by Gemma Spence (Partner content provided courtesy of Omnicom Media Group)
The new dynamics of omnichannel and the impact on luxury brands
It is no news that people spend more and more time glued to their smartphones and tablets or laptops – since 2000, time spent online by the average American has risen from 9 hours a week to almost 24 hours , which translates into more than 3 hours a day spent online. It is also no secret that much of that time is spent … spending. According to an eMarketer study, the most sought-after audience, people between 26 and 45, spend on average more than 3 hours and a half hour every week researching products and shopping on eCommerce sites.
This change in the consumer behaviour means more revenue generated through eCommerce – it is estimated that in 2017, retail eCommerce worldwide reached $2.304 trillion , a 24.8% increase over the previous year. Both the attention and the money of the consumers are shifting towards online retailers, leaving the traditional brick-and-mortar business struggling. This is becoming increasingly apparent in the United States, with Business Insider quoting 8 053 closures store closures in 2017 alone.
Despite the menacing landscape, physical space still serves an important function, especially for some of the industries (luxury, for example), where consumers still want to see, feel and try the product. At the same time, with behaviours like showrooming (see offline, buy online) and webrooming (see online, buy offline) increasing in popularity, a customer may switch between digital and bricks-and-mortar multiple times, so it’s important for both brands and retailers to understand and leverage the interconnectivity between the two. That means not only encouraging in-store customers to also explore and shop the brand online, but also driving online customers into offline stores.
A challenging task for luxury brands
Traditionally, luxury brands have been reluctant in entering the eCommerce space – purchasing high-end items was considered to be exclusively an offline experience, whilst online was reserved for buying low to mid-range goods. The assumption no longer holds true, with online luxury market growing 22% to nearly €27 billion in 2018 and now representing 10% of all luxury sales. Furthermore, digital is increasingly influencing the purchasing decision of affluent shoppers – research by McKinsey found that 40% of all luxury purchase are in some way influenced by an online touchpoint.
To operate in this new omnichannel landscape, luxury brands need to find the right balance between delivering a lively digital presence and offering a premium offline experience. An integrated global market environment will require luxury brands to connect the dots in customer experiences across the channels and fill in the gaps by offering a seamless, unified brand experience independent of the device or physical touchpoint used.
For each channel to interact with each other and support each other, a single brand presence will be required – services such as click from store, localised inventory, click and return and click and collect will have to be mastered by all the players in the omnichannel space.
During this process of change, the ability of luxury brands to leverage available inventory through a centralised system will become a key differentiator. Valentino was one of the first brands to invest in meeting the challenge by partnering with Yoox Net-a-Porter Group to create a new omnichannel business model called Next Era, designed to improve customer experience through greater visibility and access to inventory across fulfilment centers and stores. Shoppers will have new purchase options, such as buy online and pay and collect in store, buy online and return in store or live chat assistance while online shopping. YNAP also is revamping Valentino's website, providing it with a new look, mobile-centric interface, and artificial intelligence-enabled personalization functions and contextual search, enabling customers to use natural language to interact with the digital store.
There are lessons to be learnt from the digitally native fashion companies as well - Bonobos, Sézane and Nasty Gal all launched as online-only ventures and have since opened e-commerce showrooms — physical spaces where consumers can try products, and then place their order online, rather than walking out of the store with the product. This approach removes the complexity and cost of handling large store inventory and allows brands to focus on delivering the best possible offline experience.
A new communication strategy
The omnichannel landscape will mainly be shaped by younger demographics – millennials and Generation Z will represent more than 40% of the overall luxury goods market by 2025, compared with around 30% in 2016. These shoppers expect to interact with brands across different digital platforms, but also enjoy an in-store customized experience. Therefore, the traditional offline luxury experience has to be perfectly replicated across the digital channels.
Burberry has been leading the way by giving their digital presence a human touch – they offer 24/7 phone support and live chat available to online shoppers and use social media for responsive and personalized customer service. By live-streaming their fashion shows and deploying a See Now Buy Now model, they have made the luxury experience highly accessible to anyone, anywhere and on every channel.
One thing is for sure – omnichannel is here to stay and in the next two to three years, it is going to be become the industry norm even for luxury brands. Heritage house will have to face a complicated balancing act, trying to develop an online proposition that enriches the offline experience rather than cannibalize it. To succeed in this context, brands should focus their investments on digital connectivity, upwardly mobile consumers and bold business models, alongside with fixing all the brilliant basics and crafting the most innovative communication strategies to reach their younger audiences.
Gemma is the CEO of Omnicom Media Group’s eCommerce function across EMEA which is based out of London. Gemma works with many European and Global clients such as Unilever within the consulting and end-to-end activation space to help businesses grow, adapt and change to suit the changing ways that consumers shop. Gemma and her team are focused on driving top and bottom line growth through a tried and testing framework that helps deliver immense value to our clients. Gemma and her team work across many of the biggest brands and advertisers in the world including Unilever, VW Group, Sainsbury’s, Apple and Bacardi.
This specialist eCommerce practice has grown ten fold in the past two years through a focus on delivering innovative eCommerce solutions to deliver disproportionate growth for clients. Over her 10 year career, Gemma has lived and breathed every sub-discipline within the eCommerce space including owning eCommerce operations & pricing in Poland, set up a centralised warehouse in Amsterdam and managed the entire multi million euro eCommerce operation for Philips Electronics across both DTC and retailer channels.