Despite declining consumer confidence and the ever-looming threat of the supposed “retail apocalypse”, luxury brands seem to be doing better than ever. In fact, according to the Bain Luxury Study, the global luxury market grew 5% to €1.2 trillion in 2017. However, retail as a whole is changing rapidly, and for luxury brands to thrive, they will inevitably have to adapt to this evolving market in order to stay at the top of the ladder.
It can be hard to know where to start - as we know, luxury retail is a very different beast to other parts of the sector, with its own high set of standards. That’s why we’ve come up with our top three recommendations for how luxury brands can maintain their prestige and keep their customers happy.
1. Sell more than just products - sell experiences
All we ever seem to hear about these days is the importance of an online brand presence. Retail can no longer exist in a purely brick and mortar world, and that is certainly not a bad thing.
The very nature of luxury retail lends itself to physical retail over online. When someone invests their hard-earned cash in a high-end product, they are not just buying that item. They’re buying a lifestyle, a sense of exclusivity, a promise of quality and value. This means that customers want the chance to examine, touch and try on products before they buy - a necessity that comes with the price tag, naturally.
Even tech-savvy millennials are still invested in brick and mortar, with Deloitte’s research concluding that 43% of American millennials still prefer to buy luxury goods in-store.
However, this does not mean that retailers can afford to be complacent. Today’s consumers are more demanding than they have ever been, and the prestige of a luxury label alone can no longer guarantee success.
So how can brands become masters of reinvention in a sector that is so steeped in heritage and tradition? The key is investing in experiential retail.
The fact is, consumers just aren’t as willing to spend their Saturday afternoons in shopping malls any more. To get people to spend their precious leisure time shopping, then, retailers have to offer them something they can’t get online - a unique experience. We’re living in an age of limitless choice, and interaction with a brand outside the usual customer/vendor relationship can help forge that elusive brand loyalty.
A lot of retailers are already transforming their stores to place more emphasis on customer experience and less on selling. Some are even investing in spaces that are not for selling anything at all! Take for example Coach’s Life Coach pop-up, designed to ‘lead guests on a journey of self-discovery’, or Dolce and Gabbana’s cultural hub, which serves as a hang-out spot and events venue.
Providing a space for customers with no products in it might seem counterproductive, but in fact, this new “brandship” store concept, focusing on brand identity rather than sales, is exactly what’s needed in luxury retail. Luxury shoppers expect stores to go above and beyond for their customers, and creating a brand experience with no pressure to actually buy anything can be a way to fulfil this expectation. After all, luxury is not just what you buy, or even how much it costs; it’s all part of a carefully cultivated lifestyle.
2. Tap into the millennial mindset
The group that seems to respond best to the experiential model is, incidentally, one of the main demographics that luxury retailers should now be turning their attention to: millennials.
Numerous studies trying to crack the code of what young people want have found that millennials are much more motivated by experiences than they are by products alone. This may be partially due to a shift towards more conscious consumerism, and partially due to a more precarious economic situation. Either way, “frivolous” spending appears to be becoming a thing of the past.
However, this certainly does not mean that millennials aren’t buying luxury products. Older millennials are now starting to become HENRYs (High Earners, Not Rich Yet), a prime target for luxury retailers. And even amongst those who strive to be more ethical shoppers, quality will always be a huge factor. Many millennials value a minimalistic approach to consumerism, which actually meshes well with the quality-over-quantity ethos of luxury retail.
To capture the attention of millennials, it’s essential to understand what luxury means to them, a definition which has shifted in recent years. As well as a greater emphasis on ethical shopping and sustainability, younger consumers are increasingly concerned with supporting brands that align with their values and identity.
This is most prominently seen in their dedication to diversity and inclusion. Rihanna’s Fenty Beauty line, with its tagline ‘Beauty For All’, was applauded by young people for its vast range of foundation shades, and has caused many other brands to follow suit. Chanel’s new male makeup line, Boy de Chanel (whilst decidedly more of a niche market) has had similar praise. On the flip side, Victoria’s Secret recently faced a backlash after marketing director Ed Razek stated that they wouldn’t hire plus size or transgender models for its famous fashion show.
On a more individual level, millennials are also drawn to personalisation, with high value placed on self-expression and the cultivation of a strong identity. 21% of millennials use words like “personalised” and “fun” to describe luxury, and they will actively seek out brands who can provide this sense of uniqueness.
The really smart brands will also be focusing on laying the groundwork with younger millennials, and even Gen Z. The youngest generation may not be able to afford luxury items for many years yet, but forging a presence in their consciousness will stand brands in good stead for the future, providing an aspirational goal for young consumers.
3. Cater to China’s Free Independent Travellers
By far the most vital demographic for luxury retailers right now, though, is tourists - and more specifically, wealthy Chinese tourists. In 2017, Chinese travellers spent a whopping $274 billion abroad, and contribute to 21% of tourism spending globally.
In fact, according to Vogue Business, Chinese consumers are set to make up 46% of all personal luxury goods purchases by 2025. In other words, the future of luxury is firmly in the hands of wealthy Chinese shoppers, a significant number of whom purchase their goods abroad.
A growing number of these consumers are what are called “Free Independent Travellers”, who are often digitally-savvy young women - in other words, prime candidates for luxury shopping.
Many luxury brands such as Gucci, Dior and Burberry are already seeing the value of catering expressly to this key demographic. The Lunar New Year was celebrated earlier this week, an occasion marked by special Year of the Pig campaigns from these and several other brands, which will undoubtedly help cement their reputation in China.
The main way to draw in Chinese tourists, though, will be accommodating to their needs no matter where they are - for example, by providing the option to pay via WeChat. If you haven’t already heard of it, WeChat is a messaging, social media and mobile payment app with over 1 billion users. In other words, it’s a big deal - and stores that offer it as a payment option will inevitably be favoured by its users.
Now the question is, how can luxury retailers act on this advice? The answer is, of course, in-store execution.
A new experiential store concept only works if the visual merchandiser’s vision has been properly implemented. Millennials will only shop in-store if it offers something more enticing than just ordering online. And affluent Chinese tourists will be more likely to spend if they are being properly taken care of in stores. Luxury brands that truly live up to their name will be able to provide their customers with all of this and more.
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