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“Alexa – buy me a yacht…”

Posted: 02/07/2018

What is the future for a market place worth US$1.48 trillion? Luxury brands have been notoriously slow at adopting digitisation, but if ‘millennials’ and ‘generation Z’ are going to be the consumers of the future who increasingly shop online, surely luxury brands need to adapt to survive? It is arguable though, that digitisation contradicts the very core of the luxury market place; where does exclusivity, a bespoke service and the beauty of luxury brands fit in, when the entire internet has access to it?

26 June 2018 marked a significant change in the traditional approach of luxury brands - with the first ever world premiere of a limited edition handbag (in collaboration with Tod’s) launched through a WeChat mini program, named BaoShop. Not only that, but the bag was launched by a fashion blogger and one of China’s most popular influencers – Tao Liang (aka Mr Bags). His knowledge of the fashion and luxury handbag market has made him no short of a saint, when it comes to the most popular and trusted source for luxury high end handbag advice. WeChat is a Chinese multi-purpose messaging, social media and mobile payment app developed by Tencent. The BaoShop is a limited time piece pop-up shop, which Mr Bags’ four million fans can use to view and learn more about a luxury product and purchase directly through the mini programme. It aids the consumer’s experience of luxury shopping by providing a seamless ‘reading-to-shopping’ process and highlights a new effort by luxury brands to transition from bricks and mortar to online sales.

China has shown great innovation in the luxury market place by providing a new economic model for luxury businesses: the ‘fan economy’. Digital influencers, like Mr Bags, turn their influence directly into revenue. Chinese bloggers/influencers have been quick to understand the importance of the internet for luxury and fashion consumers, but across the ocean, European and American luxury brands have been slower at recognising the power of the internet for luxury shoppers. It is the age old concept that history, heritage and traditionalism are more important to the brand, so cultivating easy e-commerce and digitisation as a whole has been slowly adopted.

It appears that luxury brands in China are shifting from celebrity endorsements to product collaborations with bloggers and influencers because they fill a crucial gap in the supply chain – the ‘education of consumers’. Bloggers have followers who trust them, trust their opinion, style and taste – which is difficult for a celebrity and a luxury brand to establish on their own and may therefore pave the way for luxury brands moving forward. Changes in retail have been driven by changes in customer demands. The fan economy is the key insight into what the consumer wants as it builds on a direct-to consumer relationship that is shifting the traditional business paradigm.

Recent research by Swedish bank, Klarna (which provides online financial services and payment solutions for online stores) has found that luxury brands:

  • ‘that fail to satisfy customer demand for an easy commerce experience will fall behind their competitors’;
  • ‘90% of luxury shoppers claim to use online platforms at some stage when shopping for items’; and
  • ‘40% of luxury shoppers agree that high street brands provide better and more intuitive online shopping than their luxury competitors’.

So have the US and Europe completely lagged behind China when it comes to modernising the luxury industry? Not completely. Aggregator e-commerce store, Yoox Net-a-Porter has reported selling a single £70,000 item via messaging app WhatsApp and has used this platform to speak to their ‘extremely important people’ (EIPs) who were found to be constantly on this app rather than other platforms. The retailer integrated WhatsApp with its order management system, therefore allowing consumers easy notifications on their order and shipping confirmations. This method provides an immediate and highly personalised communication with the customer. Valuable conversations with consumers are a clear winning theme when it comes to direct sales growth.

Luxury retailers may have not adopted digital networks as quickly as high street brands, but it is key to luxury brands' ethos that if they do so, it needs to be done beautifully. Storytelling and the customer experience should be at the heart of their digital proposition. For example  Burberry has introduced live streaming of ‘see now, buy now’ catwalk shows, with in-store interactive smart mirrors that show customers content based on the clothes they are looking at. Gucci has even experimented with virtual reality with the ‘Gucci Hallucination’ for its 2018 campaign. Luxury brands have an opportunity to impress their clientele with technology and should therefore be investing in it.

Technology is bringing retail, especially luxury retail, to life. The future may even see voice enabled devices such as Google Home or Amazon Echo informing EIPs of the new collection at Chanel or Burberry and building that conversation directly with the consumer in their homes. The future for luxury retail looks exciting. 

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Penningtons Manches Cooper LLP is a limited liability partnership registered in England and Wales with registered number OC311575 and is authorised and regulated by the Solicitors Regulation Authority under number 419867.

Penningtons Manches Cooper LLP