Do or die: Luxury brands’ digital problem

In an era, which signifies the glorious run of consumers embracing digital like never before in all aspects of their lives, luxury brands have been very cautious about adopting digital. The fear that it will dilute the aura surrounding the brand has kept most luxury brands from diving fully into selling their products online.

They do have a genuine concern here; after all it’s the premium you pay for their brand and not so much the product. The experience of walking into a Louis Vuitton showroom, the touch and feel of the product, and walking out with your purchase, has always been an intrinsic part of the luxury brand aura.

Over the years, luxury brands like Hermes, Louis Vuitton, Dior, and many more have been in two minds about their digital sales approach. Some have been more open than others. Brands like LV, Prada, and Gucci claim to have about 8%-12% of their overall sales coming from digital channels. More conservative, and if I may add, more premium brands like Hermes have about 5%-6% of their sales from online channels.

What amazes me further is that these brands have great following on social media, sample this—Louis Vuitton has almost 40 million followers on Instagram, Gucci is even bigger with almost 42 million followers. Brands like Dior & Prada have almost 25 million to 32 million followers. So while the brands have not been shy to put their brand out there in the hands of the future consumers, they have not shown the same enthusiasm when it comes to online sales.

The story of 2020 has been so unique that no brand, category, or country has been untouched with the disruption that the pandemic has brought upon us. There has been an absolute bloodbath in the retail sector. With most countries having enforced lockdowns and some now facing a second wave of lockdowns, retail showrooms have become huge liabilities for companies. While the fast fashion category brands like Zara have moved quickly to shut down many of their retail storefronts.

They have done so on the back of huge upsurge in their online sales. Luxury brands have been caught with their hand in the cookie jar on this one. The change in consumer behavior has been so fast and furious that it has drowned down stray stories, like the one-day ‘revenge buying ‘ spree the Hermes Guangzhou flag ship store witnessed. The store made news for maxing out the daily sales at over $2.7 million. While this is massive, it’s no way an indication of any serious retail bounce back for these luxury brands.

On the other hand, the tourism sector shrinking has added to the retail woes of the European flagship stores of these brands, a large part of their sales came from Asian tourists into cities like Paris and London. This has almost disappeared now. While most of the luxury brands do have the deep pockets to sustain their major retail stores, there will definitely be a big downsizing of stores globally across all brands.

Why luxury brands are well placed to leverage this

1. Luxury brands have been big investors in upgrading their technology infrastructure for better management of inventory & the supply management process.

2. Their investment in social media and digital marketing over the years has built a sizable fan base, and more importantly, a brand connect with the next generation of consumers.

3. A large part of the sales process for luxury brands is rooted in industry events, like the major fashion shows that take place in cities like New York, Paris, and Milan. All these shows are now moving online, at least for this year. This is another great opportunity for the brands to leverage their digital sales push.

4. Another trend that has emerged online is that of buying pre-owned luxury items. This has been a huge success and in the process built many potential consumers for these brands and all of them are very comfortable buying online.

5. Lastly there are many successful case studies of luxury brand online aggregators like Farfetch that have proven without doubt that consumers are willing to buy luxury brands online.

Pushing digital sales will also help these brands get deeper into analytics about their customers and buying behavior. Some of the luxury brands till date operate archaic customer analytics tools.

Do not be surprised if you walk into a flagship store of one of these brands and find that they do not have any data about you in their system even if you are a regular buyer. The reason being most of them still have region specific database, so if you buy, say in Asia, the European stores will not have any details about you.

Digital sales will change all this, and help these brands really leverage their customer analytics especially during unprecedented times like these. With all of this going on, 2020 will go down as a defining year for luxury brands and their tryst with digital sales.

Views are personal. The author is co-founder, Rainmaker Ventures.