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E-commerce for Luxury Brands – Best Practices

Industry Insights

Consumers have long been accustomed to being able to buy anything on the Internet with just a few clicks and to obtaining comprehensive information about a desired product in advance. What is actually standard in e-commerce, however, does not apply to luxury brands which in part also has good reasons. Nevertheless, these companies must arrive in the digital age if they do not want to lose touch with the next generation of luxury shoppers.

Luxury shopping is different from normal shopping

A few Google searches, an ad on Instagram, reading customer reviews, a price check on the relevant portals, a visit to several online stores, perhaps a visit to a department store in between to pick up several comparable products, finally the decision in favor of a particular brand and model, and the purchase – a typical customer journey that takes place in this or a similar way for the vast majority of B2C products. But not for luxury items such as watches, handbags, shoes or clothing. This starts with the fact that luxury products do not have the same availability as mass-produced goods, which is largely what the brands themselves want. After all, the exclusivity is to be underlined by the limited access to the products. Many brands want only the true connoisseurs and enthusiasts to use their products. This is also because they want only those customers to show up with them who represent the brand's image. In addition, many practical considerations that apply to mass-market products are subordinate, such as price-performance ratio, user-friendliness, suitability for everyday use, and comparison with competing products. After all, the reasons for buying luxury items are usually more emotional than practical.

Why digitization is also important for luxury brands

That's why e-commerce for luxury brands works according to its own rules. Instead of price and practical benefits, the focus is on communicating the brand image and conveying exclusivity. In the belief that this works better offline than online, luxury brands tend to neglect their digital strategy and prefer to rely on their physical stores. There, products can be elaborately staged, customers can be personally attended to, and a VIP experience for all senses can be offered. As a result, digital channels are treated with less priority, as store visits seem more important. This in turn leads to the digital channels appearing to contribute little to sales, which confirms the supposedly correct offline strategy – a self-fulfilling prophecy, in other words.

However, there are several reasons to rethink this approach:

  1. By neglecting digital channels, companies are giving away their brand image on the Internet. Instead of having sovereignty over the presentation of their products themselves, they inevitably leave brand communication to resellers, bloggers, forum participants and similar players.
  2. In the near future, digital natives will be the largest (and soon the sole) clientele of luxury brands. Consumers who have integrated digitization into all areas of their lives will replace the "offliners" simply for reasons of age. Digital natives take digital availability and online experience for granted. Already 85% of all millennials expect a multi-channel marketing experience from luxury brands.
  3. The luxury sector is growing much faster online than offline. According to the McKinsey Digital Luxury Experience Study, digital sales have shown a growth rate of 27% since 2010 compared to only 7% for in-store sales.

The big challenge for luxury brands is therefore to meet modern expectations of digitalization without sacrificing their exclusivity. What does that look like in concrete terms?

Take advantage of the ROPO effect

ROPO (Research Online, Purchase Offline) is a phenomenon that has been observed in online retailing for a long time. The customer journey does not take place entirely on the Internet, but switches to the offline world for the actual purchase. Research into product features, different models, etc. takes place via digital channels. When the consumers are relatively sure of their choice, they go to a physical store to check the feel and dimensions of the product and the look "in real life" (in the case of fashion and accessories, "on themselves"), but also to clarify final questions with a sales person, to be able to take the item with him right away – or for the sake of the pure shopping experience. The ROPO phenomenon is particularly pronounced with luxury products. This is partly due to customer preference, partly (as already shown) to the brands' marketing strategy. For ROPO to work, firstly, a personal and exclusive experience must be produced in the phyical store. Secondly, the research process must also run smoothly. For this, it is important that all relevant information about the brand and product is available online and that all the user's questions are answered. These can be: What is the history of the brand? Which designers/inventors/entrepreneurs are behind the product? Is there a particular idea or ideal behind the design? How does the product look from different perspectives? What materials were used? How was the product manufactured: For example, what production steps are done by hand? Is the production sustainable? Where is the product produced and under what working conditions? 

Consider Showrooming

Linking the online and offline customer journey also works in the other direction. Instead of ROPO, this is called showrooming. This means that the first points of contact with the user take place in the store. Once they have examined the product there and received initial advice, they later research further information online and check whether their first impression of the look and feel of the item is confirmed. If they are convinced that they want to buy the product without having to hold it in their hands a second time, they order it directly online. A usability-optimized and smoothly functioning online store is a great advantage here. However, there are luxury brands that hesitate to make their products available online "for everyone" in order to maintain their exclusivity as strictly as possible. This may well be the right strategy in individual cases. However, it should be pointed out once again that the luxury shoppers of the future are all digital natives – and thus accustomed to being able to order a product on the Internet at a later date after seeing it in a store.

Offer an exclusive digital experience

So online, all the info and features should be available that even a user of an "ordinary" e-commerce store would expect. But these are luxury products after all. This means that the digital presence should additionally offer something more. Just as the physical store of a luxury brand has much higher standards in terms of ambience, product presentation and customer treatment than any other store, entering the online store should also provide a special experience. Of course, this applies first and foremost to the design of the website, which should match the color scheme, clarity and character of the physical store. But that's not all: The customer may receive a glass of champagne in the store to welcome him or her and similar attentions that give him or her a VIP feeling. Finding online equivalents to this is one of the major tasks. The impression of being in a special place can be conveyed by personalizing products, for example. For example, a wristwatch can be virtually put together from the various dials, bracelets, etc. Some luxury brands even offer augmented reality so that the potential customer can try on a product virtually. Overall, advice and personal service are very important.

Be picky about quality

Especially with such sophisticated features, it is important to ensure that they work flawlessly in all browsers and on all devices. The high standards set for product workmanship and design, as well as for customer relations, must also be set for all digital features. This already starts with the avoidance of spelling mistakes, "shot up" layout, links that go nowhere, slow loading times and non-intuitive usability. Perfection should be the standard in these matters.

Develop high value customers

Let's go back to what many luxury brands do very well in their offline business: cultivate a close relationship with customers in order to have upsell and cross-sell opportunities. In the online world, this can mean that after a purchase on the website, on their next visit customers are offered matching accessories and items for their product, or are pointed to services that match their purchase history. Personalization is a key success factor here. Exclusive benefits for regular customers are another way to increase the retention rate. Ideally, such measures are preceded by an analysis of customer economics such as customer acquisition costs (CAC) and customer lifetime value (CLV).

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