The rebirth of luxury retail

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The rebirth of luxury retail

17 March 2017 - Fiona Wijngaards, Business Development Manager, Global Retail, Worldpay

Over the past few years, the luxury retail market has experienced a squeeze on organic growth margins.

Due to the rise in eCommerce and global consumer demand for an omni-channel shopping experience, luxury retailers have had to overcome the strain by using what sets them apart from mainstream merchants as an industry: creativity and innovation.

In a sector where brand identity is the primary selling point, luxury merchants face huge challenges when it comes to mirroring their polished in-store brand experience online. This challenge isn’t simply limited to designing a well-functioning and slick eCommerce site. It impacts businesses at every turn – from back- office functionality, to in-store presentation and stock, to ensuring the brand is visible on emerging channels, such as luxury marketplace sites.

To enable these areas to improve and even flourish, a number of brands have opted for consolidation and acquisitions. By both adding new brands into larger holding companies and conglomerates and by reducing the variety of providers and suppliers, luxury brands create a more cost-effective and consistent quality of goods and the means by which they’re sold.

Evidence around this way of thinking can be found in LVMH acquisition of Pinarello, rumours around LMVH buying Rapha, LVMH taking an 80% stake in the Rimowa group and LMVH selling Donna Karan to G-III. These actions have shaken up a traditional sector by creating a more solid base for growth through consolidation of systems and integration of one of the sector’s key assets – creative talent.

Luxury brands are also taking a look at their local markets. Instead of focusing on the same brand experience in every store, they are creating a bespoke experience which speaks to the local brand enthusiast.

This isn’t limited to simply tailoring the products to the market, but also trialling and implementing new technology or experiential innovation for areas which would be receptive to it.

Stores are now offering enriching experiences for shoppers; for example, Neiman Marcus have piloted their “Memory Mirrors”, allowing shoppers to see side-by-side comparisons of outfits, or see a dress in different colours while you wear it in full-length smart mirrors. This same technology has been in place at Shiseido and Dior makeup counters, allowing shoppers to virtually try on different products to choose the right shades and looks.

The introduction of new channels is a particularly interesting avenue for luxury merchants. Adding marketplaces or multi-brand sites to the channel mix may have been initiated by mainstream fashion in sites like ASOS, but luxury have firmly entrenched themselves in these channels, with counterparts like Net-a-Porter and YOOX.

Brands are also developing a wider array of eCommerce faces by creating their own channels in order to appeal to customers. In May of 2017, the launch of Le Bon Marché, a multi-brand, online platform by LVMH will be branded as their department store, selling its own brands as well as those of competitors. This luxury goods eCommerce site marks a step forward in expansion toward online retail in luxury and is a sign that the brand wants to win more market share in fast-growing online sales of luxury goods. And though they’re yet to join the eCommerce race, there is also talk of Celine launching an eCommerce platform this year.

The digital revolution in many ways actually caters to the strengths of luxury – offering opportunities for creativity and allowing brands to emphasise the USP of individuality and quality of product. 
As with most industries, social media is quickly becoming a creative and influential way of engaging with prospective, new and long-time customers. Leaning on the growing influence of fashion bloggers and entertainment to further their story, a number of brands are entrenching their customer following through “must-have” mentality and behind-the-scenes looks at the legacy of their brand story.

Gucci is a great example of a brand using new media to draw reinvigorated attention to itself through media snippets discussing how garments are made, the quality inherent in each piece, and by encouraging a new generation of fashion enthusiasts.

Hermès, too, have come out ahead in using the power of social media. Having developed apps (Silk Knots, a how-to guide for tying their scarves in different ways, and Tie Break, an app utilising images and media alongside collection information and aimed toward men) to encourage product and brand engagement, the business has managed to fuse new media with their traditional values.

Though luxury brands are often thought of as maintaining a staunchly in-store view of brand representation, it’s apparent through varied and creative means that they’re actually ahead of the curve in many ways. The future of luxury online appears to be one filled with experiential virtual technology and increasing the ways valued customers can meaningfully engage with not only products and collections, but also the brand itself.

Learn more about Fiona Wijngaards, Business Development Manager, Global Retail, Worldpay