There’s no doubt that the luxury industry relies heavily on tradition, from reputation to tried and tested production methods and a certain level of service which resonates with customers willing to spend significant amounts of money. And this strategy has largely paid off—until digital technology began its stellar rise across the globe.
With the ubiquity of personal technology—mobile phone ownership is now almost at a saturation point in China—and consumer appetite for digital experiences beyond simple e-commerce, luxury brands are having to re-evaluate their engagement strategies.
According to research by Deloitte, for the luxury market to continue to thrive in China, “leadership will need to break free from nostalgia. Luxury is different, but not that different. Luxury is special, but not that special. For some luxury brands, there will be different pressures which come from heritage or private/family ownership—resulting in a risk of inertia, over-control, caution and a lack of agility.”
In a nutshell, luxury brands that have been reluctant to follow their peers into the digital arena need to become more flexible and move with the times or, as with brands across the industry, they will risk becoming increasingly irrelevant.
This presents some unique challenges to a sector steeped in tradition. According to the report, those challenges are:
• Avoiding ‘throwing the baby out with the bathwater’ and ensuring any engagement strategy maintains all the good things associated with luxury—quality, attention to detail, and personalized service—while presenting them in a digitally enabled, agile context
• Recognizing the importance of providing cross-channel and social experiences, even if the brand has been built on a traditional in-store sales model
• Committing to investment in the best, most audience-appropriate digital services available to make sure there is continuity and trust across all customer and sales journeys
Rising to the challenge
Some luxury brands are way ahead of the game when it comes to the right kind of digital crossover.
Bentley has struck just the right balance between the classic values it is known for and the latest in mobile technology. While its website is rich with images and history that reflects both brand heritage and the kind of service customers can expect in-store, Bentley has also invested in an app which uses cutting-edge facial recognition technology to recommend an automobile specification based on user emotions.
This works because:
• Bentley has sacrificed none of its brand identity—the look and feel of both the website and the app remain true to its values.
• The app uses leading edge facial/emotional recognition functionality to personalize the experience.
• The subtle call to action focuses first on personal analysis before leading the user to the website and the sales process.
Lane Crawford is widely acknowledged as a digital pioneer in the luxury business. The company celebrated its first year of trading in Shanghai with a campaign that turned its retail space into a digitally enabled arcade. Named “Future:Play,” the campaign offered shoppers immersive digital experiences and mobile interaction coupled with real-time personalization, with specific content delivered to their phones via the company’s WeChat account. This proved to be a winning online-to-offline initiative.
This works because:
• Lane Crawford used digital media to tell a traditional story in a new way which hit the audience where it ‘lived.’
• Its campaigns make full use of WeChat’s unique functionality, providing users with a reason to engage and share.
• Channel crossover ensures luxury customers get a rich brand experience, which leverages the best of each touchpoint, digital and physical.
Some of the biggest brands are reluctant to commit to a digital strategy
The examples above show what can be done with an intelligent strategy for digital engagement which is sensitive to the specific needs of a luxury market. However, a number of brands with a significant presence in the Chinese luxury market have so far taken few steps to adapt to the changing demands of their audience.
According to research carried out by Contactlab, some of the biggest names in luxury do not have a dedicated e-commerce site in China. While a presence on the main online shopping platforms such as JD.com and Tmall does give reach to luxury brands, if this is their standalone strategy, it is likely to lack resonance with an audience which is still looking for a quality experience outside the physical store. And with a 306 percent increase in online luxury product orders between 2015 and 2016, there’s a clear impact on potential profit.
This reluctance to commit to a comprehensive digital strategy and lack of progress with digital engagement can be distilled into a few key points:
• Failing to exploit popular platforms’ digital features. While brands recognize that they should have a presence on WeChat, for example, a number of them use it simply to raise awareness, where they could be following the example of successful companies such as Trollbeads (in-platform payments), Burberry (innovative promotions such as voice messages from brand ambassadors) and Chow Tai Fook (dedicated loyalty schemes).
• Equating use of online social platforms with a lack of sophistication. China is the world’s largest online retail market, with transactions set to double over the next few years and the majority of sales carried out via mobile platforms—this is the way luxury customers in China shop, and they are arguably more sophisticated than their Western counterparts. Brands underestimate them at their peril.
• Believing that tradition, heritage and quality are incompatible with agile, responsive and innovative. At the heart of any digital strategy, there has to be a fundamental willingness to accept the rapid pace of change associated with it and use it to further brand promotion. As the brands which have successfully made a connection between in-store, online and beyond have proved, not only is it entirely possible to embrace new channels, it can also breathe new life into existing values.
As Deloitte made clear, luxury brands that are unable or unwilling to keep pace with the ever-evolving digital experiences favored by Chinese consumers are likely to find themselves restricted by the least favorable aspects of tradition—being viewed as old fashioned and irrelevant—and unable to take advantage of the most attractive elements: quality, superior service and experiences tailored to customer needs.
Elisa Harca is a regional director for Asia at Red Ant, a technology partner that empowers retailers to connect online with offline, delivering smarter ways to drive innovation and fully connected retail experiences.