Why luxury brands are missing out on maximum ROI from online and offline
Luxury brands are missing out on maximising sales by better combining both online and offline shopping behaviours of their customers, according to a new report.
Online retail is a market that luxury retailers have long feared since they are less able to control and maximise the brand experience in the same way that they are able to in their physical store environments. And yet the report shows that consumers buying luxury brands both online and instore actually spend around 50% more a year than instore only customers. This can be as simple as offering customers the chance to order online and receive their purchases at home if an item is out of stock. More significantly online is expected to drive around 40% of the growth of the luxury market over the next four years meaning that’s it’s a channel such brands can’t afford not to exploit correctly.
The new report, Digital and Physical Integration: Luxury Retail’s Holy Grail, produced by ContactLab in conjunction with Exane BNP Paribas, shows that digital is one of the most profitable growth pockets available to luxury brands. The report saw a team of experts complete 61 store visits in New York, measuring technology instore; how digital clients and received and services instore and how digital is leveraged to make the most of the store.
The results showed that of the luxury retailers surveyed they scored 39% of the absolute maximum potential for dealing with digital clients instore and less than half that (17%) on technology instore and online promotion. Split by sector however US department stores led the way, scoring 50% of the maximum potential.
Of the individual retailers it showed that Ralph Lauren was top in bringing digital innovations into stores and connecting the online and offline experience. This was then followed by Bergdorf Goodman and Burberry. Dolce & Gabbana and Saint Laurent were amongst those trailing at the other end of the scale. Interactive mirrors and touchscreens at Bergdorf Goodman particularly impressed but elsewhere advanced innovations were rare, according to the report.
Bergdorf Goodman also impressed with initiatives such as a battery charger column instore and a digital floor directory that displays not only floor descriptions but also additional useful information such as where to find a specific designer or personal styling services.
Of those surveyed Barneys was the only brand to use beacons to recognise customers whilst 11 of the brands had sales assistants who stressed the separation rather than integration of digital and physical retailing activities.
Massimo Fubini, CEO of ContactLab said retailers needed to up their game. “It’s surprising to see that not many luxury brands are optimising the relationships they can have with their customers. Luxury brands are faced with competition with online retailers and so need to up their game in order to take advantage of the online sphere,” he said.
“Modern consumers cannot be categorised as online or offline as they expect multi-channels as a paradigm to engage with a brand,” said Fubini. “Brands need to not run their online and in-store business activity as separate but need to bridge the gap and offer a seamless shopping experience.”
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