The buzzword that drives retail today is experience. And if luxury retail is to retain its place at the top, it must capitalize on the so-called “experience economy” to engage discerning consumers.
Spending is shifting from traditional products to experiences, according to business strategist B. Joseph Pine II. A Boston Consulting Group report found that of the $1.8 trillion USD spent on “luxuries” in 2013, nearly 55% was actually spent on luxury experiences.
This is particularly relevant in Asia, a major engine for luxury retail. For instance, despite an economic slowdown, overseas Chinese consumption of luxury goods in 2015 accounted for 46% of luxury purchases globally.
Increasingly, the experience economy is digitally-driven. Luxury conglomerate LVMH understands this and recently launched 24Sevres.com, its highly-anticipated foray into multi-brand e-commerce. According to its CEO Bernard Arnault, LVMH aims to offer a truly differentiated online experience that clients can enjoy anytime, anywhere.
Instead of editorial content, clients experience moving images and innovative visual merchandising such as instant video-styling consultations. Asia, which represents almost one-third of LVMH global sales, is expected to be a major market for 24Sevres.com.
Technology gurus working with retail brands also say that the holy grail for retailers now is creating “digital empathy” — leveraging technology to humanize the brandand feel what the consumer feels. That insight creates bespoke shopping experiences that recognize individual tastes, and is especially relevant for global companies since different cultures have different preferences.
Social media fix
Luxury brands are also reaching out to consumers by creating a social media experience. In China, the world’s largest social network market, brands such as Longchamp, Burberry and LVMH have partnered Tencent Holdings and its vast networks for online luxury retail. Longchamp and Burberry are using WeChat, China’s most popular messaging app, to sell handbags and clothes, while LVMH’s Givenchy and Dior are demand-testing their products through flash sales on the platform.
Fusing social media, which encourages content generation and sharing, with luxury retail looks to be a promising recipe. Social media in China is also well-suited for luxury e-commerce as payment services such as WeChat Pay and Alipay are part of a massive e-commerce ecosystem that is projected to reach $870 billion USD this year.
A step further with VR
Taking e-commerce a step further conjures a virtual luxury experience that blends seamlessly with the physical one. Technologies in virtual reality (VR) and augmented reality (AR) have the potential to revolutionize luxury retail. VR immerses the consumer in a multi-sensory simulated world at the touch of a button (front-row seats to Paris Fashion Week, anyone?), while the ability of AR to bring the virtual world into the real one is only limited by the imagination.
Farfetch, the global digital platform for independent luxury boutiques, recently held an event to showcase “The Store of the Future” where it unveiled an array of new technologies to bridge the online and offline worlds. Think facial recognition that allows customized sales pitches according to a customer’s mood, or interactive holographic displays.
Although technology can transform the luxury experience, the real world still matters. A Bain & Company report projects that although 70% of high-end purchases are influenced by online interactions, physical stores will continue to play a critical role as 75% of sales will still occur in a physical location by 2025. What may change is the role the physical store plays overall. Farfetch founder José Neves envisions the new retail era to be one of “augmented retail” where the consumer shifts seamlessly between the digital and physical realms.
Innovations in the experience economy should enhance, not replace, the human experience, for that is the ultimate luxury.