This article was originally published by TotalRetail.
Luxury fashion brands and retailers used to be infamous tech laggards. Unlike D2C brands and startups that were born with digital in their DNA, longstanding luxury brands were slow to embrace digital.
In the world of luxury, iconic names and signature styles were enough to secure a loyal following, and most high-end consumers preferred to shop in stores. But recently — especially during the pandemic-induced eCommerce boom — this has all begun to change.
In a bid for consumers who now demand a sophisticated, engaging, and inspiring digital customer experience, many luxury brands are pursuing digital transformation at warp speed.
Now, some brands are on par with — or have even surpassed — their digital native contemporaries.
Rising Customer Standards Are Driving the Change
For many long-standing luxury brands, early digital transformation efforts consisted of tacking on eCommerce capabilities in the form of online shops and apps, investing in social media marketing, and forging partnerships with influencers.
Instead of integrating it from within, digital was simply added on top of traditional strategies of attracting, converting, and nurturing shoppers. But in the last couple of years, this is beginning to change.
Today, many luxury brands are making efforts to improve their standing in a saturated digital market, and become more resonant among digitally-inclined shoppers.
Consumers rule retail. They are no longer content with simply acquiring products. According to Deloitte, “they want to interact, belong, influence, and be the brands from which they buy.” Empowered by digital technology, modern shoppers are informed and selective. They not only desire but demand a shopping experience that immerses, engages, and entertains them while connecting them to the right products.
Gen Z, who is quickly becoming the most influential group of luxury shoppers, have the highest expectations for an innovative and sophisticated digital experience. That means brands and retailers must start addressing their desires now.
Digital Can No Longer Be a Side Gig
Being a fashion icon is no longer enough, and digital transformation can’t be a side project. eCommerce isn’t a separate business, it’s the business. Digital not only enables trillions of dollars in sales, but it’s an essential element of the brand-consumer relationship. It is the means through which discovery, connectivity, and community take place.
Even the most loyal of shoppers judge brands through standards of how innovative, engaging, and seamless the customer experience is. Meanwhile, legacy brands with old-school, slow, or disappointing digital experiences will be viewed as outdated and obsolete in comparison.
6 Ways Luxury Brands Have Become Digital Transformation Leaders
With a clear need to catch up in their digital transformation efforts, some luxury brands have gone so far as to transcend their more digitally native competitors. Today, luxury brands are among the first to embrace new digital trends, and boast some of the most innovative and experimental digital customer experiences.
Here are six examples:
In 2018, Deloitte predicted blockchain — the distributed ledger system that underpins cryptocurrencies like bitcoin — would revolutionize retail. A few years later, this vision is starting to come true.
Blockchain has emerged as a trustworthy way to track the provenance of luxury items and ensure payment security. Because their ledgers are unchangeable and decentralized, it’s easier to ensure data security, giving buyers greater peace of mind.
In April, European luxury companies LVMH, Prada, and Richemont announced they were joining forces to establish a blockchain consortium that will allow shoppers to track their purchases and authenticate goods. In the Aura Blockchain Consortium, each product will receive a unique code during manufacturing that will be recorded on the Aura ledger. When customers make a purchase, they will gain access to a platform, on which they can view the whole history of the product from its origin, environmental and ethical information, proof of ownership, warranty, and care instructions.
According to the New York Times, Bulgari, Cartier, Hublot, Louis Vuitton, and Prada are already using the system, and a number of other luxury brands are discussing joining in.
Since cryptocurrency prices began to skyrocket in 2017, a new class of “crypto-rich” people emerged. According to research by Edelman, one in four millennials owns or uses cryptocurrencies.
By accepting crypto-payments, some brands are creating exclusive customer experiences, such as limited edition items that can only be purchased with cryptocurrencies.
For example, Swiss luxury watchmaker Hublot sold a limited-edition watch to celebrate Bitcoin’s 10th anniversary in November 2018. Only 210 watches were available for sale, each of which sold for $25,000 worth of bitcoin.
In February, luxury Italian shoemaker Bottega Senatore announced it would start accepting Bitcoin and several other cryptocurrencies on its shop via Bit Pay. The move is part of the brand’s efforts to “combine traditional Italian luxury with constant innovation.”
3. Virtual fashion
Some luxury brands have launched lines of digital-only items that video gamers can purchase to dress up their avatars in virtual worlds. The move signals brands’ eagerness to expand to new demographics, like Gen Z, in new places, like Roblox.
Gucci launched a limited collection of accessories, shoes, and handbags this spring for Roblox, where it has the chance to meet the youngest class of luxury admirers. The entrance of high fashion into the virtual world represents a new era of commerce, with some predicting the virtual fashion market will exceed $400 billion by 2025. In early June, a virtual version of Gucci’s Dionysus Bag with Bee sold for $4,115, higher than the price of the real bag.
By staking out their spot in virtual worlds, luxury brands can tap a booming, new market while creating engaging, fantasy-like experiences for a budding class of shoppers.
In August 2020, the online luxury retailer Moda Operandi launched a unique, digital take on the trunk show model. With COVID-19 cases ticking up and in-person fashion shows no longer an option, the platform launched Moda Live, in which designers present their new styles straight to online audiences, and shoppers can pre-order clothes straight from the catwalk.
Brands that have participated in Moda Live have been “very receptive to the concept,” according to a senior Moda representative. They see livestreaming as an opportunity to communicate directly with their customers in brand new ways. With the ability to hear straight from designers, luxury shoppers were able to learn more about and connect with the latest styles.
Non-fungible tokens (NFTs) are a type of cryptocurrency that convert digital images into unique, verifiable assets that can be bought and sold through blockchain. Their emergence this year captured the attention of both luxury shoppers and the media, with sales of memes, videos, and other forms of digital art raking in hundreds of thousands of dollars.
Some luxury brands have also jumped on the NFT bandwagon, selling branded digital art to collectors with greater bragging rights. For example, luxury watch brand Jacob & Co. in April auctioned its first-ever NFT luxury watch. The highest bidder won the digital watch for a cool $100,000, along with a certificate of ownership and a case.
According to Benjamin Arabov, Jacob & Co.’s recently appointed CEO, the decision to enter the NFT realm is part of the brand’s efforts to “be a pioneer in this new digital field.” By establishing itself as one of the most innovative luxury brands, Arabov hopes future buyers will see the brand as able to provide a unique, innovative experience.
Augmented reality has proven to be one of the most effective ways to create immersive and engaging experiences, allowing shoppers to view or “try on” products from the comfort of their own home. During the pandemic, when in-store shopping wasn’t possible, AR was a godsend for beauty companies, which allowed shoppers to test products safely with the click of a button.
In-store shopping is back on, but AR is here to stay. Brands like Burberry, Gucci, and Dior have launched AR programs of their own that allow shoppers to test out handbags, sneakers, and makeup.
With highly sophisticated and life-like AR capabilities, luxury brands have the chance to wow customers while boosting sales.
For Luxury, There’s No Turning Back on the Road to Digitalization
For some brands, the journey is just beginning. For others, the speed and intensity of their digital transformations has earned them a seat among the top-ranking digital disruptors. However far along your brand is on this path, it’s clear to see that the digitalization of luxury is not over.
As younger, digital-native shoppers start wielding more buying power, luxury brands that have already begun catering to their “digital desires” will be positioned to succeed. They will be the ones that are able to offer the most innovative and inspiring customer experiences, while the ones that can’t will be seen as a relic of the past.