With upcoming malls in the region, rising costs of operations, a strong emphasis on online retail and continuous change in consumer habits, premium retail is scrambling.
Arab Luxury World, the Mediaquest conference on the business of luxury in the Middle East, being held from JW Marriott Marquis in Dubai from June 12 to 13, held a session on The Future of Premium Retail.
"Retail is a mix between sports and military arts. Every single associate and manager is a high-level athlete. There is a need to train at least for 5-15 minutes every day… We need to change the recruitment process," Regis Dupertuis, CEO, Le Monde des 5 Fleurs said at the session.
Dealing with luxury brands’ digital and in-store systems will require managers with skill sets ranging from anthropology to sociology, in addition to computer science and retail management.
"Stores are the new media and the phone is the new store. Stores have an important role in the future in terms of creating great experiences. This is important in terms of connections between consumers and brands," Charles Haddad, General Manager L’Oréal Luxe, L’OreaL Middle East, for his part said.
But the fact remains that customer experience (CX), the quality of all the interactions that take place between companies and their customers, online or offline in luxury, is beginning to upstage “status seeking”. And there is a lot of work to do on that aspect according to the latest Customer Experience Index report from Forrester Research hat found customer experiences failed to improve, with more brands than ever ranked “mediocre.”
CX in the middle of luxury buying
It’s not just about embracing technologies like AI but figuring out what consumers really want and developing the right strategy and tactics to meet their demands. It’s not gold twinkling in the eyes of high-end consumers today, but rather retailers’ approach which needs to be fit for purpose.
Bain & Company also found that nearly half of all consumers, and crucially a majority of Millennials, are buying fewer goods and more experiences. Euromonitor expects the experience economy, which includes leisure, recreation, travel and food services, to grow from $5.8tn in 2016 to $8tn in 2030.
Critical trends to stay ahead in 2019
Regis Dupertuis said challenges facing Premium Luxury Retail are: "No. 1 is professionalism. No. 2 To change people's mindsets. No. 3 is consistency and effectiveness." So what should luxury brands focus on in 2019 to stay relevant and engage with their affluent consumers? Luxe Digital looks at the following.
1. Legacy retail challenged
New digital born players and niche brands are taking the luxury industry by storm and challenging legacy brands, and appear more capable to meet the changing expectations of the modern affluent consumers.
"What a lot of companies miss is how they structure themselves. Most retail businesses still have a retail department, an e-commerce department, a marketing department. Businesses are indeed becoming siloed," Oliver White, Head of e-commerce, Sephora, said at the current session.
“Legacy luxury brands will thus need to pivot from ultra-exclusivity to a new flavour of inclusivity to align with this social shift,” says Luxe Digital.
2. Hybrid luxury
Affluent consumers are increasingly mixing and matching the high with the low to express their own style. Collaborations between streetwear labels and luxury brands enable the creation of unique items that are highly-coveted by young prosperous shoppers.
But it doesn't need to be the case at all times.
"One of the things that helped build success is the adaptation of technology, to get products out using high penetration platforms. We also understand the psychology of consumers in the region. Our product is not mass market – we stay exclusive" Jewelry designer Salama Khalfan, Founder & Creative Director, Salama Khalfan, said today.
3. Millennials have a message
Gucci is a great example of a traditional luxury brand that has successfully managed to re-invent its image to better appeal to the younger generations. Also, Millennials are not seasonal shoppers. Luxury brands now need to refresh their collections often to be in tune with their consumers’ changing expectations.
4. Optimizing Omnichannel
Luxury brands have to design an impeccable omnichannel ecosystem and experiment more with Augmented Reality (AR) and Artificial Intelligence (AI).
"What Sephora has done really well in the U.S. is consolidating retail and digital into one team. It's not called omnichannel or offline or online, it's just called a retail team," said Oliver White.
5. Green Luxury
Affluent consumers seek a meaningful contribution to their lifestyles while driving positive change in the world. Luxury brands like Gucci, Michael Kors and Diane Von Furstenberg announced a recent commitment to more ethical fashion practices, including going fur-free.
Ad sales going digital
Euromonitor International reports that luxury goods sales are growing nearly three-times faster online than in physical retail, 14% as compared with traditional retail at 5%.
With this growing presence, digital advertising platforms are winning over print publications, the traditional kings and abode of luxury brands.
For example, Calvin Klein just announced it will pull all advertising from print media starting in February 2019 in favour of a “digital-first, socially-amplified model.”
UK-based Zenith’s 2019 Advertising Expenditure Forecasts reports that digital spending will be responsible for all growth in luxury advertising spending.“We forecast luxury advertising in digital media to grow by $886m between 2017 and 2019,” it reports and adds that digital will account for about 33% of luxury’s total advertising budgets.
That means the concept of a luxury good as a status symbol is rapidly being replaced by that of a status experience or an Instagram-worthy moment.