South Korea's Dongdaemun Design Plaza
Digital contactability, the ability of a retailer to accurately target a consumer through digital, will transform the luxury industry, according to a new report by ContactLab and Exane BNP Paribas.
The "Digital Frontiers in the Luxury World" report argues that in the next five years 90 percent of luxury customers will have a digital identity traceable by brands for marketing purposes. On the flip side, consumers will increasingly generate sales and pump up brand allure through their online activity.
"To say that luxury markets will be responsible for an increasing percentage of growth is rather common," said Luca Solca, managing director equities sector and head of luxury goods at Exane BNP Paribas, Milan. "What’s less common, and more precise, is to say that the entire luxury industry is radically shifting as happened in the past with the travel and financial services compartments.
"Physical points of sale will remain fundamental and indisputable assets, however, development and adoption of digital competencies will be a necessary condition for brand survival," he said.
"The Digital Frontier: The New Luxury World of 2020 goes online" is the third edition of the report.
Looking ahead
As far as ecommerce has come over the past decade, it is still nascent in some areas. One area that brands needs to work on is the ability to identify and cater to consumers on an individual level.
Currently, most ecommerce customization is generalized or draws the wrong conclusions.
Part of the reason for this is that brands do not have full profiles of their customer base online.
As of 2015, about 24 percent of a brand's customers are anonymous and 77 percent can be contacted online through conceded information, according to proprietary data from ContactLab.
By 2020, the report argues that the number of digitally contactable consumers will rise to 87 percent.
Fendi's Twitter talk
While this shift in and of itself is not especially noteworthy, it will be accompanied by a tipping point that will usher in an industry-wide evolution of how digital is approached.
Ecommerce sales are expected to continue to grow rapidly, to an estimated 18 percent of total sales by 2020 from 6 percent today, and digital will have a direct or indirect influence on a growing number of sales.
While the word "omnichannel" has been in hibernation lately due to extreme overuse in the past year, many brands will essentially have their omnichannel overhaul figured out by 2020.
As consumers traverse channels, doing research online and shopping in-store, or any combination of actions, brands will have to make the experience seamless.
Bloomingdale's in Palo Alto
Indeed, if cross-channel behavior is enabled, consumers will spend more and be more connected, according to the report. Currently, cross-channel consumers spend 60 percent more than their peers and even spend 13 percent more than those who only shop in-store, suggesting that the most enthralled shoppers are the most likely to be adept at crossing channels and that the more exposure a consumer has to a brand, the more purchases will result.
Customize
The barriers to high-level personalization are daunting, but retailers know that the land of relevance is where ROI salvation lies, according to a new report by L2 and Monetate.
Excellent customization entails translating the knowledge and adaptability of a personal shopper to the digital sphere, approximating “organic discretion” in a way that increases conversion. Econsultancy notes that 4 percent of retailers believe their Web sites are “very personalized,” and L2 lists a few reasons for this discrepancy between aspiration and actuality: a lack of “management buy-in, technical upskilling and de-siloing of data across channels," (see story).
Effective customization can also unlock the potential dwelling inside every consumer to be a brand evangelist.
"If we look at retail turnover we can see that only a quarter of it stems from digitally contactable users," said Massimo Fubini, Founder and CEO of ContactLab. "The other revenue is generated by anonymous users (another quarter) and users who are registered but who cannot be contacted for one reason or another.
"Thanks to research such as this, we also know that digitally contactable users spend around 20 to 30 perecnt more both online and in-store: if brands learned to identify and make contactable this anonymous 'block' it would unlock hug revenue-generating potential," he said.
"To do so however one needs to use evolved digital contact tools which enable strategies of engagement and loyalty-building and allow upselling to these customers."
Final Take
Joe McCarthy, staff reporter on Luxury Daily, New York