Global luxury brands need to respond smartly to new market forces and raise their game when serving the evolving expectations of the luxury consumer.
Empowered by social networks and digital devices, luxury goods consumers are dictating increasingly when, where and how they engage with luxury brands. They have become both critics and creators, demanding a more personalised luxury experience, and expect to be given the opportunity to shape the products and services they consume – there is a clear shift in the luxury path-to-purchase.
Our 2016 Global Powers of Luxury Goods report explores the factors influencing this shift in path-to-purchase:
Consumers are becoming more immune to traditional marketing messages due to their access to extensive sources of information in real time. This offers luxury brands new (and different) opportunities to engage their consumers, which they will need to address in order to drive brand success in the coming years.
- Evaluation and selection
We are beginning to see the emergence of a new breed of online stylists and digital assistants, whose role is to advise and assist consumers through the evaluation and selection stage of the purchase cycle, exposing consumers to new forms of influence. And, importantly, this is happening across brands rather than within brands – making the shopping experience more enjoyable and easier for consumers.
- The shopping experience
The luxury sector has not been immune to the rise of e-commerce (as demonstrated by the capture of market share by Yoox Net-a-Porter, Farfetch, Matches Fashion and others, and by the continued rise of the brand.com channel). The original challenge for luxury brands was how to replicate the luxury shopping experience online, but increasingly the more valuable investment is how to use digital technology to enhance the luxury store experience.
How the changing path-to-purchase affects luxury brands
In order to create value over the next decade, senior executives in luxury companies will have some important choices to make.
First, leadership will need to break free from nostalgia, as the old retail model is dying fast. The ‘winners’ will be stronger brands (with brand equity counting for more in the multi-channel age); nimble operators; those with close relationships with consumers; and masters of the ‘last mile’ – purchasing and delivery options.
Second, luxury brands will put leadership under more pressure than ever before. For public companies or private-equity backed brands, there will be pressure to grow despite a smaller contribution from Chinese consumers than in the past.
There is a risk that the pressure may result in leadership making poor choices – on key matters such as business model, brand partnerships, market entry, pricing and products – which can damage brand equity and long-term returns.
For some luxury brands, there will be different pressures which come from heritage or private/family ownership – resulting in a risk of inertia, over-control, caution and a lack of agility. The role of the executive team here should be to avoid a temptation of trying to maintain the status quo, or to sit back and ‘protect’ the brand’s current position. Executives will have a responsibility and an opportunity to challenge traditional orthodoxies in order to win.
Finally, luxury executives will need to be even more innovative with their brand and their business. As consumers are given more choice and access, and as barriers to entry are lowered, the relevance and power of the brand in decision-making becomes more pronounced. Brand innovation should be done in end-markets, and with discipline this can be controlled and executed whilst managing brand risk. These go beyond products to platforms, business models, and entirely new customer experiences.
Download the full 2016 Global Powers of Luxury Goods report, for more.
To connect with us on topics concerning the luxury goods sector, you may contact the following people:
Jolandi Grace (email@example.com)
Africa Luxury and Fashion Community Practice Leader
Dylan Piatti (firstname.lastname@example.org)
Africa Consumer & Industrial Products Senior Chief of Staff