Luxury Brands Stumble Online
Luxury marketers pretty much sat out the dot-com boom, the following bust and the period since then for a variety of reasons. Many, according to a piece on AdAge.com, did so because staying offline kept their mystique and exclusivity alive. All that seemed to be working pretty well until the recession hit and many consumers said the heck with mystique; just give me a great price.
According to a study of 109 luxury items in 11 product categories by NYU’s Stern School of Business, the number of upscale brands that had a presence online jumped from 33 percent last year to 66 percent today.
Scott Galloway, an associate professor of marketing at the school, told Ad Age, "It was fine when revenues were growing 11 percent a year. And then everything changed. They’ve woken up and said, ‘Last holiday season sales were down 34 percent but traffic to our website was up 61 percent.’ Brands are innovating out of necessity."
Many luxury brands are still trying to match the sophistication of their digital efforts with that of their products. Missteps have been common along the way. That is changing, however, and a number of brands are demonstrating the power of online and mobile marketing to improve the customer experience and support sales. Cases in point include:
- BMW sending text messages to remind owners about service needs.
- Estee Lauder has developed a makeover widget to show consumers how they will look using its beauty products.
- Apple and Sony have used search, video and user-created content for a more meaningful experience online.
Discussion Questions: Do luxury brands have special considerations communicating with consumers and/or selling online? Are there specific luxury brands and/or retailers that have established models in websites, social media, search, mobile marketing, etc. that are worthy of emulation?
The opportunity for luxury products to promote and sell online is great. Not only can they increase awareness and sales among their existing target audience, but those people who would be intimidated checking out Fendi, Prada and Tiffany in a store, might be more inclined to examine the wares on line.
It makes sense for the retailers to look at their potential overall, i.e. consumers across all economic strata. Then they should apply the four principles regarding website development and criteria for effectiveness:
Motivation (of the consumer to come to the website, information or transaction or both)
Expectation of the visitor regarding the website and internet in general (some people are more experienced than others on the internet)
Navigation (according to visitor requirements)
Content (hierarchy of information flow)
All websites cannot be executed identically and be effective. The designers must take into consideration the unique characteristics of the target visitor to develop a site that seems to flow intuitively for that person. Regardless of any bells and whistles, consumers will follow the path of least resistance on the website. If that direction is intended by the retailer then the outcome will be a win win.
As we have discussed on these pages before, a brand’s essence should be communicated across all consumer touch points. This holds true for a luxury brand or a bargain brand. Luxury brand consumers are just as likely to go online or use mobile phones. Why shouldn’t a brand try to reach its customers through these media?
The examples presented in the article demonstrate how luxury brands have adapted to the changing online world. They are creative, yet appropriate applications of Internet and mobile technology. Look to see more luxury brands online and in mobile phone applications.
There is lots of potential for luxury brands to improve the customer experience and promote special events/offers via the web, mobile marketing, and social media. But, while these tools can enhance the customer’s overall experience, I think there is less potential to build a “typical” luxury brand’s online sales. (Not saying they won’t grow – just don’t see growth at a fast pace.)
It’s hard to have a “luxurious” experience over the web and the attention that luxury shoppers get in-store will always be superior to the e-experience. Sure, online, mobile, and social tools will get better and better, but the e-shopping experience still has a self-service feel. While some luxury shoppers are the “do it yourself” types, many more like the personal attention and pampering that is provided by luxury brands in physical locations. So, using e-tools to drive them there is a great approach.
Here’s one explanation I’ve heard for luxury retailers’ sudden interest in online – I’m not saying it’s right, but it is interesting. There are two type of luxury buyers in today’s environment: “older” luxury buyers, and “younger” buyers. The older buyers saw a large chunk of their wealth vanish, and even though it has not necessarily hurt their ability to spend, it has been a bit of a shock to their thinking ahead. They don’t have a long timeline to recover that wealth. Younger buyers have a longer term view and so are not as worried. They are still spending, and being younger, like engaging with retailers in non-traditional channels (i.e., beyond the store).
The challenge is indeed in making the online experience “luxurious,” but beyond the normal challenges of making the product experience as powerful as possible when the main point of interaction is a metal or plastic keyboard and a screen, I think there is more to be said about the service element – making luxury customers feel special when they shop online. One of the biggest elements of luxury brands is service above and beyond the call of duty, and that’s hard to achieve in a primarily self-service environment. However, I think it can be overcome with exclusive access – exclusive access to designer previews or interviews, exclusive membership in online venues that “the riffraff” can’t access. Exclusive is the key word here for sure.
By failing to invest in online tools, luxury retailers have failed to tap into international markets as well. That’s probably the most pronounced missed opportunity; they’ve had the potential to leverage their reputation and air of exclusivity to sell cosmetics to women in Japan, and handbags to the wealthy women of Argentina.
Luxury is a big, fragmented category; defined in many ways by many consumer segments. It’s the fragmentation that makes the web an invaluable tool (Long Tail anyone?). That jump from 33% of the brands being online to 66% tells me there is huge upside potential not only to sell more stuff, but for these brands to have deeper and more robust relationships with new customers.
For fashion brands, they need to shake the old-school thinking that the buyers at Bergdorf’s and Barney’s are going to grow their businesses for them. They need to think more like Twitter-ific Betsey Johnson and laser-focused, web-savvy Diane von Furstenberg. Heard about the mysterious Gilt.com?
Not having a compelling and search engine-visible web presence in this day and age is quite frankly startling, but it’s true. The potentials are great. There are some innovative, highly experiential techniques being used by retailers, brand marketers and serious geeks pushing the digital envelope that are enabled by the web, not just selling on the web. Think augmented reality and mobile apps. Luxury brands are perfect for this sort of thinking. They should be taking risks and experimenting like they do in their studios every day. Look at what Isaac Mizrahi is doing with his Inspiration Boards app to build his community.
There is a base assumption that the web is another distribution endpoint (how many doors am I in with Macy’s?) when in reality the web is and should be a significant component in a multi-channel, multi-touchpoint relationship with consumers. And quite frankly can be anything the brands’ want it to be.
Luxury brands have enjoyed a multi-decade trajectory that has allowed them to build it and we came. The new normal has not rendered these offers irrelevant; on the contrary, with the right reach into their own robust heritages and brand stories, they are uniquely poised to create new relevancy with consumers via innovation digital and otherwise.
The challenge for a luxury brand online is conveying the experience of the brand. If a customer is going to spend the type of money to purchase a luxury product then they expect a high quality customer experience and that’s not always easy to do online. In store the brand can provide amenities to the customer that ensures a top quality experience. How do you duplicate the experience of a nice atmosphere online?
Do luxury brands have special considerations communicating with consumers and/or selling online? Some random thoughts….
Yes, they have to be concerned because their business model operates in a long lead-time fashion business where 95% or higher of profits come from 5% or lower of their customers. These folks have commission sales people as well (and outlets) But looking at the examples cited, it looks like the brands mentioned are innovating around the customer experience (obvious):
-BMW is saying – we’ll help you make sure your driving experience is at its peak and the folks that will insure it are the folks who make the machine….
– Estee is saying – we’ll take what we already know about your preferences and skin type, and use it to help you make better decisions, without pushy salespeople, who may make you feel uncomfortable in the store. I am sure there is a valuable enough segment that feels that way;
– Apple is saying – the relationship doesn’t end with the sale, we want you to make the most of these products, and the place we will learn is our own user base. Welcome to the club.
The top 5% of customers will still get extreme attention. For the rest, perhaps the message is, we care about you as well but to pull it off, we need to go digital.
Also, I just did a quick check for the frequency of the words ‘love’ and ‘hate’ for a few luxury brands on Yelp, and that quick check revealed lots of love. The attributes of a luxury business are growing beyond, color, size, and material; they now include sourcing, greenness, celebrity (in a big way) and community.
I think Macy’s cause-based marketing campaigns are interesting, they are also complex but very web friendly.