What Matters Now: How Digital Can Boost Luxury Brands.

In a rapidly growing global luxury market, brands should put digital at the center of their strategies to attract new customers and retain existing ones.

Sophie Kleber
October 9, 2014

While luxury brands have been slower than others to fully embrace e-commerce and new digital channels, most are now coming around. Some have feared the perceived threat to certain aspects of traditional luxury—such as exclusivity—posed by the openness and ubiquity of digital. But luxury brands should instead recognize the significant opportunities that digital creates, both in attracting new customers and retaining existing ones. 

With the global market for luxury goods estimated to grow to $333 billion by next year (excluding travel and automotive)—spurred in large part by newly affluent consumers in Asia and parts of the developing world—brands need to start using digital to market to new customers who expect superior user experiences. Upstart digital companies are delivering those heighted experiences and redefining the meaning of “luxury.” Some of the same new digital tools also offer established luxury brands the opportunity to reinforce traditional aspects of the luxury experience, including service, both online and in-store. 

At the same time, digital enables brands to offer entirely new forms of luxury—of time and individual expression. In turn, social media has dramatically increased the aspirational base for luxury, by offering new ways to share and generate social influence. 

With the widening exposure of luxury brands through digital channels and social promotion, the potential market has broadened both within and outside of the traditional affluent core. In this context, luxury brands should consider whether they should take advantage of the new, larger audience by launching bridge lines that exploit the prestige of the original brand at a lower price point, or if they should push exclusivity further by creating even more restricted experiences to feed the higher end of the market. 

In this report, we will survey the changing landscape of the global luxury market and make four key recommendations for how luxury brands can use digital to keep pace, including: 

  1. Empower customers to be brand ambassadors by incorporating social media and review sites. 
  2. Offer new luxuries--of time and personalized experiences--using digital tools. 
  3. Create next-level in-store digital experiences that wow and delight shoppers. 
  4. Develop a strong content strategy to tell a product and brand story and better manage and use visual assets.

A shifting luxury landscape & the digital opportunity.

Luxury brands should emulate new digital players offering heightened user experiences that are redefining what “luxury” means. 

The luxury industry is undergoing a transformative moment. As brands expand into a global marketplace, accelerated by digital and social technologies, defining “luxury” isn’t simply a matter of citing price and quality, as it once was. Craftsmanship, sustainability, and exceptional service play an increasingly important role, and now more than ever, they are promoted and enabled by digital technologies. 

Innovative digital and mobile experiences are setting new standards for what users expect. While Uber, Amazon Prime, and Google Shopping Express are not “luxury” experiences per se, the concept of (nearly) on-demand delivery has changed expectations for what constitutes a luxury experience. Increasingly, these kinds of on-demand services are becoming the floor for what consumers expect, rather than truly unique experiences. 

For Uber customers, there is an emotional benefit to being able to skip long taxi lines at the train station—a sense of power bestowed upon the user. What was previously considered a luxury experience, namely a private car and driver, has become accessible to a wider potential user base. Uber’s model began by targeting affluent consumers with black car sedans such as Lincoln Town Cars and Mercedes-Benz s550s and SUVs such as Cadillac Escalades, eventually moving slightly downmarket with the launch of its rideshare service UberX. 

Other startups have emulated this model, focusing on software solutions to build luxury experiences that are seamless, don’t require a point-of-sale transaction, and offer once highly exclusive services to a broader audience. One example is BlackJet, a subscription service (at $2,500 annually) that allows members to book a private jet via its app or web site. While private jets are still not within the domain of the vast majority of consumers, the service is bridging the potential gap between private jets and premium commercial airline travel. A more recent, if ridiculous (and most likely unsustainable), entry is Techcrunch Disrupt winner Alfred, which promises to bring butlers to the masses for just $99 per month. Then there’s Indochino, an online custom suit maker that recently opened a pop-up store in Grand Central Station in New York. 

Traditionally, we have defined luxury by its limits—supply, availability, and exposure. Technology changes that equation, but also presents the opportunity for brands to redefine what luxury means to today’s affluent consumer by emphasizing superior experiences. How consumers quantify those experiences is shifting rapidly. What seemed like luxury just a few years ago, such as on-demand delivery, personalized customer service, or custom products, has become more commonplace. Luxury brands that want to stay ahead of the curve need to anticipate where consumer demand will head. 

Digital can help luxury brands attract discerning customers who are no longer focused primarily on price. 

Luxury consumers may have much more disposable income than the average customer, but that doesn’t mean they don’t want to get the most bang for their buck. Affluent consumers want value—not just quality—but how they define value may differ sharply from mass-market shoppers. 

Luxury Edit

As outlined in an influential paper by Professor Klaus-Peter Wiedmann and others, there are multiple dimensions to how consumers perceive and define luxury in a globalized, growing and changing market. The traditional conspicuous consumption model of the luxury market is giving way to one that is more grounded in an “experiential [luxury] sensibility.” According to Weidmann, consumers factor social and individual value into their overall perception of luxury, not just financial and functional value. Unlike the latter, the former are fairly complex. 

Social Values.

  • Conspicuous Value. Luxury items play an important role for consumers in search of social status. Conspicuous value is heavily influenced by an individual’s peer group, and validated by a luxury buyer’s social relationships. 
  • Prestige Value. An individual’s desire to buy luxury brands serves as a symbolic sign of group membership. As a result, a consumer may use a prestige brand to confer professional status during the week, such as carrying a Tom Ford leather briefcase to work, and a more modest brand such as a J. Crew messenger bag on the weekends to conform to social standards in his neighborhood. 

Individual Values. 

Four recommendations for seizing the digital opportunity.

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