In 2016, the total number of luxury goods and services consumers worldwide reached 415 million, and they spent €860 billion. The tip of the pyramid is made up of 17 million individuals, nearly 4% of all luxury goods consumers. They spend between €36,000 and €50,000 per year in luxury items, and accounted for 29% of the world’s overall luxury goods purchases.
According to the BCG‘s study, in 2023 their number will rise to 490 million, and they will spend €1.185 trillion. The market is expected to keep growing, though at a slower rate then before. Yet, if brands want to keep up with the pace, they will have to redouble their efforts and reinvent themselves.
In the last few years, luxury goods stores have lost some of their sparkle. One reason is that brands have increasingly adopted a ubiquitous, standardised format providing the same shopping experience everywhere, resulting in stores which differ from one another only architecturally, and come across as unimaginative. Also, traditional stores have lost appeal in terms of the range and services they offer.
To win back their customers, brands will greatly benefit from differentiating their store format based on the customer segment they are targeting. A case in point is represented by Tiffany at Harrods. The jeweller’s sales in the London department store have greatly increased after the creation of two clearly distinguished shop-in-shops within it, one focusing on the top-end range and the other on more accessible products.
Another example is the Fendi flagship store in Rome: on its first floor, clients are able to watch the label’s tailors at work from behind a large viewing window, as is often found in restaurants, experiencing the label’s creative world more fully.
At the same time, the web has gained much ground, both in terms of sales and influence, as reminded by Luca Solca, author of the Exane BNP Paribas retail survey. “Expenditure by consumers who buy both in brick-and-mortar and online stores is 45% higher compared to that of clients who only purchase in-store. The omni-channel approach is a major opportunity in a market which grows at a snail’s pace.” Also, e-tailing allows labels to cut costs significantly, especially from the logistics point of view, as there are no rents to pay and there is less staff to hire. Another advantage is that customers who are well-informed thanks to the internet waste less time in shops.
Given this scenario, integration between brick-and-mortar and web retailing has become a priority for CEOs, said Solca. If they are well supported by a web presence, stores can afford to be smaller, becoming simply a place where advice can be offered and where customers go to see and feel products, and personalise them.
Yet this kind of integration is still hard to achieve for the majority of brands. The survey ranked Ralph Lauren, Bergdorf Goodman, Burberry and Louis Vuitton at the head of the table, while the bottom places belonged to Bottega Veneta, Tod’s, Chanel, Dior, Dolce & Gabbana, Salvatore Ferragamo, Saint Laurent and, at the back of the pack, Céline.
“There are a few outstanding cases, and some major groups whose performance is improving, but also many brands that are struggling to respond to the demand for impeccable customer service both online and in-store, and for a real integration between the two,” said Nicola Pianon of BCG, who also underlined the “crazy” influence exercised by social media.
According to the consultancy firm’s survey, “70% of the interviewees interact first of all and chiefly with brands once they are on social media, and often more than once a day.”
Another major growth vector is represented by e-tailing in China, though its deployment is complicated, because the market is dominated by local players with which some kind of agreement is necessary, said Luca Solca.
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