Most luxury consumers, regardless of age, enjoy shopping across channels – digital and physical. And 50% of luxury sales are from omnichannel shopping. These are among the key findings of a recent study by the consulting firm The Boston Consulting Group (BCG).
The report, based on a survey of 10,000 consumers in 10 countries and interviews with industry experts, confirms that omnichannel retailing is indeed an irreversible trend, and that luxury brands really need to step up their game to better meet expectations of a new generation of consumers who are empowered by new technologies to exercise cross-channel shopping.
Physical and digital domains
The luxury market, for the most part, still heavily relies on in-store interactions. That is, more than 40% of luxury sales are in-store only transactions. Conversely, online sales account for only 8% of the market, even though the number is expected to rise to 12% by 2020. This finding is consistent with the current state of the retail industry as a whole. In the US, e-commerce generated only 8.3% of nationwide retail sales in 2014, according to data from the US Department of Commerce. Even though e-commerce has grown exponentially on a global scale, online retail is projected to account for only 8.8% of global retail sales by 2018.
Still, the majority of luxury consumers choose to engage in cross-channel shopping. They either research products online first then purchase them offline, or examine products at a store and then buy them online. Either way, luxury retailers must maintain a strong presence in both physical and digital domains in order to increase sales and customer engagement. In other words, making their brands and products readily available and easily accessible in all channels is absolutely essential.
The most critical factor that drives luxury brands towards omnichannel retailing is the fact that most of their customers expect an omnichannel experience. 86% of millennials, 84% of people born in generation X, and 75% of baby boomers and older people consider the ability to interact with a luxury brand across multiple channels important.
Interestingly, older generations engage in digital channels almost as much as younger and more tech-savvy generations do. In some countries, most notably Japan and Russia, older consumers are the most active online luxury shoppers.
There are some significant variations among countries with regard to how readily luxury shoppers embrace omnichannel experience. For instance, only 31% of French shoppers research online prior to purchasing luxury products in a store. This figure in the US and Japan is 47% and 46% respectively.
Why omnichannel retailing matters
Luxury retailers have been struggling recently as they are facing a multitude of unfavourable factors such as a stronger dollar, low oil price, and slowing economic growth in China. Omnichannel could very well be the solution to such challenges.
Selling to omnichannel shoppers is generally more profitable. A Deloitte study indicated that omnichannel consumers spend 93% and 208% more per transaction than online-only and in-store-only consumers do, respectively.
The personal luxury sector is also experiencing a shift towards experiences versus goods. And omnichannel retailing can help brands greatly enhance their customer services. Imagine you walk into a store and are welcomed by a sales associate equipped with a tablet, or smartphone, who can assist you with detailed production information immediately. She can also use it as an m-POS (mobile point of sale) to conduct transactions on the spot. Even better, if you find the right product but your favourite colour is out of stock, the sales associate can place an online order right from her tablet and have that product shipped to your home.
Stay informed with the latest trends and updates in Retail Management: Subscribe to our Blog.
How can traditional retail chains compete with rapidly growing e-commerce competitors and ultimately prevail? Our white paper will answer the following questions:
- Why must retail chains embrace omnichannel?
- What are the commonly used omnichannel strategies?
- How does omnichannel transform the retail industry?
- What do retailers need to do to lay the foundation for omnichannel.