Letter from Paris: Luxury and digital

The 2016 Digital Luxe meeting took place here in Paris in early May, with marketing professionals gathering to share their views on the issues affecting the luxury goods sector.
 
Over the years, luxury as a category has evolved from family “maisons” that sold their products to well-known wealthy clients, to major international groups that face the ever increasing democratisation of the luxury category.  Many of these Brands have fueled their growth by extending beyond their core propositions with line extensions such as sunglasses, fragrances and cosmetics.

As these brands have changed, their market places have too. No longer are these ‘Maisons’ focusing on the wealthy of Europe and North America, instead China is now a primary source of revenue for most (one in two luxury consumers are Chinese).  And, importantly, Chinese consumers are highly digitally connected; they are familiar with brands via online search capabilities and use apps to compare prices.

So, inevitably the luxury sector is experiencing significant tension with a need to blend its heritage of elitism and exclusivity with a democratised, unstoppable world of potential customers who feed on digital and are providing vast amounts of data.
 
Luxury’s traditional business model is entering the digital era
These ‘connected consumers’ are shaking up traditional buying cycles. Today, the trend is “See Now, Buy Now” so speed can provide a significant competitive advantage to producers.

Today there are start-ups capable of delivering high-end customised jewelry to their clients in just two weeks, using only online tools.  Others allow customers to pre-order designer’s latest collections right after the runway show.

Technology has become essential to support the customer experience
In 2015, 76% of Chinese luxury consumers bought outside their country, mostly online. This underlines the fact that a connected customer journey is increasingly crucial to ensure the sector’s continued growth. Against this, however, lies the fact that the conventional purchasing experience of a luxury item is usually an ultra-customised experience. So today Brands face the need to recreate the boutique’s premium relationship with their consumer through online shopping platforms or apps.  This makes the mastering of data and technology essential to create a seamless, unique and high quality experience.

Influencers are part the brand’s creative process
The ubiquity of social networks have disrupted the traditional advertising chain used in Luxury. The category’s new visibility is at odds with its heritage of uniqueness/elitism and Maisons’ traditional exclusivity and creativity.  Now they have to communicate in a populist manner and take into account on-line influencers who are redefining high fashion and are increasingly important in the industry.

What about data?
Speakers at the Digital Luxe Meeting were unanimous: luxury and data have not got on well. It is still a rare capability in the sector, mostly because of the lack of “data scientists” within luxury goods providers. Still, data cannot be ignored by the luxury sector. Luxury’s raisin d’etre is creativity, fed from intuition which is derived from unique knowledge. And today, knowledge is… data.

On all levels, the major issue for luxury industry will be to implement digital and data in the decision-making process whilst keeping the magic of creation and seamlessly blending it with the logic of data…

Nicolas Gondeau is a Partner at The Observatory International, Paris.