DIGITAL

How Social Media & Luxury Brand Websites Are Impacting eCommerce

by

Sophie Doran

|

This is the featured image caption
Credit: This is the featured image credit

Ambrogio Michetti, manager at McKinsey & Co, explains that today’s luxury consumers are perfectly comfortable buying all manner of items online

Over the last decade, collaborations between luxury brands and contemporary artists have gone beyond mere artistic partnerships towards a new kind of luxury branding.

PARIS – Art and fashion have always developed side by side, for fashion, like art, often gives visual expression to the cultural zeitgeist. During the 1920s, Salvador Dalí created dresses for Coco Chanel and Elsa Schiapparelli. In the 1930s, Ferragamo’s shoes commissioned designs for advertisements from Futurist painter Lucio Venna, while Gianni Versace commissioned works from artists such as Alighiero Boetti and Roy Lichtenstein for the launch of his collections. Yves Saint Laurent’s vast art collection, recently auctioned at Christie’s in Paris, testified to his great love of art and revealed the influence of a variety of artists on his own designs.

In the 1980s, relationships between luxury brands and artists were advanced when Alain Dominique Perrin created the Fondation Cartier. In the Fondation Cartier pour l’Art Contemporain, a book marking the foundation’s 20th anniversary, Perrin says he makes “a connection between all the different sorts of arts, and luxury goods are a kind of art. Luxury goods are handicrafts of art, applied art.”

The Fondation Cartier pour l’Art Contemparain building in Paris

Ambrogio Michetti, manager at McKinsey & Co, explains that today’s luxury consumers are perfectly comfortable buying all manner of items online

Part of Louis Vuitton’s fully integrated content and commerce website

Ambrogio Michetti, manager at McKinsey & Co, explains that today’s luxury consumers are perfectly comfortable buying all manner of items online

Luxury goods companies worldwide have focused considerable attention on online marketing and sales channels in the past year, to tangible effect. Initially, many were wary, fearing that e-commerce might diminish their brands’ integrity or that customers would be unlikely to buy expensive items without seeing them first. Indeed, the reasoning went, the in-store sales ceremony was an intrinsic part of the value proposition.

Most now accept that such arguments no longer hold for many luxury goods. Today’s consumers are perfectly comfortable buying all manner of items online. And even if some still prefer to make their purchases in a store, their buying decisions are often influenced by their online experience.

Ambrogio Michetti, one of the authors of Digital Luxury Experience 2012, shares the key insights from the second report produced by the Altagamma-McKinsey Online Observatory, a collaboration between the Altagamma Foundation and McKinsey & Company.

“ A brand’s web site & positioning on social media contribute a great deal to the way customers’ perceive brands ”

Conducting the report…

Firstly we analysed the digital market of more than 300 personal luxury goods companies. We gauged current online sales and assessed future outlook according to price segment, channel and geographical breakdown.

We also clustered these companies into eight product categories and 13 sub-categories, in order to compare companies to their peers. We measured some 700 web sites, with more than 70 indicators along the following dimensions: social media and buzz volume, Digital Customer Decision Journey steps, website usability, digital investments, organisations and capabilities.

We also conducted interviews with 2,500 consumers in five major luxury markets— Germany, France, Italy, the United Kingdom, and the United States.

“ The growth rate of digital sales is 3 times higher than the total luxury market ”

Unsurprisingly we confirmed…

Digital sales are a powerful growth engine for luxury good companies. Although the growth in luxury over the past two decades has been propelled by the expansion of specific regions— first the United States and Japan, then, since the turn of the century, the U.S. and Asia – digital growth is now crucial. Its growth rate is 3 times higher than the total luxury market, with online sales reaching €6.2 billion in 2011.

And these figures tell only part of the eCommerce story. A company’s digital presence also influences what consumers do when they are shopping offline. A brand’s web site and its positioning on social media contribute a great deal to the way customers’ perceive brands and, if done successfully, they can help drive in-store sales. Our research suggests that the two types of ROPO sales (research online, purchase offline, and vice versa) comprise as much as 40 % of total market sales in 2011.

Since the digital world evolves quickly, luxury companies will have to work harder and harder to keep up, let alone excel. The proliferation of technological platforms and of on- and offline customer touch points make it challenging for companies to both capture consumers’ attention and simultaneously protect the brand by ensuring that the consumer experience is always on-message.

“ More than one-third of those surveyed said that if they want to make a purchase, they do so on the same day ”

More surprisingly we found…

One of the most intriguing insights to emerge from the survey is the speed with which consumers make luxury purchases. More than one-third of those surveyed said that if they want to make a purchase, they would do so on the same day they conducted an online search. About one-third of these speedy shoppers went to a store to buy the item, while the remainder purchased online.

In order to meet the needs of these shoppers, online stores must be easy to use, display a wide range of products (wider than many companies have offered to date), and effectively emphasise the value of those products, be it the craftsmanship, lifestyle appeal, or quality.

Simply put, consumers are even more in control than we thought. They are looking for a more direct online relationship with the brands they buy, and companies will need to respond with a variety of strategies, such discounts on selected products for selected customers based on their online behaviour. Some 40 % of our survey respondents said that personalised offers would tempt them to make additional purchases online. Luxury goods sellers also have to provide exceptional service in all sorts of ways, since customers value many different elements of the online offer.

Almost half of the respondents in our survey identified first-rate service, such as same-day delivery or gift wrapping, as reasons for paying a premium. One-fifth said a more streamlined, simpler transaction process would encourage them to make further purchases.

Another surprising finding was that approximately 50% of total online sales come from full price websites. And if the online sales of department stores are included, the proportion of full-price online sales is higher still. This finding banishes past concerns that discounted goods would represent the bulk of online luxury sales.

“ Approximately 50% of total online sales come from full price websites ”

Since the last study…

Since our last survey in 2011, monobrand retailers have shown an enormous increase in their social media presence. They have, on average, raised the number of people who follow them on Twitter by 422 %, and increased the number who “like” them on Facebook by 63 %.

Luxury companies have also improved the functionality of their sites. No longer needing to be persuaded of the importance of e-commerce and unwilling to give up more market share to online competitors, many brands have invested heavily in their online sites, attempting to recreate aspects of the in-store shopping experience. Catwalk shows, social networking features, product rotations, virtual personal shoppers, and a high level of service are common features.

As a result of this investment, digital sales for monobrand retailers grew by an average of 37 % last year, and consumer sentiment about these brands has, on average, improved by 7 %, as measured by positive comments posted online.

“ Only 15% of the companies in our survey had a mobile site. Only 20% had a mobile application ”

Looking to the future…

Although we’ve seen considerable advancement since the last report, there is much more work to be done. Branded goods companies need to accompany their consumers as they cruise effortlessly between blogs, search engines, retailers’ sites, social media, and branded mobile applications. But some are lagging.

Only 15 % of the companies in our survey had a mobile site, for example, and only 20 % had a mobile application. Of the latter, only 40 % provided an android version of the application, thus failing to keep pace with a large swathe of potential customers.

And there’s ample opportunity to enhance the digital shopping experience. What luxury shoppers miss most about being online, it seems, is the ability to have human interaction and to appreciate the physicality of the product.

Only in a store can customers seek advice from a real assistant, be sure the item will fit, and know what it really looks like and what it feels like to hold or wear. Companies that can do anything to compensate for these missing experiences online will find themselves at a considerable advantage.

“ The difference between poor & excellent online skills can affect those sales by as much as 10 % ”

If readers remember only one thing it should be…

A company’s online abilities are crucial, no matter what the category. Even in a sector that does not lend itself to a particularly high level of online sales, such as design and furniture, the difference between poor and excellent online skills can affect those sales by as much as 10 %, according to our research. In the hotel sector, being online-friendly can boost sales by as much as 30 %.

For luxury goods manufacturers, the real-life shopping experience has always been considered an essential component of a brand’s equity, so making online connections with consumers can be particularly challenging.

But with digital sales set to power so much of the industry’s growth in the next five years, it is a connection that luxury goods companies have to get right. The Altagamma-McKinsey report shows that when they do, they not only improve consumers’ online experience of the brand, but also transform that experience into sales.

Luxury Society invites our readers to discover McKinsey’s full Digital Luxury Experience 2012 Report and contact author Ambrogio Michetti for more information regarding the research

To further investigate eCommerce on Luxury Society, we invite your to explore the related materials as follows:

Luxury Brands, Retailers & The Evolution of E-Commerce
Personalising the Luxury eCommerce Experience
The New Customer Service Means Offering Convenience

Sophie Doran
Sophie Doran

Creative Strategist, Digital

Sophie Doran is currently Senior Creative Strategist, Digital at Karla Otto. Prior to this role, she was the Paris-based editor-in-chief of Luxury Society. Prior to joining Luxury Society, Sophie completed her MBA in Melbourne, Australia, with a focus on luxury brand dynamics and leadership, whilst simultaneously working in management roles for several luxury retailers.

DIGITAL

How Social Media & Luxury Brand Websites Are Impacting eCommerce

by

Sophie Doran

|

This is the featured image caption
Credit : This is the featured image credit

Ambrogio Michetti, manager at McKinsey & Co, explains that today’s luxury consumers are perfectly comfortable buying all manner of items online

Over the last decade, collaborations between luxury brands and contemporary artists have gone beyond mere artistic partnerships towards a new kind of luxury branding.

PARIS – Art and fashion have always developed side by side, for fashion, like art, often gives visual expression to the cultural zeitgeist. During the 1920s, Salvador Dalí created dresses for Coco Chanel and Elsa Schiapparelli. In the 1930s, Ferragamo’s shoes commissioned designs for advertisements from Futurist painter Lucio Venna, while Gianni Versace commissioned works from artists such as Alighiero Boetti and Roy Lichtenstein for the launch of his collections. Yves Saint Laurent’s vast art collection, recently auctioned at Christie’s in Paris, testified to his great love of art and revealed the influence of a variety of artists on his own designs.

In the 1980s, relationships between luxury brands and artists were advanced when Alain Dominique Perrin created the Fondation Cartier. In the Fondation Cartier pour l’Art Contemporain, a book marking the foundation’s 20th anniversary, Perrin says he makes “a connection between all the different sorts of arts, and luxury goods are a kind of art. Luxury goods are handicrafts of art, applied art.”

The Fondation Cartier pour l’Art Contemparain building in Paris

Ambrogio Michetti, manager at McKinsey & Co, explains that today’s luxury consumers are perfectly comfortable buying all manner of items online

Part of Louis Vuitton’s fully integrated content and commerce website

Ambrogio Michetti, manager at McKinsey & Co, explains that today’s luxury consumers are perfectly comfortable buying all manner of items online

Luxury goods companies worldwide have focused considerable attention on online marketing and sales channels in the past year, to tangible effect. Initially, many were wary, fearing that e-commerce might diminish their brands’ integrity or that customers would be unlikely to buy expensive items without seeing them first. Indeed, the reasoning went, the in-store sales ceremony was an intrinsic part of the value proposition.

Most now accept that such arguments no longer hold for many luxury goods. Today’s consumers are perfectly comfortable buying all manner of items online. And even if some still prefer to make their purchases in a store, their buying decisions are often influenced by their online experience.

Ambrogio Michetti, one of the authors of Digital Luxury Experience 2012, shares the key insights from the second report produced by the Altagamma-McKinsey Online Observatory, a collaboration between the Altagamma Foundation and McKinsey & Company.

“ A brand’s web site & positioning on social media contribute a great deal to the way customers’ perceive brands ”

Conducting the report…

Firstly we analysed the digital market of more than 300 personal luxury goods companies. We gauged current online sales and assessed future outlook according to price segment, channel and geographical breakdown.

We also clustered these companies into eight product categories and 13 sub-categories, in order to compare companies to their peers. We measured some 700 web sites, with more than 70 indicators along the following dimensions: social media and buzz volume, Digital Customer Decision Journey steps, website usability, digital investments, organisations and capabilities.

We also conducted interviews with 2,500 consumers in five major luxury markets— Germany, France, Italy, the United Kingdom, and the United States.

“ The growth rate of digital sales is 3 times higher than the total luxury market ”

Unsurprisingly we confirmed…

Digital sales are a powerful growth engine for luxury good companies. Although the growth in luxury over the past two decades has been propelled by the expansion of specific regions— first the United States and Japan, then, since the turn of the century, the U.S. and Asia – digital growth is now crucial. Its growth rate is 3 times higher than the total luxury market, with online sales reaching €6.2 billion in 2011.

And these figures tell only part of the eCommerce story. A company’s digital presence also influences what consumers do when they are shopping offline. A brand’s web site and its positioning on social media contribute a great deal to the way customers’ perceive brands and, if done successfully, they can help drive in-store sales. Our research suggests that the two types of ROPO sales (research online, purchase offline, and vice versa) comprise as much as 40 % of total market sales in 2011.

Since the digital world evolves quickly, luxury companies will have to work harder and harder to keep up, let alone excel. The proliferation of technological platforms and of on- and offline customer touch points make it challenging for companies to both capture consumers’ attention and simultaneously protect the brand by ensuring that the consumer experience is always on-message.

“ More than one-third of those surveyed said that if they want to make a purchase, they do so on the same day ”

More surprisingly we found…

One of the most intriguing insights to emerge from the survey is the speed with which consumers make luxury purchases. More than one-third of those surveyed said that if they want to make a purchase, they would do so on the same day they conducted an online search. About one-third of these speedy shoppers went to a store to buy the item, while the remainder purchased online.

In order to meet the needs of these shoppers, online stores must be easy to use, display a wide range of products (wider than many companies have offered to date), and effectively emphasise the value of those products, be it the craftsmanship, lifestyle appeal, or quality.

Simply put, consumers are even more in control than we thought. They are looking for a more direct online relationship with the brands they buy, and companies will need to respond with a variety of strategies, such discounts on selected products for selected customers based on their online behaviour. Some 40 % of our survey respondents said that personalised offers would tempt them to make additional purchases online. Luxury goods sellers also have to provide exceptional service in all sorts of ways, since customers value many different elements of the online offer.

Almost half of the respondents in our survey identified first-rate service, such as same-day delivery or gift wrapping, as reasons for paying a premium. One-fifth said a more streamlined, simpler transaction process would encourage them to make further purchases.

Another surprising finding was that approximately 50% of total online sales come from full price websites. And if the online sales of department stores are included, the proportion of full-price online sales is higher still. This finding banishes past concerns that discounted goods would represent the bulk of online luxury sales.

“ Approximately 50% of total online sales come from full price websites ”

Since the last study…

Since our last survey in 2011, monobrand retailers have shown an enormous increase in their social media presence. They have, on average, raised the number of people who follow them on Twitter by 422 %, and increased the number who “like” them on Facebook by 63 %.

Luxury companies have also improved the functionality of their sites. No longer needing to be persuaded of the importance of e-commerce and unwilling to give up more market share to online competitors, many brands have invested heavily in their online sites, attempting to recreate aspects of the in-store shopping experience. Catwalk shows, social networking features, product rotations, virtual personal shoppers, and a high level of service are common features.

As a result of this investment, digital sales for monobrand retailers grew by an average of 37 % last year, and consumer sentiment about these brands has, on average, improved by 7 %, as measured by positive comments posted online.

“ Only 15% of the companies in our survey had a mobile site. Only 20% had a mobile application ”

Looking to the future…

Although we’ve seen considerable advancement since the last report, there is much more work to be done. Branded goods companies need to accompany their consumers as they cruise effortlessly between blogs, search engines, retailers’ sites, social media, and branded mobile applications. But some are lagging.

Only 15 % of the companies in our survey had a mobile site, for example, and only 20 % had a mobile application. Of the latter, only 40 % provided an android version of the application, thus failing to keep pace with a large swathe of potential customers.

And there’s ample opportunity to enhance the digital shopping experience. What luxury shoppers miss most about being online, it seems, is the ability to have human interaction and to appreciate the physicality of the product.

Only in a store can customers seek advice from a real assistant, be sure the item will fit, and know what it really looks like and what it feels like to hold or wear. Companies that can do anything to compensate for these missing experiences online will find themselves at a considerable advantage.

“ The difference between poor & excellent online skills can affect those sales by as much as 10 % ”

If readers remember only one thing it should be…

A company’s online abilities are crucial, no matter what the category. Even in a sector that does not lend itself to a particularly high level of online sales, such as design and furniture, the difference between poor and excellent online skills can affect those sales by as much as 10 %, according to our research. In the hotel sector, being online-friendly can boost sales by as much as 30 %.

For luxury goods manufacturers, the real-life shopping experience has always been considered an essential component of a brand’s equity, so making online connections with consumers can be particularly challenging.

But with digital sales set to power so much of the industry’s growth in the next five years, it is a connection that luxury goods companies have to get right. The Altagamma-McKinsey report shows that when they do, they not only improve consumers’ online experience of the brand, but also transform that experience into sales.

Luxury Society invites our readers to discover McKinsey’s full Digital Luxury Experience 2012 Report and contact author Ambrogio Michetti for more information regarding the research

To further investigate eCommerce on Luxury Society, we invite your to explore the related materials as follows:

Luxury Brands, Retailers & The Evolution of E-Commerce
Personalising the Luxury eCommerce Experience
The New Customer Service Means Offering Convenience

Sophie Doran
Sophie Doran

Creative Strategist, Digital

Sophie Doran is currently Senior Creative Strategist, Digital at Karla Otto. Prior to this role, she was the Paris-based editor-in-chief of Luxury Society. Prior to joining Luxury Society, Sophie completed her MBA in Melbourne, Australia, with a focus on luxury brand dynamics and leadership, whilst simultaneously working in management roles for several luxury retailers.

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