Though considered a niche category by some, luxury goods—including high-end fashions, accessories, footwear, and beauty products—are a hot commodity. The global pandemic may have impacted how consumers buy luxury goods, but the market is still growing. According to McKinsey & Co., consumers will likely return quickly to paying full price for luxury goods—the same way they did after the 2008 global financial crisis. The firm anticipates growth of 1% to 4% for luxury retail in 2021.
Emerging customer segments and increased spending among core luxury shoppers will help drive growth in existing markets and channels, far more so than any new sector expansion.
What’s the moral of this story? Understanding how and why consumers—both old and new—purchase luxury goods will be vital for growth among luxury brands and retailers.
In the era of the empowered customer—one who has access to information 24/7— it is more critical than ever to engage in ongoing conversations with customers. Understanding what is important to customers, how they want to be serviced, and how luxury brands fit into their lives can not only help brands and retailers make more strategic decisions, it can help foster a better connection between shopper and brand (with the intent that a strengthened relationship will move some moderate buyers into the top echelon of luxury consumers). It simply is not enough to solely market to them. They now expect a two-way conversation with the brands they buy from. Whether it's through deep insights uncovered in a community of loyal customers or through the feedback delivered via a micro-survey on your ecommerce site, brands must be listening to and learning from their customers at all times and across all channels.
It is no longer simply a "luxury" to engage with your customers—it’s a market necessity for growth. Below are five key examples of how engaging with customers to gather feedback and insights can help answer key business questions as well as strengthen relationships with key customer groups and increase customer value.
1. Reach young, affluent consumers
Millennial and Gen Z consumers are an important target audience for luxury brands. An industry once dominated by middle-aged affluent buyers is now seeing a strong cohort of younger shoppers who hold off buying homes and cars, and instead splurge on limited-edition sneakers or the latest collection by a hot designer.
Younger consumers live and breathe in social networks; they are used to communicating with each other and the brands they prefer through social media (be it through Tik Tok, Twitter, Instagram, etc.). It’s almost an expectation that reaching this target will require out-of-the-box thinking. Leading brands have implemented microsurveys as part of the ecommerce experience, gathering context-rich feedback based on where the customer is in their buying journey. Gathering this feedback allows your brand to learn about the unique needs and preferences for this younger cohort, in order to better serve them and meet their ever-evolving needs.
Marketing to millennials will likely require a diversified strategy (founded in a better understanding of this group) in comparison to targeting an older demographic that historically has been the “go to” audience.
2. Validate and scale insights from your sales associates
Sales associates are an integral part of the luxury shopping experience and will continue to be as in-person shopping rebounds. Though skilled in being a critical brand voice to the customer, the relationship is often one-sided (speaking to the customer about the brand, not hearing customer feedback or input), or limited in capacity (some dialog with active or preferred customers, yet they miss out on the concerns of lapsed or infrequent customers). Capturing the voice of the customer requires gathering direct feedback, but associates are often the first people to identify gaps or opportunities for improvement in the customer experience.
A customer experience management (CXM) solution can help your brand action the information captured by customers and sales associates. These tools use rule engines to create and monitor cases to effortlessly make long-term fixes to your business processes to provide a better customer experience. Closing the loop on customer feedback and showing the impact of their insights helps foster deeper relationships and brand advocacy.
3. Understand how to enhance the omni-channel experience
An optimal, in-boutique store experience is fueled by a variety of elements, including talented sales associates, a welcoming ambience, and well-curated assortment. How can the in-boutique experience translate online or through a mobile experience? Does it have to be the same to ensure brand consistency? How should online and mobile be different from one another? Why does a customer choose in-store for one type of item, and online for another?
The global pandemic also revealed that relying too heavily on in-person shopping experiences negatively impacts the resilience of your business. Being able to offer luxury experiences across digital and in-person channels will be crucial for success. Learning what customers love about sales associates and replicating that on digital channels will be necessary for reaching more customers. This requires the right mix of methods and tools to gather broad feedback and capture deep insight to truly understand what’s top of mind for luxury shoppers.
Research has shown that omni-channel customers are often the most valuable from a spending perspective. Each channel may be owned by a different team, but to the customer it’s one brand, one experience. Understanding how to optimize all channels and encourage cross-channel use can help enhance brand loyalty and foster stronger spending among customers.
4. Develop a strategy for optimizing global tourism
Acquiring luxury goods when traveling abroad is not a new phenomenon among luxury consumers. What is missing, however, is the "why" behind the path to purchase. Why do some Chinese customers prefer to buy handbags in Europe (even if readily available in their home country) yet are fine with purchasing shoes or belts at home? What is different about the in-store experience in Italy that makes it more appealing for American consumers (and in what capacity)? These questions may seem feasibly answered in a point-of-time study, but an on-going dialogue through an insight community can help reveal how the nuances may change over time.
We’re in uncharted territory as we look to the next normal as tourism returns, but having a system in place for learning from your customers—both where they are now and where they’re expecting to go—ensures you’re providing the best possible experience across every touchpoint.
5. Balance exclusivity with ubiquity
The on-going battle between exclusivity and ubiquity is a common struggle for luxury brands. Limited availability of product can help support brand exclusivity (in turn supporting a higher price tag), yet being too limited can impact the bottom line if there isn’t enough sales volume to make it worthwhile.
On the other hand, some luxury brands have diluted some of their luster by being "too available" to everyone everywhere. Where is the fine line? Are some accessories acceptable if more widely produced, while select handbags should be reserved for those few and far between? What are your customers saying? And does this conversation differ depending on where the customer lives (e.g. Asia versus America)? This should be an on-going dialogue.
These five examples only scratch the surface for the types of worthwhile conversation that luxury retailers and consumers should have. Many of the most successful luxury companies are already engaging their customers and giving them "virtual seats" in their boardrooms. Why might your brand be waiting? Don’t miss out on critical insights and the opportunity to strengthen relationships. Now, more than ever, is the time to bring your empowered luxury customers to the table.