 patterns and add their embroidered initials using the Bar Scarf; and Louis Vuitton lovers may choose via Mon Monogram the inside color of their classic Speedy bag, adding colorful stripes and initials on the outside. However, the more sophisticated the process gets, the more expensive and demanding for the consumer. Burberry Bespoke and Amazon Atelier (Loewe) were born online but wisely relegated to stores. In the case of Amazona Atelier clients get to fully customize the iconic Amazona bag: its corner patches, the handles and the leather body. The wide variety of materials offered with stretches from calf and goatskin to the more exotic ostrich and crocodile; a color palette that includes skins available in 19 different shades; and three options for the metalwork -gold, palladium and ruthenium- makes the possible outcomes number 131,265 in total, way too much for a regular customer alone in its sofa.
  • 23. Alba Romero Villa How to recreate the luxury buying experience online – IMLB 2014 Page  |  23       Attractive product customization is today however beyond offering the client the possibility of engraving initials in products and should include the client somehow in the creative process to propose a real added value that will foster brand affinity and boost loyalty. About two-thirds of affluent consumers expect a highly customized experience when shopping for luxury goods and especially when it comes to purchasing fashion. This is particularly evident for luxury Executive Boards when it comes to customer services in stores, where sales associates often carry a notebook in which they collect customer data such as personal details, preferences, lifestyles, etc. Nevertheless, only a few luxury brands collect data online to create customized messages. Though 59% of brands capture information at account signup, only 26% of them use it to personalize their emailing. The ability to establish and maintain customer relationships via personalization is not just a best practice; it is becoming “table stakes” for the industry. As driving traffic towards the site becomes increasingly expensive, successful brands turn to personalized contextual marketing emails to drive top-line growth and conversion while raising the conversation with its audience (Monetate, 2014). The average emails send rate increased 65% over 2015 to 2.8 emails per week versus 1.7 emails per week the previous year, 2014. However the bulk of emailing marketing
  • 24. Alba Romero Villa How to recreate the luxury buying experience online – IMLB 2014 Page  |  24       still fail in taking advantage of the customization tools provided by Internet powered databases and providing innovative content to stand up in the crowd. Most of email content is either editorial (81%) or promotional (61%) as brands continue to underutilize customer data to craft customized messages. So far, only 26% of brands analyzed in the Digital IQ Index used personalized emails and an important percentage resorted to trigger emails such as Abandoned Shopping Carts (L2, 2015).
  • 25. Alba Romero Villa How to recreate the luxury buying experience online – IMLB 2014 Page  |  25       II. Recreate a sense of exclusivity online: Online Exclusives. By definition luxury should have remained a niche sector and not a $1.1 trillion industry with a two digits year-on-year net growth and great margins (Zargani, 2015). Exclusivity is fundamental to luxury as it maintains consumer desire through scarcity and rarity. However, most of the well-known luxury brands today are no longer family- owned at human-scale business but members of large luxury conglomerates listed in stock markets. In such competitive environment, investors and shareholders are demanding a certain increase of revenues per year. So brands must decide whether copying with this pressure by increasing in value or in volume, by appealing to middle-classes trading up and increasing production levels. Truth is that only a very few players are able to succeed in the first option, explaining why most luxury brands have turned to artificial rarity. It’s what business expert Jean- Noël Kapferer named the “The Art of Artificial Rarity” (Doran, 2015). This is only possible because luxury benefits from the leverage effect of the brand. Once a brand has acquired a specific status that is it, it’s legitimated to cover new product ranges not as luxurious, for example cosmetics, or indulge in large production volumes and omnipresent channels of distribution. Exclusivity can be then created online through private member groups, concierge services, or digitally delivered loyalty perks that are reserved to specific customers segments. Translated to e-commerce, online exclusives are pivotal to preserve this artificial sense or rarity. On one hand, luxury brands still hesitant to fully immerse in digital e-commerce may decide to grant their restricted online distribution to a third entitled partner in order to test the potential of the web before carrying further investments in developing heir own dedicated e-commerce platforms. Like for example, Dior granted to the American Department Store Bergdorf Goodman online shop http://www.bergdorfgoodman.com/ the exclusivity to offer a selection of its shoe collection online in a Christmas pop-up store.
  • 26. Alba Romero Villa How to recreate the luxury buying experience online – IMLB 2014 Page  |  26       Coco Crush capsule collection: Chanel exclusive Preview on Net-a-Porter The week following the announcement that Chanel will finally be operating their own e- commerce website sometime in 2016, the maison released an unprecedented collaboration with the popular high-fashion multi-brand retailer Net-a-porter. For three weeks only, Chanel launched online in exclusive Preview its newest fine jewelry collection, Coco Crush, in an unprecedented digital pop-up hosted by the leader of luxury shopping destination. Chanel kept a tight control over this collaboration, being very present in the conception and collaborating closely with Net-a-Porter tech team that built the entire application including 360-degree photography that allowed shoppers to zoom, interact, expand and examine products as closely as possible to real life; the shopping experience was accessible in multiple devices: desktop, tablet and mobile. Chanel was dipping its toes into the digital waters by partnering with a legitimated luxury independent seller to make its products available to purchase online. As a matter of fact, it was the first time that Chanel made available to shop online anything other than its cosmetics but for a limited time-lapse: from April 15 to May 6 before being sold in Chanel boutiques worldwide. The six-piece capsule collection comprise five rings and one cuff crafted from 18-karat white and yellow gold with prices ranging from $2 150 to $20 500. Three of the pieces including the most expensive one, the cuff priced at $20,500, were sold out in less than 24 hours. And if the unquestionable success of this initiative was any indication of their future relevance in e-commerce, there is no doubt that luxury consumers are craving for it. However, online availability will come at a price as Chanel outlined its plans to harmonize its global pricing structure before eventually entering online retailing.
  • 27. Alba Romero Villa How to recreate the luxury buying experience online – IMLB 2014 Page  |  27       Online Exclusive Limited Editions: Majexclusive Online Exclusive Limited Editions serve to different purposes: they are key offers to reproduce artificial scarcity online as the quantities available and the days of sale are limited. Moreover, an interesting proposal accompanied by the allure of “exclusive item” may trigger and encourage hesitant offline clients to have a taste of what the brand has to offer them online. In addition, limited editions create buzz and media coverage online and offline. Premium brands have understood the potential of online exclusive limited editions that have successfully integrated to their collections. For instance, the Parisian brand Maje launched its first online exclusivity –a fringed suede poncho- during the previous Spring Summer 2015 Collection with extensive media coverage of both: printed specialized magazines and online fashion destinations. Each Majexclusive edition features a different product specially conceived for the e- commerce which stock is limited to 200 units worldwide. The most recent proposal, the party dress RIVERA, made it to the top of the list of the company best sellers that week within a few days online.
  • 28. Alba Romero Villa How to recreate the luxury buying experience online – IMLB 2014 Page  |  28       III. Instant ecommerce of Live stream runway shows pieces Most of the brands broadcast on live their runway shows. In early 2014, Burberry was, with the Fall Winter 2014 menswear Collection, the first to introduce the possibility to pre-order an item immediately following the runway show. • Shorten the time between presentation and availability on store This new instant e-commerce possibility was designed to shorten the time between the introduction of the new Collection and its availability on stores as there is often a period of months between a runway show and the arrival of items in stores. Also, it allows the fashion houses to defeat counterfeiting, copies, and beat fast fashion on their own territory. As the collective memory gets shorter, it allows brands to benefit from the communication and interest peak initiated by the runways, which are key events for a brand and take place twice a year. It reinforces the feeling for the customers that they belong to the inner circle of the brand which allows them to order part or the entire Collection on the go and extend the longevity of the collection’s introduction by increasing the retail timeline for certain collections through their digital spaces. Such new way of consuming luxury goods grants the customers an access to the opportunity of purchasing exclusive runway dedicated pieces that would not be widely available as many items will never be produced in real collections. On the other hand, interactivity gives the brands customers’ insights before the pieces are being produced. Hence, this initiative targets early high-end fashion adopters and fashion enthusiasts’ on the go by offering them instant, convenient access to shopping months before the products hits the store shelves. A perfect example of the implantation of this new digital strategy is Burberry, who broadcasted in January 2014 their Fall Winter Menswear fashion show
  • 29. Alba Romero Villa How to recreate the luxury buying experience online – IMLB 2014 Page  |  29       directly on its Facebook page and included a link that took the viewers on a site where the clients could either like it and share it on social networks or “shop-it”. It allowed Burberry to provide its customers with a new service and unique experience of owning extraordinary pieces before they even arrived in stores in a cost-effective way by launching into production only on demand. Another significant example of a brand taking implementing perfectly this new instant ecommerce strategy is Versace. Versace created a dedicated microsite on which it broadcasted on live its runway show. In order to improve the traffic and drive customers to the live streaming of the show, Versace used mailing and social networks before the event to redirect customers to the special purpose website launching the hashtag “ShowShopParty”. The website was fed constantly with exclusive content such as interviews of Designer Donatella Versace, but also through a specific scrollable social feed updated during the entire presentation, encouraging viewers to comment and share their opinion on the social networks or by the insertion of ecommerce links for items that appeared in real time, allowing consumers to purchase the corresponding look right away and encouraging shopping on-the-go. However, contrary to Burberry, Versace moved up the production process to before the show in order to make items available for purchase (to be opposed to pre-order only), competing directly with fast fashion on their own territory. Indeed, the Versace Collection was also available in selected Versace boutiques and flagship’s stores. The purchase of the new Collection could be done either in real time online or on official boutiques, without having to wait for the next season is new. The launch of a dedicated mobile application by Moda Operandi at the Mercedes-Benz Fashion Week in February 2014 reveals the importance of the expansion of instant e-commerce strategy and real-time sale and data for the Luxury goods industry.
  • 30. Alba Romero Villa How to recreate the luxury buying experience online – IMLB 2014 Page  |  30       The Moda Operandi app was conceived to help the designers to showcase their collections right after their runway shows. Following their review of the Collection, the customers could either preorder or enter their email address to receive an alert when the Collection would be available. • Improve Brand loyalty In addition, these new processes allowed the brands to achieve a greater degree of personalization by confectioning each piece on an individual basis and allowing the fans to order a piece that may have never got produced. Moreover, it is worth noting that anything a brand can do to diversify its interactions channel to a brand experience such as runway shows is an opportunity to increase customer engagement. Hence, implementing instant e-commerce strategy strengthens the position of the brands, which aim at giving their customers an individualized and personal experience through clothing. To some extent, it may also result to boost the brand loyalty by improving the sense of uniqueness. For instance, the Moda Operandi app was conceived to help the designers to showcase their collections right after their runway shows, providing both Moda Operandi and the Designers with immediate information about customers’ insights, behaviors and preferences. Also, Moschino’s “Watch It, Taste It, Shop It” event was made exclusive through several means (access code requested, save the date card, hub in the internet website, etc.) so that the fans will have the feeling to belong to an exclusive community, to the brand’s inner circle. Moschino promoted it by encouraging fans to request and obtain an access code in order to be able to attend to this event. By delivering new layer of interactions with the brand experience, Moschino improved the customer engagement. Indeed, requiring user to register and requesting a personal access code is a real personalized experience improving brand loyalty from engaged users and brand evangelists.
  • 31. Alba Romero Villa How to recreate the luxury buying experience online – IMLB 2014 Page  |  31       5. PART III: ANALYSIS. There is no doubt that the Internet is not going anywhere anytime soon. We wake up next to our connected devices and they accompany us in our every day step. Internet has become an intrinsic part of most people’s lives and this is specially truth for wealthy consumers. They are all online and expect to purchase goods and services via e-retail with ease, leaving the brands to accept that they need to be online after long-lasting discussions on whether they should or shouldn’t integrate ecommerce within their strategies. With late adopters jumping the bandwagon of luxury ecommerce, the question is no longer about why or if luxury brands should be selling their products online but about how they should do so. Affluent have being purchasing goods and services online for years now. They have become tech savvy, hyper-connected and care about the shopping experience online as much as they do in the retail shops. When it comes to digital luxury brands are not moving as fast and as certain as clients expect them to do. They are underperforming and generally failing on meeting user demands in terms of innovation and management online. Wealthy consumers have been transferring ecommerce expectations from mainstream websites from other sectors and multi-brand independent retailers that have set up the rules and best practices of the business online. Luxury doesn’t have any margin for error left. Despite being conservative about ecommerce; they’re joining at a time in which a framework, steps and rules have been drafted on what shapes a satisfying shopping experience online. Looking on the bright side, there is no need to subdue the brand through a process of trial-and-error in the worldwide exposed web. E-commerce is nevertheless still a quite recent phenomenon for luxury, so techniques and technologies to provide “the perfect luxury buying experience online” are still volatile and in constant evolution. This uncertain territory explains why some brands were held back so long. However, the main reason behind the love-hate relation of luxury brands with e-commerce is rooted in the denial of key brands CEOs to believe that the all access web could be a suitable space for purchasing their rare, expensive, reserved to a “happy few” products. They refuse to acknowledge that their core consumers could be ever be
  • 32. Alba Romero Villa How to recreate the luxury buying experience online – IMLB 2014 Page  |  32       interested in buying luxury online convinced that they will always prefer the sumptuous surroundings of their boutiques and the real touch of products. Firs of all, let’s challenge this mantra with a list of reasons to invest in e-commerce: “We were impressed by the scalability of an online flagship store open to the world 24 hours a day seven days a week from day one. We were attracted by the power of modern CRM software to nurture an enduring and personal relationship with our customers around the world and provide them with a level of service difficult to match with a black book and a telephone alone”. Mark Dunhill, CEO Faberge (Okonkwo, 2010) From a consumer point of view: 1. Time efficiency Because of its nature, luxury and prestige fashion houses target of preference is placed at the top end of the wealth scale. Truth is, either they earn this money with hard work or they happen to posses it. The World Ultra Wealth Report of 2013 not only appointed that the group is getting younger and richer but more importantly: at least 65% of the world’s wealthiest families (Heads of Households) are first generation wealth, and depending on how you define the term “self-made” is over 80%. Therefore, luxury should focus and cuddle a majority successful executive women or men indulging in self-reward with a subtle statement: ‘You’ve earned and you deserve it’. Yet they tend to have less time than financial assets. The rich are no longer all ladies of leisure or housewives with infinite time to shop. 2. Convenience Online shopping is rather intuitive and convenient as product comes to you by the magic of clicking directly from a mobile device or a computer. The offer of products available is often larger in terms of sizing and styles and the different items are easy to compare.
  • 33. Alba Romero Villa How to recreate the luxury buying experience online – IMLB 2014 Page  |  33       Ease is a key advantage to exploit. Some sites have figured out how to take advantage of that, for instance Net-a-Porter teamed up with StndAIR’s private seaplanes to offer same day deliveries to the Hamptons in summer. A service that the online retailed provides also in New York City to those women in need of a last minute outfit to attend an event or that simply are impatient to enjoy their purchases. 3. Anonymity It used to be that a luxury buying experience involved dressing up and going into a high-end magnificent boutique where a sales assistant will look at you from the bottom up to then advise you on what to buy while enjoying a glass of champagne. In fact, some sales assistants are asked to write down descriptions of the outfits shoppers are wearing when entering into the boutique. But the downsides of such practices, as Forrester analyst, Sucharita Mulpru, pointed out is that “a lot of consumers and affluent people are intimidated or annoyed by shopping at luxury retail stores”. In contrast, Internet allows easy shopping at any time. No dressing up is required. Furthermore, anonymity and discretion are becoming since the economical crisis increasingly appreciated values among wealthy consumers. 4. Some changes on shopping behavior are resisting the principle that luxury is consumed to show status, that is to say that luxury needs to stay exclusive to a ‘happy few’. In addition, recent surveys have shown that luxury buyers are tending to value more products than the buying experience. During the last years, the industry has noticed a change in the consumer behavior regarding the acquisition of luxury goods and services. Luxury is increasingly enjoyed in intimacy, or its purchase responds to an individual seek of pleasure rather than a social recognition of status. The director of the ‘art de vivre’ department in the forecast agency Nelly Rodi, Vincent Grégoire, has observed the arising of a new generation of luxury consumers that prefer “the luxury for oneself, private and synonym of a non-tangible welfare”. Only 10% of the satisfied clients in luxury admit finding in luxury consumption a means to assert their social status. New intimate and self-centered motivations for consuming luxury may be: pleasure and hedonism, valorization, a concern for our appearance, a well-being feeling and the certainty of high quality standards. Lead by these new factors consumers show a
  • 34. Alba Romero Villa How to recreate the luxury buying experience online – IMLB 2014 Page  |  34       weak sensibility to prices, since what they are looking for is to reward themselves with an exceptional product or service. Seen from this perspective, quality and creativity play an essential role, and so do a certain level of confidentiality and affinity to the brand. The high-end experience in store allowed brands to price their products even higher. As luxury consumers today expertly know their way around advertisement, publications and reviews, they’re more able to do their own research and decision making. More and more, they fall in love with products and the luxury buying experience is far less important than the products itself. Furthermore, nowadays luxury consumers value easy shopping, and a product experience that actually feels luxurious. Plus, the new luxury experience is in ownership. Finally, consumers trust better the advice available via unbiased experts online than the ones coming from a brand sales team. People want nice things more than they want nice services. As a matter of fact, surprisingly luxury products have proven to be a blast in some of the ‘worlds largest and more varied shops online’ such eBay or Amazon. Even though, luxury brands fear that these mainstream shopping experiences devalue their image, some have decided to welcome these incomes. For example, Gucci has made Amazon.com one of their official authorized online retailers. (Adams, 2013). From a company point of view: 5. The possibility of engaging with consumers regardless their channel of choice. The e-shop will not put and end to physical shops, as e-commerce has been proven to be complementary to shops, not a way to cannibalize their sales. Both channels online and offline are complementary and reinforce each other. It is more and more frequent to find ‘multi-channel’ consumers. As a matter of fact in countries with a high rate of Internet penetration, ‘multi-channel’ consumers have overcome ‘one-channel’ consumers. In addition, studies have shown that a buyer that uses indistinctly several channels (such physical stores, e-shops and phone) will spend twice more than one that only purchases goods in store (Mc Kinsey, 2015) (SAS, 2015). Seen this way, e-commerce could be perceived as an extra distribution
  • 35. Alba Romero Villa How to recreate the luxury buying experience online – IMLB 2014 Page  |  35       channel to approach not only loyal consumers but also new ones, wherever they shop. Some brands have already noticed that and have decided to start developing the different channels in a complementary way. E-retail also influences offline store visits since people look for and exchange opinions and information on products and brands. The e-commerce site may constitute a previous step to the purchase in store or may help to conclude an act of buying. In fact, 70% of European consumers have admitted to look for information online before purchasing any good in a luxury store. In reverse, as we’ve seen previously, 70% of online sales are conducted by people that have already experienced the brand and the products in-store (Google-IPSOS, 2013). To sum up, an e-commerce site does not cannibalize the traditional points of sales. On the contrary, it completes and enriches the brand overall proposal. Nevertheless, customer expectations in both channels differ: the definition and criteria for a good shopping experience online and offline are different. 6. Growth potential – a shop 24/7 The flexibility of the online stores (24/7) as well as its ubiquity complements the services delivered in stores. Being able to shop on our own schedule and terms turned out to be for some clients more convenient and appealing that the obligation to go in store. Consequently, the monthly turnover of some e-retail websites is sometimes equivalent to that of one or several shops, even a country or even surpass the highest point of sales in revenues. However, online purchases still represent a shy 6% of the total turnover although is forecasted to account for 18% to 20% of the luxury turnover annually by 2025 after recently reaching its tipping point (L2, 2015).
  • 36. Alba Romero Villa How to recreate the luxury buying experience online – IMLB 2014 Page  |  36       Win-win reasons for both: companies and clients 7. Greater choice of products & Long Tail theory Since an online e-commerce site is not limited in terms of space in the storehouse as luxury brand dedicated shops are –don’t forget that they’re located in the most expensive streets all around the world—designer labels face the ability to offer a larger choice of goods. Thanks to this strategy, they’re able to give a response to the demand of a segmented marketplace seeking for rare products. Moreover, usually these unique goods often justify larger margins. Therefore, niche or specialty goods can translate into big business for retailers who learn to tap into that end of the market, commonly referred to as the Long Tail. Furthermore, some companies such as Hermes found in ecommerce a market to place their lowest performing lines of products. Even if gross revenues will remain being generated by generic products, in catering to the Long Tail consumer, e-retailers have several advantages over traditional ones, such as infinite shelf space and the ability to change or add to inventory more easily, allowing them to offer an unlimited selection of high-margin items. Benefiting from low inventory costs, this model requires strong platforms to make niche content available to interested buyers. In addition, e-commerce can indeed be offered to customers as an alternative to overtake certain stock shortages in store. Consumers may choose to buy on Internet to take profit from a larger choice of styles, goods, sizes, etc. 8. Web 2.0: access to information about products, reviews, etc. When making purchasing decisions affluent turn to Internet more than any other medium to conduct their research -New Markets (92%) and Mature Markets (69%)-. They use search engines to track their favorite brands and products, look for information in websites and apps, go on social networks or read online reviews (Google-IPSOS, 2013). Luxury clients draw knowledge about the luxury market mainly from the Internet, where they can discover brands new proposals, learn about the brands essence, value and heritage and explore and compare different universes. Luxury goods are
  • 37. Alba Romero Villa How to recreate the luxury buying experience online – IMLB 2014 Page  |  37       costly and by conducting such researches clients are justify themselves that they’re making the right choice. Since wealthy consumers are few and they have plenty of information and options at their disposal, they may use Internet as a tool for increasing their bargaining power. 9. Online added services: customization & personalization of goods, online exclusives. In order to get over the lack of a sensorial relation with products when buying on Internet and to reproduce a sense of rarity, many brands have decided boost their online sales by adding value to their e-shops with special benefits such online exclusives, individual cross-sales proposals or customization and personalization of goods. Some leather goods brands offer a service online through which clients can add their initials to bags and wallets (Louis Vuitton, Bottega Veneta, Gucci, etc.) and even make-up (Guerlain Rouge G lipstick). However, today’s personalization proposals can’t be limited to merely engraving initials –a service taken for granted- and should include the client in the creative process to make him feel valued and foster a sense of brand belonging. This next step is the mass customization of products described in the best practices section. Ralph Lauren offers the possibility to customize their polos online, but also Burberry, Salvatore Ferragamo or even Boucheron have created customization platforms that the client can interact with. For example, Boucheron allowed its consumers to personalize their own rings by choosing the stones or the shape, and later on the client receives an email with the estimated cost of the jewel. A similar process occurs with some automobile brands such Mercedes or Citroën: the consumer can navigate online and select different choices of customization (materials, wheel rims, colors, etc.) while instantly visualizing the final effect of all the modifications in a digital model of the selected car.
  • 38. Alba Romero Villa How to recreate the luxury buying experience online – IMLB 2014 Page  |  38       Opportunities Internet investments could bring to luxury brands æ From a communication point of view Internet has become indispensable for luxury brands, granting them the possibility to develop a direct fluid communication flow towards the audience without the need of turning to intermediates such as specialized magazines, celebrity endorsement to convey information. Within the essence of the brand, the presence of luxury maisons online should go beyond the official website to develop interactions through discussions, exchanges or by animating a community, a specific social network. æ High profitability rates at lower investment rates than retail. Some luxury sectors traditionally focused in the business-to-business or wholesale, such jewelry or watches industries are increasingly developing a retail network on their own for selling their products to the end consumer. They are realizing that in order to compete in the luxury space today they need to adapt to consumer shopping habits or will suffer decreasing in sales and relevance. They’re creating brand-dedicated websites, improving their marketing and communication campaigns and opening their own mono-brand network of retail shops to boost awareness and increase desirability for their products. æ From a logistic / supply chain viewpoint, the existence of an e-boutique enables the company to expand abroad with limited fixed and structure costs in comparison with a physical extension. In addition, the development of a website can grant access to luxury to the inhabitants of less urban areas. æ An online store could serve to conquer new clients, which are used to buy online but would not dare to enter in luxury stores. The opportunity here for luxury companies lies in the ability to access new customer segments, not just online but also by bringing more customers to the stores, while also offering greater convenience to time-poor entrepreneur-like affluent providing them with a new way to experience the brand. In addition, the so-called ‘seniors’ (aged 50 to 65) constitute a growing segment in e-commerce: representing only a 37% of all Internet users, they account for the 48% of the total revenues online (31 billion of euros) (E-Commerce Mag, 2014).
  • 39. Alba Romero Villa How to recreate the luxury buying experience online – IMLB 2014 Page  |  39       æ An online interface allows the company to gather / collect / compile detailed information on the customers via sign up forms and the use of cookies. Used wisely this information would help the company to design a more accurate and efficient Customer Relationship Management programs among existing clients or brand lovers. Internet optimizes the management and usage of a brand CRM database. Online players acquire a great number of information referred not only to existing clients but also to potential consumers. In agreement with search engines companies such Google and with social media communities, for example Facebook, the data available may include habits of navigation and personal detailed information that enlarges the knowledge that a company has regarding both: their target and existing clients. With a pertinent management of the referred information, brands are able to engage consumers thanks to the development of a more pertinent communication and the customization of messages. Once luxury brands are increasingly accepting that a digital presence is essential to their brands, some questions about how to integrate Internet prevail: • How can luxury brands recreate their brand essence online? • What are the elements that conform a luxury buying experience online? • How can they do to recreate the sensorial offline experience of the brand online? To better answer these questions first of all it’s important to note that as any shop location and advertising campaign, a digital brand dedicated site should be included within the company’s general strategy defined by a specific brand positioning, values and tradition. Let’s not forget that a brand interacts with its audience and consumers at every point of contact of them with the brand. Therefore, luxury brands must examine their global strategy to convey all channels together. Equity and coherence should drive the complementarity of each channel representing the different parts of a whole 360º brand extension. The need of coherence within the brand strategy supposes that a perfect digital strategy respond to a case-by-case basis.
  • 40. Alba Romero Villa How to recreate the luxury buying experience online – IMLB 2014 Page  |  40       Before developing a right e-commerce platform a brand should develop a relevant digital presence online by developing a strong brand digital culture, which involves e-branding, online communications and marketing, interactions and monitoring of the social web as well as the development of advanced client relationship management techniques. The brand dedicated website is only one of the several aspects of the brand’s digital presence online. But it is also the one on which the brand can leverage the most. The appropriate website is key to validate what the brand represents for existing clients and appeal new clients or fashion enthusiasts. A luxury online buying experience must convey innovation, creativity and a specific know-how that luxury companies may not have in house. Since luxury brands do not master yet the channel and its specificities; and consumers are purchasing luxury online with certain expectations that brands are obliged to meet, some brands may decide to externalize or license the e-commerce service as they’ve done in the past to enter more specific and technical industries such beauty products and perfumery or watch making. Even this is a valid approach; brands must be involved and supervise the whole process. Despite the above, in the medium run, the strategy should be always to integrate the e-commerce platform into the company general management. Unfamiliar with the digital universe and its grounds, many brands externalized the design of their websites to the same consulting firms, resulting in identical spaces which navigation experience could be mistaken for another. However, and even though most fashion luxury brands offer today identical product categories and ranges, the brand essence remains their most important source of originality and equity. This specific positioning and differentiation is even more important online, where it is easier to jump from brand to brand and which represents the first touch-point of new luxury clients with brands worldwide, specially in countries with a relative recent luxury market such as Brazil or China. Due to the sensory nature of the products, and given the fact that the Internet is mainly driven by sight, luxury spaces should focus on aesthetics. Nevertheless, this should not be confounded with the integration of unbalanced and incongruent animations such as heavy flash, different website concepts and inconsistent features that have little to offer to the overall experience.
  • 41. Alba Romero Villa How to recreate the luxury buying experience online – IMLB 2014 Page  |  41       Usability and functionality of the elements used are as important as the webpage concept and design. Usability represents a user friendly space defined by its ability to easily provide the visitor with what he’s looking for. A navigation flow should be defined as the traffic of the store so the visitor discovers and apprehend what the brand has to offer online. A functional website is efficient regarding the tools implemented, providing a harmony in which visitors feel comfortable to extend their time. Contrary to the general believe e-commerce does not devaluate the brand image. As a matter of fact, it could reinforce the brand leading to higher rates of clients’ acquisition and retention. After all, even if the latest Bamboo Shopper Crocodile Gucci bag is available online to everyone at anytime, truth is that you still need to be able to invest $29 000 to buy it right away. Different models prevail today and a brand should define which form of presence suits them better: 1) No e-commerce presence at all. 2) Should ‘brand X’ sell its product in a mono-brand and dedicated e-commerce website, or on the contrary, sign agreements officially authorizing pure (or not) multi- brand players to sell its products online? a. E-commerce presence through third party websites. b. E-commerce presence through a dedicated e-commerce space integrated within the official webpage. c. The friend (‘compagnon’) site. d. The twin (‘jumeau’) site. e. The partner (‘partenaire’) site.
  • 42. Alba Romero Villa How to recreate the luxury buying experience online – IMLB 2014 Page  |  42       PRODUCTS PROPOSED TO SALE OBJECTIVE OF THE WEBSITE EXAMPLES FRIEND SITE Limited selection To develop notoriety and brand image Hermès, Jean-Paul Gauthier, Isabel Marant TWIN SITE Wide offer, most of the references are available To propose an alternative to the clients and increase turnover Louis Vuitton, Christian Dior, YSL PARTNER SITE The whole references sold in stores and eventually exclusive products Create a new distribution channel, generating activity Thierry Muggler, Gucci, Coach Source: (Consulting, 2012) Once the concept of the site is settled, the next dimension to plan refers to the assortment of products. To define it correctly, the question that a given brand must answer is: Who is the ‘brand X’ targeting at in the e-shop? If the brand is aiming to foster loyalty by offering a complementary channel of distribution to their core and regular consumers it will sell online its ‘full line’ of goods and services. On the other hand, if a brand is integrating e-retail strictly to recruit new consumers, ‘trading up’ consumers, aspirational ones or a younger audience will more likely decide to select a range of products within the catalog, usually the so-called ‘accessible luxury’, ‘entry products’ or low-performing lines in stock. Notwithstanding, brands opting for this middle presence online may end up confusing consumers or raise frustration among clients investing their time navigating online and selecting carefully products to finally discover that they are unable to buy them right away. As the Business Week comically described in the article Luxury brands are stupid to snub the Internet: Imagine, if you can, the following Champagne tragedy: You’re wealthy and stylish and have decided to buy a handbag after a tough day at the office. You pour yourself a glass of red wine, flip open your laptop, and head to chanel.com. After clicking around for a few minutes, you’re annoyed to discover that cosmetics are the only thing for sale. Next you visit dior.com, where you can enjoy runway footage, browse product
  • 43. Alba Romero Villa How to recreate the luxury buying experience online – IMLB 2014 Page  |  43       images, and even learn that some of its shoes embody, as the French couture house puts it, “all the modernity of Dior”. Except you can’t actually buy them using modern technology. Source: (Soller, 2014) A different question is the online availability of iconic best products, which stocks are very limited –for example the Kelly bag- and which inaccessibility fuels the luxury dream and the brand promise. Regarding prices, a brand-dedicated e-shop should seek the mentioned coherence between online and offline. Therefore, prices should be alike in both channels, as many consumers will look for information online before going to the stores to buy and vice versa. It’s true that some consumers relate e-commerce to discounts and deals, but that’s not the future nor is the objective of a luxury brand-dedicated e-shop. Furthermore, as Internet is global, this allows customers to have a worldwide access to their different platforms. Thus, they are able to analyze the different price policies. Some brands are addressing this issue before moving forward with e-commerce. For instance, Chanel will harmonize its prices before opening their e-commerce platform sometime in current 2016. A third dimension involves defining a specific logistics procedure (delivery, exchange and return of the goods sold online). In order to provide an impeccable logistic service luxury brands must partner with a performing and professional supplier. The logistic procedure is key: it encourages or discourages consumers to shop online. The golden rule is transparency: every e-shop must provide an accessible FAQ section for consumers to get information on how much time the delivery of their products approximately is going to take, how can they return purchased goods and what’s the process and conditions to do so as well as to receive a reimbursement if they are not satisfied, or how they can exchange products if they don’t suit them. A good logistics policy will reassure and retain consumers. As far for the communication online: by their nature luxury brands attract audience attention, so they can easily overcome the online challenge that many e-players face: drawing visitors to their sites. Offline, the foot traffic is defined by the store location but online brands must promote their sites differently by using specific tools such as SEO
  • 44. Alba Romero Villa How to recreate the luxury buying experience online – IMLB 2014 Page  |  44       and SEM techniques. However, a luxury brand online must focus its communication in building brand notoriety and visibility; improve the brand awareness, and recruit and create customer loyalty. This way, luxury brands will reinforce their status, since an e- commerce website cannot be limited to its sales but needs to serve as a tool to diffuse the brand history, educate the audience on the brand milestones, heritage and specific know-how, present new proposals, current events… Thanks to Internet, luxury brands have the opportunity to directly interact with its audience and the possibility to recreate a sense of group belonging –thanks to social media, community events...-. Often based on storytelling or an invoked heritage, brands online should recreate an atmosphere and a consumption scenario. In order to recruit and retain customers a brand may use affiliation techniques and emailing. Social media can either be used to boost the brand image or to develop a customer service platform. It is important to keep in mind that often the social web is the previous step before finalizing a purchase of high priced items. Finally, it’s time to cover the luxury buying experience online since recreating the offline experience online represents the major obstacle for brands that hesitate to sell their products online. The following chart helps to match the client’s level of expectations in store through an equivalent online. Therefore, based on this chart, it is possible to determine what should be implemented to transpose the store experience into a successful online experience (Consulting, 2012):
  • 45. Alba Romero Villa How to recreate the luxury buying experience online – IMLB 2014 Page  |  45       The principle is to create an ‘e-ritual’ by understanding the store experience to recreate it online. Determining the store experience means identify what the customer feels when he/she enters in the store: the welcoming, the atmosphere, the visual merchandising, the history of the place and of the brand, but also the magic of the sensorial experience when interacting with the products: the touch of the leather, the smell of a corporative perfume or holding a piece of jewelry. Recurring to visual effects that appeal to the same senses compromised in stores could overcome the lack of sensorial interaction with products online. Online strategies should include visualization, detailed information, and atmosphere of the website, an ergonomic website and high quality content. For instance, it is possible to upload HQ photos or assemble products to create a “window” effect. However, it would remain difficult for the customer to imagine the product through an online store. It is necessary to move from e-shopping to feel-shopping to allow the customer to feel the product as if he/she could touch it. As such, one can use 360 videos, 3D or anything else that is offer or will be offered by the implementation of new technologies. Another important aspect relates to support. As a traffic flow is defined in store, a clear navigation flow must be also defined online to help the consumers visiting the website, allowing them to know the whole range of products and facilitate a quick purchase of pre-selected products. Broadcrumbs tracing our path in online shopping are a functional tool that allows client to trace their digital footsteps to easily come backwards. Intuition, easy access and explicitly are the three core characteristics that any online shop must accomplish. Furthermore, innovation, invention and creativity should be core competences defining the e-commerce strategy of luxury brands, as they are offline. However, when integrating technologies brands need to ensure that clients are familiar with them to a certain extend to make it usable for users online. They all should come up with a personal and recognizable tradition online, to differentiate themselves from non-luxury players by bringing some renewal to the business. Some brands are experimenting and promoting additional services and online events to retain customers
  • 46. Alba Romero Villa How to recreate the luxury buying experience online – IMLB 2014 Page  |  46       and encourage sales on their Internet channels. The most used ones in luxury are: personalization & customization of products and services, additional offers such bonus points or special deals such 24/48h deliveries, free trials, etc. General consumers’ motivations and expectations when buying luxury online: MOTIVATIONS EXPECTATIONS OBSTACLES & FEARS Convenience Price Larger choice of products, styles and sizes. A growing habit to purchase goods online. A certain degree of interaction Detailed and transparent information regarding products, prices, logistics, after sales services and services. Added value strategies online (online exclusives, customization…). Price appealing Security and confidence Coherence between e-shop and shop. Company’s responsibility and availability. Sense of community belonging Master of the online universe and logistics. Support while shopping & After-service solutions The risk of counterfeits Technical issues Delivery problems The difficult to return, change goods The need of human and sensorial interaction when buying high priced goods.
  • 47. Alba Romero Villa How to recreate the luxury buying experience online – IMLB 2014 Page  |  47       Luxury brands should aspire to implement a ‘360º strategy’ by bringing and complementing all channels of distribution together. Online and offline should be considered as parts of a ‘global multi-channel retail strategy’. In addition, as consumers are getting more and more used to shop in different channels, CRM database should be integrated as well. Regarding how to complement channels, an ultimate approach consists in intertwining them to offer services characterized by their high added value. Some of the initiatives could be: allow clients to book online products and pick them in store; give them the choice of paying online or in store; set up a service online where consumers can check where a given product in a specific size can be found among the brand’s stores network; give the choice for online purchases to be delivered to the nearest brand’s retail store (especially useful if the costumer needs to try on the products) facilitating exchanges and returns of goods in place; or integrate the after sales services for goods purchased online in stores (guaranties, follow up…). By interconnecting channels a brand will be reaching ‘click and mortar’ business model –putting together a number of operations that include online and offline processes, intended typically for a website and a physical store-. A click-and-mortar company can offer customers the benefits of fast online transactions and traditional face-to-face service. DIGITAL STRATEATEGY (coherence between offline and online strategy) STRONG CONCEPT USABILTY AND PERFORMANCE ASSORTMENT BUYING EXPERIENCE PRICELOGISTICS SECURITY COMMUNICATION SOCIAL WEB
  • 48. Alba Romero Villa How to recreate the luxury buying experience online – IMLB 2014 Page  |  48       6. CONCLUSION As the most powerful marketing tool that will drive luxury businesses forward in the next century, the Internet has become indispensable for luxury to reinforce brand presence, break into new territories, engage clients on a higher level and demonstrate overall value. The economical downturn and the influence of the social web have increased the bargaining power of luxury consumers that have been placed in the center of the relation with luxury brands. The traditional superior position of luxury brands responsible for dictating tastes and trends to clients in the past has been challenged. Empowered by their constant use of Internet, wealthy consumers have become experts on scanning the web and looking for websites that provide real value and those that have little to offer. They evolved along with certain pages, building specific expectations that lead them to easily discard websites that fail to meet them. More than brand loyal, shoppers online have become more web loyal. For instance: Amazon Premium users. They’re mastering the channel and have a total control on the information and news they receive online, carefully filtering and choosing what to see and what to ignore to then interact with the information, create or co-create their own content, share, discuss it or endorse influencing others purchasing decisions. “They are looking for an exceptional experience that will appeal to their senses, enhance their mood, recognize their present and engage their minds away” (Okonkwo, 2010). Until very recently high luxury brands have been distrustful and excessively cautious for their own sake about the integration of e-commerce into the sector, fearing that enlarged digital strategies could diminish brand integrity and believing that customers would be unlikely to buy expensive items online without seeing and touching them first. After all, the in-store purchase ceremony is an in intrinsic part of the value proposition. However, against their odds, it would appear that clients are getting confortable and used to buy all sorts of items online, regardless price points. Furthermore, relevant and dynamic digital strategies have proven to boost engagement and sentiments towards the brands with a strong effective presence online.
  • 49. Alba Romero Villa How to recreate the luxury buying experience online – IMLB 2014 Page  |  49       By staying offline, right now labels are losing a percentage of sales to successful multi- brands online retailers and department-stores sites; but also to unofficial channels of distribution such as vintage e-shops, second-hand e-markets and even bidding sites such as eBay. In this context, brands should fight for regaining control over the client experience with the brand. In that regard, the objective should be to adopt an equal, coherent and comparable strategy online and offline to correspond to their offline brand positioning and values. Preserving a brand allure involves to remain loyal to a coherent 360º global strategy. Brands must ensure that their brand identity is well represented at every point of contact with its audience. Nevertheless, it’s worth noting that the digital presence of a brand is not limited to their institutional webpage online. Brands should interact to a certain level wherever their clients are present online, by creating interactive and engaging content that boosts the digital brand experience and by maximizing the use of search engines to better direct consumers to their brands regardless if they tape the brand name directly on Google or not. The official webpage of a brand is a key driver of a company offer online and the one on which the brand can leverage the most. An appropriate website is key to validate what the brand represents for existing clients while appealing to new clients and fashion enthusiasts. Every brand should draw inspiration from their essence and values to define to a certain extent a unique original presence online. The brands itself is the key source of value for luxury companies and this shouldn’t be compromised by webpages that look just alike everyone elses in the competence. A winning official webpage should be based in a strong harmonious concept –rich in creativity and aesthetics- but first and foremost functional, user-friendly and performing. Its content owes to be original, compelling and attractive but relevant and interesting. Texts and descriptions featured online should be concise, thorough, consistent and coherent in the choice of words used and expression and tones adopted. Interactive engaging formats such as video, powerful zoom tools, real mannequins in movement and HD or 360º degrees imaginary enhance the navigation experience provided that they serve a purpose and they’re used in the right doses.
  • 50. Alba Romero Villa How to recreate the luxury buying experience online – IMLB 2014 Page  |  50       Moreover, as affluent shoppers rely on multiple devices, the luxury websites should assure a flawless experience no matter which screen their clients are using. Smartphones drive half of search volume (L2, 2015) doing of the mobile optimization a given today and no longer a point of differentiation among the industry. In a context of multichannel clients linking offline and online channels efforts is a must. Online Customer Relationship Management techniques should encourage consumers to visit the physical stores while sales assistants should encourage them to visit the company’s webpage and social networks profile as well. Brands can’t afford the luxury of considering e-commerce and retail separately within the company or promote both channels as competing stores. This is especially true for the Client Relationship Management Department, which a luxury brand should be responsible for. Empowered by their ability to influence others and master their experiences online, clients are playing an active role in their interaction with brands. They except to be remembered, recognized and acknowledge and there is no better way of doing so than providing an elevated custom made service through all platforms. With the significant advances in data collection online, the amount and quality of data collected should be considered as a top asset and crossed online and offline. Well managed, wisely customization tools could become an important driver of sales leading to customer loyalty. Gathering personal data includes an ethical dimension that must be approached by the brand. However, wouldn’t be worth developing CRM programs with experts that could follow-up the top segment of a luxury brand to tailor messages, recommendations and communications specially dedicated to them? This new approach could constitute the latest black notebook powered by CRM departments in-house. Luxury brands are no longer defined solely in terms of rarity and high prices only accessible to a happy few where access to goods and services is often a click of the mouse away from most. Time has become the real luxury with customers deriving pleasure and satisfaction from the moments of interaction with brand world, not just the product themselves. For brands this means delivering relevant experiences, seamlessly at every point in the customer journey.