Au revoir buses of Chinese tourists on the Champs Elysées. Welcome virtual personal shopping! 

Au revoir Fashion Weeks, reuniting ‘la crème de la crème’ in the fashion capitals. Welcome live streamed cat walks! 

In reaction to lockdown store closures and social distancing, luxury brands like Harrods and Prada have imagined new ways to engage with their consumers accelerating the digital transformation which started 20 years ago.

According to the Business of Fashion, the luxury industry went through 3 waves of innovation. First the wholesale luxury business went digital with Net-a-porter as its poster child. Then challengers like Farfetch launched e-luxury platforms. Finally, the past 10 years have been the stage of interesting business models disruption – from renting haute couture with Rent the Runway, to peer-to-peer luxury goods marketplace like Depop, and new D2C brands like Aurate. All this time, traditional luxury brands have been selling through hybrid models combining traditional retail and direct-to-consumer sales in physical flagship stores.

Today, it looks like the cards are being redistributed. According to Bain & Company, online luxury sales are forecasted to take 25% of the market by 2025 while department stores decline. And, consumers are using that opportunity to shop directly with the brands, increasing their online market share, at the expense of retailers. Brands like Gucci and Saint Laurent have invested heavily in developing unique e-commerce experiences that are integrated with their online marketing and social media platforms.

E-commerce is just one part of the equation

Selling online is not complex… for a ‘regular’ brand. However, when a big part of what your consumers buy is a premium shopping experience with best-in-class service in a beautiful store, translating it online becomes a challenge. And I can imagine that is what luxury brands have been trying to solve for years: how do we maintain the same level of prestige and deliver high-end experiences digitally so that consumers don’t feel they got their experience robbed?

Some brands like Chanel have famously refused to sell its clothing, bags and shoes online, and only very recently began investing heavily in its online experience. Others are experimenting, like Gucci, using augmented reality technology to let the consumers try on shoes and allowing them to buy directly from the app, or Celine whose e-commerce imagery is set as a fashion lookbook. These mechanisms are nice but feel gimmicky and don’t answer the bigger question: how can luxury brands shift from a mostly physical experience to an omnichannel experience?

Beyond the sale, the digital opportunity lies in reinventing the direct-to-consumer brand proposition.

Let’s learn from the media industry. In the last century, it was selling physical products (newspapers and magazines) delivered regularly to your door or bought at the train station. The digitalisation of the economy made news free, dematerialised and accessible to anyone with internet access. Media had to reinvent their value proposition, leveraging their unique assets – journalists, community, etc, as well as organise themselves differently to deliver such propositions to their consumers. They learnt how to monetise quality, exclusivity and access. For example, WSJ+ offers exclusive premium perks for members including invites to member-only events, access to Journal-hosted talks, private museum tours and discounts on luxury goods.

Having helped numerous brands invent new direct-to-consumer propositions in the media and consumer goods industry, there are 4 key elements that need to be considered.

• Product: When you invest the kind of money that goes into luxury products you are perfectly entitled to have it personalised how you want it, not how it comes out of the factory.

• Content & Storytelling: Luxury brands sell status and dreams. From designers, new seasons, ambassadors, influencers…brands dispose of a vast range of assets to generate engaging content to keep their audience interested and entertained. Content is also the best feature to communicate values to consumers. This is especially relevant for Millennials. They will make up 40% of the luxury sales by 2025 and deeply care about engagement and emotionally connecting with the brands they buy through shared values like transparency and sustainability.

• Services: From a premium membership providing exclusive access to a fashion show or the opportunity to connect with an expert to get advice, services can be offered online and offline as part of the shopping experience or a separate service. In 2017, LVMH developed their ecommerce site 24 Sèvres, which offers exclusive designers and pieces. Their loyalty program rewards consumers with benefits like invitations to private sales and personalized shopping advice.

• Community: The sense of belonging to an exclusive group of people is a key part of the luxury experience and can be nurtured by the brand.

It is about creating long term relationships, not a high volume of one-off transactions.

To be successful, the business model needs to evolve.

The two sides of the coin need to be balanced to ensure profitability and contribution to growth.

• Generating value for the business. Beyond sales, direct-to-consumer represents the opportunity for luxury brands to build long-term relationships with consumers. The good news is that by having high-touch personalised service as part of their DNA, luxury brands have a tremendous know-how in gathering qualitative data on their consumers. If leveraged properly, these relationships will bring greater value to the business – increased lifetime value and engagement. If reimagined, the new propositions can create new revenue streams – services, exclusive membership, etc.

• Investment required. To deliver this new type of value proposition, companies will need to harness existing capabilities they have such as service and expert advice, and build new capabilities – content creation, community engagement, digital products and experience. Also, for the consumer omnichannel experience to be smooth, companies will have to hire new skills, change their ways of working and measure performance not only to drive sales but also engagement and retention.

Many consumers will have changed their habits during the pandemic and will likely keep them at least for a while. Hopefully luxury brands can use the next few months as an opportunity to accelerate their digital transformation.