Luxury retail is experiencing a paradigm shift. The traditional ways of doing retail are no more effective and require a radical makeover. Mobile commerce is blooming worldwide as growing number of consumers are using their smartphones to research, compare, purchase and return products.
Does this mean brick-and-mortar stores are becoming passé? Absolutely true, many iconic retailers like Nordstrom, Lord & Taylor, Victoria’s Secret, Barneys, to name a few, are closing their retail stores. To remain relevant, these stores are trying to reinvent themselves by going digital. But, simply moving sales online will not be enough for their survival. Retailers need to devise innovative ways to make their stores meaningful for new-age luxury buyers.
In tandem, digital players such as Amazon, Rent the Runway and Warby Parker are opening physical stores as a way to augment their online experience. What’s leading to these changes? The customers’ demand for a seamless, bespoke shopping experience, with a 360-degree access to retail across all touch-points is resulting in luxury retail disruption.
Here’s a look at 6 major trends reshaping the luxury retail environment.
6Phygital Retail
In the future, there will be need to blur the line between physical and digital retail. As per Juniper Research, fashion brands’ retail spend on Artificial Intelligence (AI) is predicted to rise from US$2 billion in 2018 to US$7.3 billion by 2022. Software developer SAP is working with Harrods to develop technology that provides customers with personalised recommendations from the in-store screens based on what they are wearing. Omnichannel brands are using digital behavior to inform in-store assortment. The Nike store in Los Angeles has furnished the store with Nike Cortez sneakers after understanding through digital commerce data that its local customers enjoy running.
Note: Data-driven technology is helping luxury retailers to design appropriate in-store strategies.
5Experiential Stores
In the coming times,luxury retailing will be driven by experience. The recently opened flagship store of Nordstrom in New York is trying to captivate time-starved buyers by providing dedicated service stations for easy returns/ exchanges, etc. The store is providing a perfect blend of technology, innovation and a truly luxury experience. Store associates are well-trained and empowered to augment customers’ experience. Similarly, Sephora is providing free beauty workshops to not only attract customers but to also provide them with something more than just a product to walk away with.
Note: Luxury retailers need to have some sort of in-store celebrations/events every now and then so people will step into the store and also discover something different every time they visit.
4Care is the New Commerce
Organisations have to adopt ‘care is the new commerce’ mindset. They need to understand each step that the customer goes through in his/her journey while making buying decisions. This will help in understanding the customers’problems better and providing them with personalised solutions (services) by leveraging analytics and AI. Recently, Cartier has initiated a digital customer care system ‘Cartier Care’which is designed to build a relationship with clients. It provides clients access to a comprehensive suite of watch workshop services like complementary battery changes, brightening and engraving, full technical checks, etc. It also aims to permit customers to sell their timepieces back to the company and acquire creations from the latest collections.
Note: Today, luxury retailers need to go an extra mile to serve their clients.
3Zero-Inventory Stores
There are many luxury retail brands that focus on e-commerce business models, but they can also benefit from a physical presence. Various researchers have proposed a novel idea known as zero-inventory stores (ZIS) which will make physical stores a platform where shoppers can touch, see and experience products while placing orders online. Less inventory would require smaller store formats, which in turn would mean huge savings on rental costs. Such stores will enable help retailers gain the best of both physical and digital worlds. Research suggests this strategy is not only cost effective for retailers but has a supercharging impact on digitally native customers. As ZIS provides Millennials with an opportunity to experience the product, it would generate more demand and less returns. JLL, the commercial real estate company, predicts more than 800 new stores will open in the next five 5 years by top 100 digital players. Will this have any implications on traditional luxury retailers? In my view, this will have a lethal impact on age-old retailers, who may have to fi nd alternatives to survive in this complex and challenging environment.
Note: Experience-driven ZIS will help luxury retailers to engage, inform and provide better service to Millennials while leveraging online fulfillment.
2Luxury Brands Partnering with Resale/ Rental Sites
A few years ago, high-end brands could never have thought to make collaborations with closet-sharing/ pre-owned apps. However,as luxury consumption patterns of consumers are undergoing drastic changes, brands are exploring new ways such as these to generate traffic into their dying stores, attract Millennial clientele and boost sales. Also, because of the circular nature of the partnership, it is a way to boost the corporate social image of luxury brands. For example, recently Burberry has announced an official partnership with pre-owned luxury site ‘The RealReal’. Customers who purchased consigned Burberry items through ‘The RealReal’ are provided with a unique shopping experience at Burberry stores. Similarly, Rent the Runway and Neiman Marcus teamed up to redefine the way consumers shop.
Note: Luxury retailers have to explore new business partnership opportunities to draw Millennials into their stores.
1Pop-In / Pop-Up Shop
Physical retailers like Nordstrom created pop-in shops with EverLane, a brand known for its transparency approach, to tap today’s discerning, eco-conscious shoppers. Similarly, many luxury brands like Chanel, Louis Vuitton, etc. are opening pop-up stores to test small before opening full-fledged stores. This store format helps brands display their new collections and engage directly with customers, while studying the market and the catchment area. Recently, the Hermes Silk Mix pop-up was held in Munich. The pop-up’s priority was to entice young consumers who feel estranged by flagship stores and for whom sense of community holds great significance.
Note: Luxury retailers have to come up with innovative store formats to excite discerning, new-age consumers.
