5 Minutes Read By Dr. Stefan Sambol, Christian Brugger, Sinan Erhan, Christiane Jauch, Tatiana Griebel

The Future of Luxury E-Commerce

#Digital Marketing#Digital Strategy#Retail & E-commerce#Growth Strategy
Brand store

Luxury brands need to prioritize e-commerce as a key element of their business strategy. Unfortunately, many luxury brands are falling behind in digitalization strategies. By establishing brand standards and creating digital touchpoints across all channels, luxury brands can integrate data and processes, gather feedback, and build a 360-degree view of their customers. An omnichannel digital strategy is crucial for personalization and delivering a positive customer experience.


E-commerce Boom

The e-commerce market has been growing steadily for a decade now but, in the wake of the pandemic when the e-commerce market grew around fivefold in the UK, digital retail has cemented itself as just as, if not more important than traditional retail when it comes to B2C sales.

Though traditionally more centered around in-person luxury experiences, the luxury retail market has not been immune to the boom of e-commerce. For instance, several luxury brands, such as Gucci and Dior, have invested heavily in e-commerce strategy over the past few years in order to inspire, activate and engage customers across digital channels and platforms, even looking into metaverse opportunities in 2022. Forecasters expect one-fifth of personal luxury sales to take place online over the next couple of years and online sales of goods to more than triple from €20 billion in 2009 to €74 billion in 2025, without accounting for the role of online browsing in purchase decision-making.

With this in mind, it is abundantly clear that luxury brands can no longer treat digital presence as an added part of the sales experience, but must integrate e-commerce initiatives as a priority element of overall business strategy.


Luxury E-commerce Is Falling Behind

Unfortunately, despite the digital retail trend, the majority of luxury brands are falling behind when it comes to digitalization strategies. Though online presence is nothing new for luxury brands, legacy brands in particular are only just now jumping on the digital strategy trend and investing significant financial capital into their digital marketing.

This may have something to do with the renaissance of in-store shopping in the post-pandemic luxury sector. It remains true that the majority of luxury shopping still happens in person as customers continue to enjoy the experience of going to a luxury store, inspecting and choosing high-value goods to walk away with. Unlike the classic retail shopping trip that often involves traipsing around the shops with fellow consumers and picking up items from vast shelves of available goods, the in-store visit is a luxury experience in itself for legacy brands.

Nevertheless, this does not negate the role of strong digital marketing for luxury brands as a significant enough portion of sales does happen online and, perhaps more significantly than this, in-store purchase decisions tend now to be informed by online research. Known as the ‘‘ROPO (Research Online, Purchase Offline) effect” modern customers considering high-value purchases feel more engaged with a brand and comfortable with completing in-store purchasing choices after first researching options online to consider the information they need about the brand and products. By 2025, 80% of all seller and buyer interactions will be influenced by online channels. Recognizing this vital stage and successfully embedding it into a digital strategy is consequently essential for luxury brands to remain competitive with their peers and effectively engage with their customer bases online.

What Does a Cutting-Edge Luxury E-commerce Strategy Look Like?

Digitalisation can mean a lot of things, encompassing anything from building a digital storefront or enhanced mobile app, to concentrating on scalable SEO, SEA and site strategies, investigating Web3 experiences for customers, Open AI, or investing in blockchain technology to underpin the value of goods. Bucherer, for instance, acquired SaaS company Adresta AG last year as an investment into blockchain-based digital authenticity certificates for selling luxury watches from the likes of Rolex and Patek Philippe. However, when it comes to digital marketing, omnichannel digital transformation is the queen.

Luxury brands embracing omnichannel marketing deliver a consistent and rich customer experience across online and offline channels. Digital marketing strategy is often siloed into departments, particularly when it comes to larger, heritage brands that have built their digital presence out over time. The social media department, for instance, will be separated from the website developers, who will in turn be entirely independent from the customer service team.

The first requirement of an omnichannel brand strategy is to establish a set of brand standards that apply to all customer interactions across all channels, from messaging to visuals to customer service. Customers these days jump from channel to channel. Customers may spot an ad for a luxury product on Instagram or TikTok, hop over to the brand website, interact and ask questions to the customer service teams on either or all platforms, before making any purchase decisions. Establishing consistent brand standards and creating digital touchpoints across all channels, from Google to Twitter to the brand website, is essential for customer engagement as they will need to be able to switch seamlessly between channels without losing context, or sense of brand identity.

Omnichannel digital strategy is also crucial to the personalisation factor that separates luxury brands from regular retail in-store. By investing in technology solutions that support omnichannel experiences, such as mobile apps, chatbots, augmented reality, and virtual try-ons, luxury brands can easily implement systems and tools that integrate data and processes across channels. This is both helpful for ensuring a consistent customer experience and essential for personalisation as the data gathered across channels and through created digital feedback loops allows luxury brands to personalise interactions, and offer a more tailored experience addressing specific customer preferences.


Omnichannel Strategy 3.0 Is the Future for ROI

Overall, the goal of digital marketing is to deliver a compelling and seamless customer experience that reinforces the brand's image and values and ultimately drives customer loyalty and satisfaction. Getting rid of departmental silos and investing in omnichannel digital integration is the most competitive strategy to achieve this.

We are in an omnichannel era and the final iteration of cross-channel marketing is to link digital marketing data with feedback data gathered and brand strategy displayed in-store. Additionally, by implementing tracking systems that allow brands to gather data from both online and offline sources, luxury retailers can build a 360-degree view of their customers in both the digital and real worlds. Omnichannel 3.0 should allow luxury brands to service their customers consistently across the entire luxury sales journey, from researching the brand and products online, to purchasing offline.

Best-in-class luxury brands (e.g. Gucci, Dior etc) measure a ROPO-Effect between 70-80%. Our recent analysis has found that return on investment (ROI) for omnichannel strategies can be up to 15x with offline conversion tracking and precise attribution. Measuring the omnichannel journey and return on ad spend (ROAS) enables brands to increase budget and marketing efficiency. In this way, ‘digital’ is contributing profitable growth to the overall topline development of the brand. Luxury brands need to start prioritising their e-commerce strategies and attributions now, or risk falling behind.

By Dr. Stefan Sambol

By Christian Brugger

By Sinan Erhan

By Christiane Jauch

By Tatiana Griebel

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