Why Retail Experiences Matter for Luxury Brands

Key Takeaways: Retail is a critical touchpoint, as it's the place where brands can confirm and strengthen their digital storytelling or carelessly destroy it. Many times, they do the latter. As consumers spend much more time online, they simply expect dramatically more when they decide to spend time with a brand in the physical world. And many brands forget this: one underwhelming experience can end the relationship between the customer and you. Metrics like Net Promoter Scores often give false reassurances, because they will mainly trigger a customer to react if something really negative happens. Most people will simply give you a five-star rating in the absence of negativity. Our lives are increasingly infused with technology and digital experiences. We shop online and use apps all the time for almost anything. In China and the US, adults roughly spend 5 to 7 hours daily on mobile devices, while teenagers spend 7 to 9 hours on average. And now, given the ongoing COVID-19 pandemic, e-commerce has taken off, increasing significantly for practically all brands during the crisis. In some cases reaching as high as 30 percent of revenue for brands that were 5 to 10 percent prior to the start of the pandemic. Brands that didn’t take e-commerce and digital mastery seriously enough before the pandemic are now out of business, or heading in that direction. Seismic shifts, to be sure. It’s also proof that we are living in accelerated times, where change is happening exponentially. This should make luxury brands nervous when it comes to retail experiences in the physical world. Because the same unprecedented shifts in behaviors that drive online platforms will have a profound effect on the “real” world of brick-and-mortar stores. This brings us to the essence of luxury, where the need to create experiences that touch the heart of consumers, that literally change them, is of the utmost importance. Even today, many brands think first and foremost about their products. Typically, most resources are in product development and production, with craftsmanship and fine materials their point of differentiation. The problem is that they compete with many other luxury brands, and an increasing number of them also make craftsmanship and fine materials their focus. As a result, products become more exchangeable, even at the highest level, and the purpose of brands becomes a critical factor, especially their emotional values. This needs to be felt along all touchpoints. And retail is a critical touchpoint, as it’s the place where human-to-human, in person interactions happen. This is also the place where brands can confirm and strengthen their digital storytelling that initiated the customer journey, or they can carelessly destroy it. Many times, they do the latter. In a recent article, I asked the readers to reflect on their last hotel or restaurant experience and if they remembered any part of them. The answer was, in many cases, no. Because even if these experiences are really good, even if the service is great, we simply expect that when it comes to luxury. It’s simply perceived as a given. When we expect something, it’s already priced in. In other words, a great customer experience is the minimum expected experience in luxury — it’s nothing special. It will not be memorable, unless something unexpected, surprising, deeply involving happens. And more importantly, it can be only unexpected if it is differentiated and unique. Hence, to provide such an experience, luxury brands must not rely on randomness. It has to be the result of strategy, training, and mastery in delivery. Additionally, the digital experience, as well as the physical experience, has to tell the story of the brand. However, when brands do it right, you leave the store with your mind blown. When you reflect on what just happened, you should feel the emotion that is unique to that brand. The visit should change you. To do so, it has to be a unity of a highly personalized human experience with the distinct emotion of the brand. And the entire experience has to stretch your expectations. It’s easy to say, “We strive to exceed expectations.” To deliver on this promise means you first need full clarity on your brand positioning, and each and every person involved in the transaction needs to have the same understanding of what’s required. And finally, you need clarity what your audience expects. Reality, though, is different in many cases. When I audit the experience among different luxury brands of the same category, independent of whether this is in Japan, China, US, Middle East, or Europe, the results are the same typically. Even in categories like fine watches and jewelry, diamonds, luxury fashion, or luxury cars, you get pretty much the same experience across the leading brands, with few exceptions. Often these experiences are underwhelming, even disappointing. Even brands that do it better often struggle with providing consistency. They may give you a luxury experience when the store is empty. But in peak periods, I witnessed experiences provided by some of the most admired luxury brands that, frankly, felt like a cheap warehouse experience. I witnessed arrogant behavior in many instances. And worse, in many experience audits we find indifference and ignorance, even offensive behavior towards customers. Many real-world experiences feel rushed and not personal. Mind blowing, magical, memorable experiences that make me come back for more are the exception, even among some of the best luxury brands. And they pretty much depend on which salesperson you happen to interact with. In other words, they are random events, which is deadly in luxury, especially when you deal with Generation Z. What elder customers may have forgiven, younger customers won’t. And the stakes are much higher now. As we spend much more time in the virtual and digital worlds, we simply expect dramatically more when we decide to spend time with a brand in the physical world. And many brands forget this: one underwhelming experience in luxury probably ends the relationship between the customer and you. We did a lot of research on “break-up moments” with luxury brands and the number one reason is that customers did not feel valued during a brand interaction. This has huge implications. Retail experiences can’t be just afterthoughts. They can’t be transactional places where you display your merchandise, make a sale, and forget about the customer. This model should be dead already, but unfortunately it’s not. For those who still operate this way, the consequences will be dire, as competition is heating up. Almost all luxury brands still ask their customers to take a questionnaire about the experience and then they calculate a NPS (Net Promoter Score). In my opinion, it’s a waste of time and money. It probably even makes you less competitive as it gives you false positives. Only A.I. supported permanent social sentiment analytics can tell you how customers really talk about you when they leave your stores. Metrics like NPS most of the time give false reassurances, because they will mainly trigger a customer to react if something really negative happens. Most people will simply give you a five-star rating in the absence of negativity. They will not tell you if you did not blow their minds. They will also not tell you through a questionnaire if your brand story does not come across and this should be a huge concern. Thus, you may underwhelm customers without even being aware of as traditional market research tools are not measuring the right indicators in a world where purpose differentiates brands. Brands need to worry about our relative performance to their direct competitors and have to ask themselves if they’re telling their story through their retail experience in an engaging, inspiring, and memorable way. Do they make their customers crave for the next experience? Are they inspiring them so much that they would wait in line for an hour to experience our brand? And do they inspire them to share their experience with everyone else, telling the brand’s story in their own words, but consistent with how they want the world to see them? In our research, very few brands do that sufficiently. But with Generation Z and an increasingly digital world, the physical experiences become a choice for customers. And they better give them extreme value, when they come to shop. They better question their ability to do so in the toughest possible way, because they will be judged. It’s always about the customers, not about the brand. The new game of luxury does not allow for compromise. Daniel Langer is CEO of the luxury, lifestyle and consumer brand strategy firm Équité, and the professor of luxury strategy and extreme value creation at Pepperdine University in Malibu, California. He consults some of the leading luxury brands in the world, is the author of several luxury management books, a global keynote speaker, and holds luxury masterclasses in Europe, the USA, and Asia. Follow @drlanger

Sectors

Insights

Company

Why Retail Experiences Matter for Luxury Brands