The revolution will not be televised-it will be felt, eaten and digitized-the upcoming challenges of high end fashion retail.
Luxury sales have fallen flat, sales of personal luxury goods — which include fashion, accessories and beauty — are estimated to remain constant reaching 249 billion euros this year.
The Brexit vote and the terrorism threat have impacted shopping in Europe, whereas in the United States, the strong dollar has led to a decline in tourism spending. World anxiety over the results of the US presidential elections has not helped sales, and moreover has led to a focus on bargain-hunting and pushed sales of high-end goods down 3% to 82 billion euros from a year ago, according to Bain & Company’s 2016 Luxury Market Monitor.
“Chinese shoppers, who represent 30% of global luxury spenders (down from 31% last year), have become more individualistic and price-conscious, especially with the rising middle class, and spend more at home” what Bain calls “the new normal” trend.
Luca Solca managing director and sector head of global luxury goods at Exane BNP Paribas published his outlook for the future of the elite fashion industry looking at “a luxury goods industry that is more and more resembling retail”. The executive’s conclusion is that Chinese shoppers’ willingness to pay has been tempered, meaning “the peak of the largest nationality wave ever to benefit luxury goods is behind us. Brands need a new paradigm, other than opening more stores in China and bumping up prices”.
Experts say upscale brands need to rethink their in-store and digital presence to engage with younger, connected customers looking for a personal lifestyle experience. Armando Branchini, vice president of Italy’s Altagamma Foundation, which represents the country’s luxury goods makers, sees this challenge as work of art , “Luxury stores must be like a theater for shoppers. Doing this on a digital platform is more difficult.” Retailers are now expected to have their stores reflect their client’s lifestyle choices and tastes, this is done by producing a corresponding color-scheme filled environment, with an assortment of enticing food and music options to echo and enhance the brand message. Branchini goes on to say, “when shoppers don’t come alone, you need to interact with them inside and outside the store, through innovation and imagination,”.
Brands from Burberry, Gucci, Ralph Lauren, and Club Monaco are adding their versions of upscale coffee shops to their flagship stores; while Prada’s purchase of Milan-based pastry shop Pasticceria Marchesi, is a clear sign of this cross-pollination trend. Hungry? In the mood for a drink? No need to leave the chic Ginza district of Tokyo, who offers customers something to calm their appetite in the most surprising of places, stores such as Bulgari, Chanel and Dunhill, now all offer food and drink options along with their expensive garments. “Luxury brands need to continue to reinvent themselves to surprise and delight the customer. It really means you need to help change lives,” Oliver Chen, luxury analyst at Cowen & Co., told Retail Dive. “And this is emotional, experiential. And that has to do with hotels, food and museums and culture and art.”
Federica Levato, Partner at Bain & Co. in Milan sees this trend as only part of the future responsibilities high-end stores must offer their clients. “The brands which will be able to integrate in-store and online trends will be the clear winners”. The industry keeps changing and having an unique store experience is only part of the equation. e-commerce has become the fastest-rising channel globally for the luxury industry and is now the third-largest “luxury goods market” after U.S. and Japan in terms of market penetration, according to the Bain Report. The difficulty for retailers is to provide a “real-life” feel to the online experience. Stores must begin to make use of their virtual pallets as supplements for a real life experience, or a blending of the digital and of the physical channels. Shelley E. Kohan, VP of retail consulting at RetailNext, wrote via email to Retail Dive, highlighting Neiman Marcus’ work as digital innovators, making use of mobile devises to compliment the in stores’ employees scope and function. Rohan also went on to praise traditional fashion powerhouses Burberry, and Hermes’ work in keeping on the margin of ingenuity while remaining true to their style. “it’s key for brands to stay authentic and true to their brand ethos. Don’t be perfect, be real.”
The future is not quite now, however, as a study commissioned by RetailNext, part of Forrester Research found that online channels still account for only 7% of the global luxury market. 71% of luxury shoppers said they go to brick-and-mortar stores to “touch and feel” the merchandise. The trick is to gear these incentives towards millennials, which according to the Bain Report, will represent 75% of the global luxury market by 2020.
Whomever is best at grabbing these youngins’ attention and loyalty will emerge as clear winners as the Bain Report anticipates global sector sales to increase 4% in 2016 to 1.08 trillion euros, along with sales of personal luxury goods also raising at a rate of 3-4% reaching 280-285 billion euros by 2020. Luxury brands, be ready, to the victor go the spoils.