Luxury Institute News

In contrast with their reputation as leaders on catwalks the world over, luxury brands have perfected the slow embrace when it comes to technology. Will it be to their detriment?

By Hannah Tattersall
The Australian Financial Review
November 19, 2010

It’s 1am in Sydney. A woman wakes up and turns on her iPad. She opens her Burberry app and goes to the latest catwalk parade live from London Fashion Week. She zooms in on a model sporting a trench coat, moving her cursor from the shoulder of the garment down to its belt. As soon as the show finishes, she logs her interest and waits for a customer service representative to call and take her details. 

In six to eight weeks – four months ahead of its arrival in store – she receives her product. 

This ecommerce initiative, which ran for a week after the recent London show, was a world first, the brainchild of Burberry chief creative officer, Christopher Bailey.  So excited was he by the move, after the show he tweeted that the fashion house was “now as much a media content company as a design company because it’s all part of the overall experience”. 

Burberry has 2 million fans on Facebook.  Conservative by nature, luxury brands such as Chanel, Gucci, Louis Vuitton and Bulgari have been slow to embrace ecommerce. They pride themselves on the store experience they offer customers. And that experience -with personal service (champagne at times), and a touch and look approach – cannot be recreated online. Furthermore, these brands argue, even if you could sell luxury online, the affluent consumer isn’t interested.

Until now.

In October, New York based Luxury Lab released its second annual L2 Digital IQ Index of 72 luxury brands, ranking websites and mobile applications, digital marketing strategies and social media initiatives to quantify brands’ digital competence. Coach ranked number one, Ralph Lauren two and Burberry six. 

A Luxury Institute survey found 34 per cent of affluent respondents have downloaded apps to their smartphones, with another 11 per cent saying they intend to do so in the near future. 

Luxury brands are now scurrying to be recognised as having the knowhow to compete in a digital world. “Today, nobody questions doing ecommerce,” Milton Pedraza, Luxury Institute chief executive says,”but a few years ago there was a silly debate in the luxury industry about whether they should sell online or not. That’s been put to rest.”

Pedraza says this is because luxury brands were in the “same constellation but not of the same planet as mass brands”.

They didn’t see the web as able to replicate the store experience, without which, they believed, luxury brands weren’t luxury.

“They weren’t like Amazon.com; they weren’t like Zappos.com,” Pedraza says.  “They didn’t quickly embrace the convenience factor of the internet. They were afraid of it.”

He says it’s time luxury brands moved away from Flash sites that take minutes to load and annoy users, to embrace mobile applications.

Sites such as Foursquare can inform sales staff when clients enter a store. “Luxury needs to use that as the centrepiece to groom relationships,” he says. “You’re using the mobile device to enhance the consumer and also to enhance the sales professional and make it easier to interact between the [two].” 

The biggest mover and shaker in the luxury market, Asia, has spurred the need for brands to recognise online mechanisms globally. A 2008 study by KPMG International found Asian respondents felt most comfortable making financial transactions on their mobile.

Luxury brand consultant Melinda O’Rourke says in China alone, 60 to 70 per cent of luxury consumers are 20 to 27 years old. “Luxury brands have to look overall at their strategies because for the first time there’s such a big youth market,” she says.

Many global brands are yet to view Australia as a profitable market – in critical mass terms, we are not as important as China or the US. But Australia proved it was a robust market when it came through the global financial crisis relatively unscathed. And with our dollar at parity with the US dollar, Australians are embracing online retail in droves. We are the third biggest users of luxury shopping site NetAPorter, where the average annual spend per Australian customer is £728 ($1190), when the international average is £313.

In a survey conducted by O’Rourke’s firm, MO Luxury, in Australia in September, 57 per cent of respondents claimed to have visited luxury beauty websites. O’Rourke says NetAPorter has increased confidence in the online luxury market. The Richemont Group bought a 33 per cent stake in NetAPorter in April.

Associate professor of marketing at Melbourne Business School and luxury brand consultant Mark Ritson says luxury brands like to break rules and push fashion forward.

“But when it comes to business strategy, that’s not the case,” he says. “In business strategy, most luxury brands take pride in moving very slowly . . . they think about things in a decade or double decade way.”

While other luxury brands might see Burberry as a shelf down from them in the luxury store, Bailey’s moves in the online world have not gone unnoticed.

Francesco Trapani, chief executive of Bulgari, says his luxury house has “made a massive leap in the scope and sophistication of its online initiatives” in the past few years. It has a Facebook page about its brand, products, events and activities around the world, shares campaign videos on YouTube, and uses Twitter in the US to engage with customers – it has about 4000 followers.

“We’re evaluating the roll out of Twitter to other markets, but to date we haven’t seen high demand for it elsewhere,” Trapani says. “Expect to see more mobile activity next year.”

His company has noted an increase in product research and brand engagement online, he says. For now, however, it has no plans to launch online shopping in Australia.

Juliet Fallowfield, Chanel Australia and New Zealand’s corporate communications manager, says the company has been streaming shows from Paris to Australia within 24 hours, allowing consumers to watch and zoom in on product detailing. But it has not yet embraced ecommerce and she is unaware of any plans to do so. Chanel has a Facebook page and uses its website to alert consumers to news and announcements.

One thing Facebook can’t provide is tangibility. “Our customers are aware they receive more than just access to the physical product when they visit Chanel,” she says. “They won’t just come in, have a look and hear about the price. They’ll have the expert advice, the tailored Chanel environment, which gives a complete luxury experience.”

Trapani agrees the luxury consumer expects more than what can be provided by mobile and online devices, particularly when it comes to the brand’s high end jewellery ranges.

“Each high jewellery purchase is a major investment from both financial and emotional perspectives, so the human touch is vital,” he says. “In comparison, customers who purchase our fragrances need an initial physical experience to learn about the scent, but once they’ve become a fan of a particular scent, they generally prefer the convenience of finding the product online.”

Critics, however, say by being so accessible, brands risk losing the exclusivity that comes with being a true luxury brand. “Brands have to compete and make sure they’re relevant,” Pedraza says. “But they still need to show they’re a luxury brand. The risk with moving online is that anyone can access the brand.”

With social media “anyone can be involved, have a dialogue,” O’Rourke says. “And although they’re very consumer focused these days, it’s still about coming to our house and respecting our rules. We’ll serve our clients but we’ll serve them in our own environment.

“What’s fundamental is luxury is very much about the experience . . . Luxury brands are all about control. They have beautiful stores you walk into, this seamlessness, whether it’s Tokyo, London, New York, Sydney or Melbourne. There’s a consistent look. They can control their environment, everything from product to the store’s look, staff, knowledge.

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