The Evolution of Luxury Retail and the Importance of Customer ExperienceOctober 13, 2023
Luxury Retail Vs Retail Is More Insulated Against Market Disruptions
Luxury retail is traditionally more insulated against market disruptions. Its clientele is affluent and typically insulated from inflation, allowing it to weather global slowdowns far more easily than other segments.
It’s also a sector that tends to set new trends in retail technology, pioneering personalized shopping and customer-centric conversion strategies. This is why omnichannel luxury tends to be on the forefront of innovation.
It’s all about the experience
Luxury shoppers value a bespoke shopping experience based on the concept of clienteling. This extends beyond product selection and merchandising to a customer relationship that starts at purchase and continues long after the item leaves the store. This is why affluent consumers favor buying high-end products online at undiscounted prices through sites such as Net-A-Porter or Farfetch.
Luxury brands are also prioritizing omnichannel experiences. In addition to a full range of buy online, pick up in store services, they are offering onsite personal stylist appointments, shoe repair, trendy restaurant choices and more. These innovations often trickle down to the lower end of the retail economy, helping to redefine what constitutes luxury for many consumers.
Gen Z luxury shoppers are platform agnostic and expect to engage with retailers simultaneously on physical and virtual platforms. To meet these dual desires, luxury retailers can add value to the customer journey by leveraging generative AI to offer a more immersive experience.
It’s all about the brand
Many luxury brands are responding to experiential preferences by offering a wide range of onsite services, from personal stylist appointments and clothing alterations to trendy restaurant choices and online order pickup. This is particularly the case with millennials, whose aversion to frivolous spending seems to be giving way to a more conscious approach to consumption.
Authenticity and social consciousness are also important to this new generation of luxury shoppers, who want to see luxury brands make clear their commitment to the world’s environmental and political issues. Moreover, they are looking for luxury products to offer a high level of craftsmanship and exclusivity.
Despite the global economic slowdown, luxury sales continue to outperform retail, thanks to the loyalty of their high-earning target customer base. But the challenge is that these consumers are hybrid shoppers, expecting a consistent experience across channels, both digitally and physically. The key to success for luxury retailers is to deliver an evolved shopping experience, based on data-driven insights and innovative technologies, to retain these customers.
It’s all about exclusivity
Luxury brands have always been considered among the most insulated retail segments against market disruptions. They rebounded from Covid-19 far faster than other sectors, and are likely to weather inflationary pressures better than others as well.
But the rise of online shopping is threatening to deprive high-end shoppers of a key element of their brand experience. When a product can be bought at a moment’s notice from anywhere in the world, it loses its exclusivity.
As a result, luxury brands have been rethinking their customer experience to offer unique products and experiences that reclaim luxury’s exclusivity. For example, many luxury retailers have rolled out buy online, pick up in store (BOPIS) services as a way to extend their clienteling offerings and give shoppers an experience that is uniquely theirs. They’re also experimenting with other innovative services, from virtual try-ons to immersive fashion shows. Some are even dipping their toes into the fast-growing gaming sector, such as Balenciaga’s production of its fall 2021 fashion show as a video game.
It’s all about the customer
Luxury customers are value-based. They want to see brands – particularly luxury brands – support causes they care about. These values can be social, environmental or political. It is important for luxury brands to communicate these in-store and online.
In addition to customer service that focuses on clienteling, luxury retailers often leverage technology for personalized offers and targeted conversions. These innovations tend to percolate downwards as lower-end retailers imitate the strategies of their luxury counterparts.
During the COVID-19 pandemic, many brands based in the middle of the retail economy were forced to focus on ecommerce. We have seen Sears Canada, Payless ShoeSource, Bentley’s and more shutter their doors. Those who have succeeded in the middle are those that provide high-end product at a more affordable price point, such as DSW Shoes, Winners and Nordstrom Rack. These retailers use data to create a lifestyle connection with their audiences and encourage brand loyalty with exclusive products and treasure-hunt type experiences.