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Is your business looking to crack the luxury code? | ALW2019

“Five years ago, we were talking about how luxury brands were lagging behind in digital adoption. Today, digital is the No.1 medium for luxury brands."

“Businesses are now trying to target niches that probably in the past were not seen as exciting enough" "We're still stuck in the old model of silos. So, as long as we are there, we can't have that omni-channel experience" "Technologies can give people a glimpse of the future. This can influence people’s purchases and luxury experiences"

The Middle East and the GCC regions have rapidly begun moving data, business processes, interactions and engagements to digital platforms in an attempt to diversify away from oil-based revenues and increase the focus on evolving consumer behaviors. The luxury industry, which includes the high-end and premium luxury market, has quickly latched onto this trend. Despite geopolitical tensions and fluctuating oil prices, the Middle East luxury goods market has witnessed a 3 percent year-on-year growth. A 2018 McKinsey report indicates that 80 percent of luxury sales were influenced by online platforms.

Kering, which owns the industry-leading Gucci brand, recently announced that 50 percent of its media budget in 2018 was spent on digital advertising. LVMH and Christian Dior have also begun splashing the big bucks to develop meaningful and lasting relationships with the smartphone and digital-savvy millennial and Gen Z generations on social media platforms.

“Five years ago we were talking about how luxury brands were lagging behind in terms of digital adoption. Today, digital has become the Number One medium for luxury brands. It’s been accelerated through high mobile adoption here in the region – we have 90 percent smartphone adoption in this part of the world,” said Eric Bequin, Managing Director, OMD Luxury and North Africa, OMD.

Engaging online and offline

The sixth edition of the Arab Luxury World, the Middle East’s leading luxury business conference, taking place on Wednesday, June 12 and Thursday, June 13, at the JW Marriott Marquis Dubai, provided in-depth insights on digital transformation in its Cracking the Luxury Code. The panel discussion showcased how innovative digital strategies have boosted the growth of several luxury brands in 2018.

“Businesses are now trying to target niches that probably in the past were not seen as exciting enough. The digital platform and the e-commerce space offers the opportunity to scale beyond your territory,” said Ghizlan Guenez, Founder and CEO of the Modist.

While on one hand, the e-commerce boom has swept most luxury businesses into the digitization wave as a factor defining the digital placement of brands, as well as their products and services; on the other hand, social media, digital marketing and online influencers have dictated a need for digitalization.

"The key issue here is how we want to mix between what we do on the analog space and what we do on digital space, and how these two merge together. I think one of the key issues that helps drive the luxury industry is this capacity of creating silos. We're still stuck in the old model of silos. So, as long as we are there, we can't have that omni-channel experience where we're really looking after consumers. Opportunities in technology are limitless but as long as marketing, PR, and digital, work in silos, experiences for consumers will never be frictionless," said Eric Bequin, Managing Director, OMD Luxury and North Africa, OMD.

Digital businesses with digital business culture

The distinction between digitization and digitalization is quite subtle. Digitization calls for businesses to make data-driven decisions and incorporate digital workflows, but digitalization takes this a step further by calling for a complete digital transformation overhaul in work culture, acquisition of digital skills, change in modes of communication, and adoption of customer-centric technologies.

“A lot of times, there are items and products that you might want in 20 years, when you look different and think different, but you can’t really imagine yourself in that situation. However, we are coming to a point where we now have experiments and technologies that will give people a visual of how they will look and feel 20 years from now – technologies can give people a glimpse of the future. This has been shown to influence people’s purchases and luxury experiences,” said Moran Cerf, Professor of Neuroscience and Business at the Kellogg School of Management.

In addition to increasing brand engagement, the digital move has also fueled personalization and customization by providing metrics on successful engagements. Digital transformation has opened up immense possibilities through data surrounding customer feedback and insights. It has permitted for accurate and efficient means of collecting, aggregating and storing consumer information, which can then be analyzed, interpreted and used to implement targeted and tailored content, product and service strategies.

The recent annual report from Bain & Co puts this into perspective by showcasing a 22 percent growth in Middle East online shopping, which is almost twice as much as the rest of the world. There is no turning back when it comes to digital transformation. However, luxury brands face challenges on how to implement the right technologies to reach customers and be more effective.