THE LUXURY RETAIL LANDSCAPE IN 2016: ONLINE AND OFFLINE PRESENCE BOTH KEY TO INCREASED REVENUES

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From the Champs Elysee in Paris, to Orchard Road in Singapore, luxury brands have long been recognized for their opulent and recognizable boutiques. With their large floor space, high ceilings, and attentive sales personnel, a visit to one of these stores always provides luxury shoppers with a memorable experience for each piece of luxury they acquire.
However, as the world increasingly becomes a smaller place with increased connectivity via the Internet, more and more shoppers are trying their hand at purchasing luxury goods online, skipping the unique purchase experience for better prices.
In late 2015, Agility Research, a market research firm specializing in luxury brands, conducted a multi-country study covering at online luxury shoppers who have purchased luxury online in markets like China, Australia, Hong Kong, Japan, and Korea and delved into their thoughts about buying luxury in 2016.

LUXURY’S PURPOSE IN 2016

To start off, while luxury will be serving the same purpose, and meeting similar needs to most shoppers across the globe, purchase frequency is likely to vary. For example, to many luxury shoppers, luxury is all about quality, exclusivity, and uniqueness. This is especially true amongst shoppers in Australia, China, India, and South East Asia (In contrast, shoppers from New Zealand do not place as much importance on standing out or purchasing luxury as a status piece.). However, looking forward specifically to 2016, most shoppers do not plan to spend more on luxury. Only in China and India can we expect luxury spending to increase.
This broad view on luxury purchasing can be linked to overall consumer confidence heading into 2016. At this point in time, with the exception of China, India, Thailand, and Vietnam, most shoppers believe that they will not be enjoying increased disposable incomes in 2016 (see figure 1). As such, it is logical for these shoppers to curb or simply maintain their luxury spending.

Figure 1

REACHING LUXURY SHOPPERS IN 2016

With huge markets such as China and India looking forward to an increase in spending on luxury in the next 12 months, it will be critical for luxury brands to ensure that communication strategies are geared towards these very confident markets. Online is becoming a trusted resource for many markets, and should figure significantly in the marketing budgets of luxury brands that want to step up in 2016.

Figure 2

Online search and brand websites are oft-cited as key information sources for a number of markets (see figure 2), indicating that many luxury shoppers proactively do their own online research before making their purchases. Facebook, especially, plays a key role in reaching the right markets as it is the most cited social media source for luxury goods in all markets covered, except for China which relies on Sina Weibo. Moreover, many shoppers, particularly in Asia, rely on their mobile devices when doing their research.
Most interesting is the consumer dependence on brand presence both online (social media/online search/brand website) and in shopping malls. It is likely that luxury brands with a strong presence in shopping centres are also those likely to be considered by those who might be ultimately purchasing online. This is unlike mass appeal brands that can do well even without a brick and mortar presence.
In retail terms, brick and mortar stores will still play a significant role in most markets as they are likely to purchase from traditional mediums this year. In China and India, both huge markets, the majority of online shoppers are willing to continue purchasing luxury online, hence it is still in the best interest of luxury brands to ensure that these 2 significant markets’ online retail needs are attended to.

WHAT DOES THIS MEAN FOR LUXURY BRANDS?

1.) Online, while not a key luxury retail medium globally, will play a significant role in the luxury brand wars of 2016. The brands that are most successful in engaging the right audience via Facebook in 2016 are likely to enjoy financial rewards within the year in markets like China and India who are both looking to spend more on luxury goods this year.

2.) Search Engine Optimization must figure highly in brand strategies and spending since all luxury shoppers engage in their own online research prior to purchase.

3.) Retail outlets are here to stay. Most markets will still rely on consumers purchasing via retail outlets, and markets increasingly become more open to online purchasing will prefer brands that have a strong and visible retail presence. In the world of luxury, retail outlets that showcase the uniqueness, and exclusivity of luxury brands are a hygiene factor across any market regardless of where they might prefer to shop at.

4.) China, India, and South East Asia, in this order, will be spending the most on luxury brands in 2016. Knowing their needs, and reaching this dynamic market will be critical to luxury brands who realize success this year.