Embracing tech is key for next-gen UK luxury shopper - Walpole report
With the luxury sector continuing to grow, UK businesses, or global names operating in the country, need to understand the changing dynamics of the luxury consumer and to react to the way affluent consumers now want to shop and that means embracing technology.
That’s the conclusion of a new report from luxury body Walpole and property firm CBRE, released Friday.
The UK luxury sector has grown 33% from £3.4bn in 2012 to £4.5bn in 2017, according to Euromonitor and despite the Brexit vote hitting local consumer confidence, the influx of tourists due to the weak pound has continued to support rising luxury spend in Britain.
But the luxury sector can’t depend on that to support its growth, and technology will be a key focus for the future. That’s especially the case as an earlier survey showed as many as 57% of Walpole’s luxury company members believing they had suffered from an underinvestment in e-commerce in previous years.
Walpole said that the sector has now woken up to the importance of e-tail, although retailers still “need to strike the right balance between complying with the desires of each customer and staying true to what the brand stands for.”
Many luxury retailers have both identified e-commerce as one of their main priority areas over the next five years and recognised the importance of providing in-store retail technology and e-commerce platforms to cater for the next generation of luxury customers.
But another challenge is that this ‘next generation’ is made up of Millennials and Gen Z who aren’t as affluent (yet) as their elder peers. That could be the reason for many firms focusing on ultra-luxury, as Burberry has in the last year, but Walpole said it’s still important to grab the brand loyalty of these younger consumers now, as their incomes will only rise in the years ahead.
Technology could be key to this and developments might include “the rollout of ‘showroom’ type stores where customers can experience the product first [then order online] and get the item delivered at home.”
And while “the next generation of luxury customers will currently spend less on luxury products, they are likely to purchase higher volumes of more affordable luxury goods and will prefer to use technology to carry out their purchases.”
However, although Millennials and Gen Z love tech, they generally prefer to purchase in- store. They want to see, touch and try out the product before the purchase, the report said.
“This age group also sees shopping as part of a leisure activity and therefore expects an experiential environment when they shop. Store design and position will therefore become increasingly important to facilitate an experiential environment for their customers who use technology to suit their lifestyle. Millennials also expect a convenient shopping environment as part of the service provision in-store. They want to try and return items quickly, not have to wait to pay and be able to order items in-store.”
Despite their store preference, the report highlighted the omnichannel approach of these consumers, buying 58% of luxury goods online and 78% in-store, “which indicates the significance of providing a seamless retail environment across both.”
It cited Burberry’s Regent Street store as an example of how technology is being used to enhance the physical shopping experience with a unique audio-visual experience. That includes floor-to-ceiling screens to display catwalk footage, supported by hundreds of surround-sound speakers. Screens and mirrors, dotted around the store, display tailored multimedia content as people approach, which “enables retailers to place fewer items on the shop floor, creating a minimalistic display while adding to the exclusive feel for the brand.”
“Meanwhile, all store staff have tablet devices that can display a customer’s purchase history and therefore help them to provide advice on suitable products. These initiatives all add to the personalised store experience, supporting the luxury nature of the brand through the use of technology, and reinforcing consumer desire to visit the store.”
And Walpole said Harrods has also embraced tech. The latest version of its app features beacon technology which helps customers to navigate through the store. It’s also partnering with Quividi to be able to anonymously track customer responses to digital advertising to help identify who the audience are for each campaign and providing Harrods with information on who is visiting its store and which brand they are interested in. And as part of its £200m ongoing revamp, and in recognition of the importance of Chinese customers, Harrods introduced Alibaba’s digital payment system, Alipay and plans to introduce Tencent’s WeChat Pay this year.
Walpole added that features such as in-store beacons and wifi hotspots are increasingly being used and are more than just gimmicks as they can help combine customers’ online shopping habits with those in physical stores and help track who is coming into the store.
“Luxury brands will have a smaller number of regular shoppers than mass-market retailers, meaning they will be better positioned to understand each individual customer,” it said. “Sending updates to store staff as customers come into stores, which analyse previous purchasing habits both online and in-store, will help staff provide more effective advice and enhance in-store service provision.”
The body believes that fewer and fewer brands will choose to follow the approach of Celine, which doesn’t yet sell online, “as brands come under pressure to meet consumer expectations [of] spending significant sums of money online.”
It said “a fully transactional website is crucial as e-commerce is the major growth channel in retail. CBRE expects it to increase its share in the UK to around 19% of all retail sales at the end of 2021. Therefore, despite wanting to maintain brand exclusivity, and trying to encourage consumers to make the most of the in-store experiences that come as part of the luxury brand experience, "retailers who choose to avoid providing at least a fully transactional e-commerce platform might alienate themselves from shoppers. This is particularly the case with younger, more tech-savvy consumers.”
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