5 Ways 2020 Has Remade the Luxury Industry
Luxury brands have long been known for their ability to control how their products are presented and sold. However, the pandemic has placed the industry at a crossroads. In order to keep pace with changing customer expectations on ways to engage with brands, the luxury sector is embracing new models which are more conscious, collaborative and connected. Mazars recently released a report which explores the ways the luxury sector is making over its business model heading into 2021.
The Rise of Digital Luxury
While traditionally many luxury brands have viewed digital innovation as peripheral, they've begun to embrace it in order to better deliver clientele an exceptional customer experience. Technologies such as digital certification, for example, which proves the authenticity of products, as well as technology that powers live experiences such as concerts, special sales, art previews and access to capsule collections — all linked to customers’ social media use and their followers — are coming into vogue across brands. Hermès and Tiffany, for instance, are adopting digital marketing tools such as livestreaming, which they had rejected in the past. Chatbots and radio frequency identification (RFID) tags are further simplifying and personalizing the customer journey.
New Customer Cohorts
China is luxury's No. 1 growth market. Other cohorts include HENRYs (High-Earners-Not-Rich-Yet), millennials and Generation Z. Each cohort has its own distinctive opportunities and pressures for client centricity. For example, circularity and sustainability are powerful drivers for Generation Z, which increasingly mixes luxury streetwear with vintage luxury to play into their personal brands and self-expression.
The Experience Path
The success of third-party e-commerce sites presented luxury brands with a choice of whether to continue selling as normal or to embrace the shifting digital landscape. Leading luxury brands have found ways to harness e-commerce opportunities, focusing more on creating a unique luxury experience with online and offline elements. For example, Prada’s dressing rooms are able to read the electronic tags found on each item of the brand for available colors, sizes, complementary items, and more. Gucci’s 63 Wooster Street features a 3D screening room and multisensorial space where musicians in residence perform. YooxMirror’s mobile application allows users to "try on" clothes from the retailer’s site by creating and styling an avatar that looks like them.
Circularity and Sustainability
Clienteling services are becoming vital in ensuring greater transparency, circularity and sustainability, especially those services that come after the initial sale of a luxury product. Take-back and recycling programs offer sustainable consumption options, including Eileen Fisher’s pioneering Renew program. Similarly, The Fashion Pact is a global coalition which helps major luxury houses such as Burberry, Kering, and Prada to offer brand-to-brand exchanges for greater environmental sustainability.
Ecosystem Partnerships
Many luxury brands and retailers are adopting an innovation ecosystem approach, forming strategic partnerships with tech companies to develop, refine and implement greater digital capabilities. This is enabling them to scale on social media by creating online and hybrid content to draw in customers and tell the brand’s story across different platforms. It's also scaling marketing and sales through, for example, collaborations with retail platforms such as Yoox Net-a-Porter, Farfetch, and Tmall.
Looking to 2021, the luxury industry is facing challenges and opportunities as the world emerges from the COVID-19 pandemic. Thanks to new digital technology, customers expect to be able to browse and buy online as well as in-store, to get instant and accurate information about a product’s sustainability and authenticity, and to be looked after post-purchase. Luxury retailers and brands able to embrace a more conscious, collaborative and connected model will be well-placed to evolve the industry at a pace that aligns with customer expectations.
Julie Petit, CPA, is a partner in the Mazars Luxury Group and an expert in luxury retail, working with some of the world’s largest retail and luxury companies. Julie.petit@mazarsUSA.com.
