Title Luxury’s secret weapon to surviving Covid: The personal shopper Media name/outlet Inside Retail Country Australia Date 3/11/20 Description Luxury’s secret weapon to surviving Covid: The personal shopper
November 3, 20208 mins read
Before the Covid-19 crisis turned retail upside down, the luxury goods market was on the upswing. Growth forecasts put the market on track to increase to US$388 billion in 2025, a CAGR of 6.4 per cent.Luxury labels like LVMH, Kering, and Richemont have worked hard to win over the hearts, minds and wallets of those consumers who desire for exclusivity, glamour and endless product innovation. Success was easily defined, even guaranteed, through high-touch, high-service, experiential in-store retail experiences.
The love affair has however come to a screeching halt. Covid-19 has put a proverbial spanner in the works curtailing the once insatiable appetite of the luxury market.
The combined effects of contracting GDP, unemployment and massive uncertainty when it comes to global economic recovery has led consumers to pull the purse strings tight on discretionary spend and sales have plummeted. Even optimistic forecasts for growth place the market at a precipitousdecline of 25-35 per cent in 2020. Boston Consulting Group places the decline at 45 per cent this year and projects that industry growth is unlikely to return to pre-pandemic levels until 2024.
Travel restrictions are worsening the decline. Globally, 30 per cent of revenue in the luxury market is derived from consumers travelling and purchasing outside their home country. Country-of-origin purchasing has traditionally been a mainstay value-add element of the largely in-store shopping experience. Yet with travel restrictions in place, and no sign of these relaxing due to second waves of Covid-19, the interconnectedness of travel and luxury spend no longer exists in the way that it once did.
But it’s not just travel-based purchases that are affected.
At the local level the pandemic has meant that consumers are no longer in-store in the numbers that they once were. For example, sales for this year’s spring season were down by up to 70 per cent when compared to 2019 as consumers have been unable and in many cases unwilling due to contact risk to view the collections in-store.
This represents a conundrum for the industry – the in-store experience has always been the lynchpin when it comes to enhancing foot traffic, brand legitimacy, authenticity and importantly deep consumer engagement with the brand and its narrative.
For those consuming luxury for conspicuous motivations, in-store was the place to be seen. It was the experience – and for the majority. The Luxury Institute’s report this year indicated that 62 per cent of affluent consumers indicated a preference for shopping in-store.
A new retail vision for luxury online
With Covid-19 turning the luxury market on its head, consumers have been driven to shop online. Where pre-Covid-19, online luxury sales accounted for only 10 per cent to 12 per cent globally, online sales are now predicted to cannibalise bricks-and-mortar. Lockdown has made the move to online a non-negotiable.
However, it is a double-edged sword.
On the one hand, it has offered a ray of hope for the struggling luxury market. It has allowed labels to penetrate new market segments – international markets that previously relied on travel-based purchases now have greater access to items than ever before. Growth is expected to pick up again with Asia leading the way on the back of Mainland China’s recovery and resurgence. Europe is also expected to follow suit in 2021.
It has also spawned a host of new shopper behaviours. Younger luxury segments such as Gen-Z, have adopted new shopping habits during Covid. They are now spending 50per cent of their total transaction time in what is called the online ‘inspiration phase’. The inspo phase is a critical piece of the customer journey to purchase which is focused on finding inspiration or inspiring others in social media. And the targeting opportunity is massive. Research has found that more than 70 per cent of Gen Zs globally make their purchase decision during this shopping stage.
But the question remains.
Can the luxury-goods sector shape its future and capitalise on these changing consumer needs?
Navigating the new normal
The challenge for luxury retailers this year amidst Covid, social distancing and cancelled in-store brand activations has been how to deliver the brand experience and a high-service personalised experience when customers aren’t walking through the doors. Burberry stores in mainland China faced a plunge in foot traffic of 80 per cent in their stores that remained open during the pandemic.
What does this all mean for the future of luxury retail?
It means that success will now be redefined through how luxury brands pivot to navigate the new normal.
With limited direct access to consumers and with many stores remaining closed for the foreseeable future, luxury brands have been searching for new ways to engage their consumer base, generate sales, build community and connect with their consumers.
Labels have dealt with this challenge in a multitude of ways, but a core defining feature is the digitalization of the consumer’s shopping journey. Gucci has introduced a virtual reality app so consumers can try on their sneakers. They’re not alone. FarFetch is experimenting with Virtual Try-Ons via its app where you can aim your phone camera at your feet to try on shoes, and its aiming to extend this to meet the needs of clients wanting to try on ‘investment jewellery’ like high-end watches.
But there’s a fly in the ointment.
E-commerce alone doesn’t deliver direct consumer-stylist contact for luxury consumers – a key enabler of consumer loyalty. Luxury consumers want curated wardrobe edits, personal styling and a human-touch. They are looking for a value-added experience – digital styling sessions, concierge services, and instant 24/7 chat access to their stylists. And it pays. Forbesreported that consumers will spend 48 per cent more when their shopping experience is personalised. Why? Because they feel like the brand understands them. It also creates what is termed ‘identity loyalty’ – a deeply enmeshed connection between the consumers identity and the brands identity. That powerful emotional connection creates engagement, and engagement means spend.
Research also shows that consumers who buy high-end labels are in the top 0.001per cent of time-poor shoppers. They want specific luxury items that they see on influencers, off the runway, or at launches all sourced at speed and with immediate gratification. Luxury consumers are also seeking out older, hard-to-find pieces from sold out seasons, and in-demand trend pieces that might be elusive to track down. Time has become a luxury in itself and it’s a valuable asset.
It is no surprise therefore that consumers are turning to online luxury personal shoppers to meet their needs. Whether it is Bieber’s Crocs, a Bottega Veneta’s cult ‘stomper’, or Prada loafers: a personal shopper can track it down for you and deliver it to you at lightning speed.
All it takes is a DM and screenshot via Instagram, a WhatsApp message or an email, a fee on top of the item, and your personal shopper team will be sent on their mission. And there are plenty of success stories. Gabriel Waller who famously sourced Rosie Huntington-Whiteley’s Celine coat. Or Amber Gordon whose company Tailored Styling London operates as a middle-woman working within a global network of luxury suppliers to hunt down items for A-lister clients at a fee. Items can vary from a £35, 000 Hermes clutch for her WAG clients to a hard to find £200, 000 diamond encrusted crocodile Birkin.
Online luxury personal shoppers are perfectly placed to cater to this change in shopper behaviour – they can take the consumers product request, provide tailored styling advice on the item, place the pre-order and meet the customers’ needs. This allows them to capitalise on the sales conversion opportunity. They can also create a high-touch, customised and curated, one-on-one experience. It’s about making a connection with the customer, tailoring their experience, and delivering outstanding service. They can deliver the experience in a personal connected way.
It’s proving to be a successful formula.
Why? To coin a phrase – it’s not just about the Louboutin shoes – it is about the individualised attention and experience.
Intelligent luxury: Delivering ‘personal’ in an era of AI
Online personal shoppers are also not just for A-listers. Lockdown life and the shift to work-from-home has meant that more consumers are now used to seeing curated content being pushed through to them via influencers, stylists and shoppers. It has become second nature for consumers to buy based on live video editorial and chat messages through social media platforms. During Covid-19, we have seen numerous brands pivot to offer digital stylist sessions.
But unlike the shopper models a la Gabriel Waller, ‘personal’ doesn’t always mean only a one-on-one shopping experience. Many luxury fashion retailers have recently adopted digital technologies and artificial intelligence driven systems to mimic the in-store shopping experience. Technology means that luxury brands are able to reach a wider audience and deliver a personalised experience at scale.
EditorialistYX is a digital platform that datafies consumers wardrobes allowing stylists to virtually consult, curate and tailor content which is delivered to the consumers daily feed. At a USD$6000 yearly fee, and an additional $1500 monthly for the “Private Client” treatment – its premium service doesn’t come cheap. But it does promise to deliver ‘intelligent luxury’ and ‘aestheticism.’ The brand is also considering expanding its successful service to the mid-market to capitalise on the more cost-conscious luxury consumer. Even Harrods got in on the act in 2020 offering a new service “remote clienteling” via smartphone messaging to deliver a personal shopper experience to its loyal consumers.
Threads Styling, founded in 2009 is an innovative digital personal shopper service, another example of the digitisation of luxury. Driven all through mobile communications, Threads Styling’s shoppable Instagram is filled with luxury inspiration – Chanel Dad sandals, Begum Pumps, and Prada Monoliths – and all you have to do is click to DM to land them. It’s like being a kid in a candy store – only there’s a personal sales assistant helpfully filling your shopping basket for you. It’s personal shopping on steroids – a bespoke chat-based personal shopper service which is targeting impressionable high net-worth millennials who are after speed, convenience, and immediacy – but the key difference is that it is doing it at scale enabled by digital tech. When paired with immersive technologies, such as virtual and augmented reality, these types of personal shopper services are able to move towards replicating the physical in-store experience through a virtual yet tangible immersive layer. Even before the pandemic hit, the luxury market was set to invest $USD 1.5 billion in AR this year.
Shoppable posts, apps, and facilitated purchases directly through stylists and influencers have made it easy for online personal shoppers to capitalise on the opportunity. They can connect with consumers delivering service and product at speeds, but with the added bonus of a brick-and-mortar type personalised sales relationship. And that’s the key – consumers are getting convenience, a high level of personalised service and engagement, deep product knowledge and expertise, as well as a long-term personal relationship with the shopper. FarFetch has reported a 60 per cent uptick in traffic to its digital marketplace for the second quarter when compared to the same period in 2019, and with it an increase of 500, 000 new consumers. It’s a win-win.
But it’s not just about sales via one-on-one relationships and DMs. PS Dept has taken their online luxury shopper concept a step further, using AI and bot technology to allow its luxury consumers to ask its stylists broad questions. By connecting up its question portal via its app with back-end inventory systems for brands, it enables its limited team of human stylists to deliver mass efficiency. In one year, the PS Dept delivered 45,000 items to consumers with only five stylists. Its operating model is akin to the Genius Bar of luxury and its working with its customer retention for sitting at 68 per cent.
All of this points to one conclusion. The online luxury personal shopper service is here to stay.
Time and time again, the luxury industry has proven itself capable of reinvention. Surviving and thriving in 2020 amidst the Covid-19 crisis requires nothing less. Success this time will depend on the ability of luxury retailers to be ambidextrous – to deal with the current challenges of the pandemic and the mass shift of consumers to online, whilst also planning ahead for the brave new digital future of luxury.
As Luxury Institute CEO Milton Pedraza said: “Regardless of the channel…for brands to truly capitalize on the abundant opportunity they need to master an understanding of their customers’ stated and unstated needs and desires, and execute brilliantly, treating each client as an individual human being. This is what we mean by omni-personal relationships. That skill is in high demand, yet, in low supply right now in luxury. Brands that aspire to high performance in 2020 need to master the skills with extreme urgency.”
URL https://insideretail.com.au/sectors/luxury/luxurys-secret-weapon-to-surviving-covid-the-personal-shopper-202011 Persons Jana Bowden