08 Nov 2018

8 Nov 2018

Do you ever wonder whether both Luxury Retail and the Ecommerce sector can coexist together? In Luxe Talent we explain to you why this is actually possible.

There’s the extended belief that ecommerce is not a very indispensable factor for a Luxury Retail business, since the cornerstone of Luxury is usually based on the store experience and personalized service. In Luxe Talent we distil some of the keys and tendencies to demystify this idea.

First of all, it is very important to keep the mind cold and try to escape from apocalyptic or integrated positions —borrowing some expressions from the philosopher Umberto Eco—, on the topic that concerns us. The apocalyptic will surely show an attitude of rejection against the influence of ecommerce, as they may consider it as a threat against the classic forms of purchase, even thinking that it may cause the disappearance of the Retail experience, as we used to know it. You may also think that ecommerce, by definition located in a digital space, lacks the most primary emotions that can arise from the shopping experience. The integrated ones will think that Ecommerce is the only possible way due to the facilities and comfort that provided during the service. An example that could be used is how the final phase of the check out, in which the requirements are being shortened at the time of registering or filling in information fields, is becoming more and more agile. As we said at the beginning, let’s maintain a critical stance and try to understand why we don’t need to choose between one form of purchase or another, but that both can be perfectly complementary and understand each other as allies.

If we take a look at some statistics of the sector, according to the Report on Fashion in Spain, conducted in collaboration between Modaes, Kantar and Salesforce Commerce Cloud: “E-commerce accounted for 5.4% of the total turnover of fashion in 2017, a small percentage, especially if compared to the one registered in other European countries, but with a great boost compared to 1.5% obtained in 2012”. This data serves as a reality check for the apocalyptists who maintain that Ecommerce is going to put an end to the traditional purchasing style (perhaps the same ones who said that the electronic book would kill the paper!). The Ecommerce in the Fashion sector still represents a small percentage, undoubtedly growing, but very relative to other sectors dedicated exclusively to online sales, such as the giant Amazon. In turn, the data also serves to relativize the influence of the Millennial Generation from a sales point of view.  While it is true that Millennials are the ones with the highest number of online purchases (they represent 32% of sales, the largest among all groups), they are not the ones that spend the most. In this sense, Generation X are the ones who lead them and spend an annual average of 139 euros, compared to the 112 euros from the Millennial Generation. At the same time, consumers aged between 35 and 54 represent 53.4% ​​of the income collected by Fashion in the Ecommerce sector. This information serves us essentially not to magnify the “impact” that some younger social groups can exert, because in many cases the influence they get to exert by clickbait is distorted. These data lead us to think that there may be a trend that benefits the Luxury sector in the digital context, since today, those who spend more -Generation X- are the same ones who do not mind investing it in the network. Without a doubt, the relationship between the Millennial Generation and the e-retail is practically single, due to the constant presence of brands in the digital ecosystem in which they move. However, as we have said, we must look at the groups that have the highest number of sales on the Internet and monetary value.

Bernat Claret, Center Manager at NEINVER, commented in our last course of KPI’s for Luxury Retail that took place last October at our headquarters in Barcelona, ​​that after the economic crisis of 2008, sales within the Luxury sector focused mainly on accessories and footwear. This is a way for the customer to continue consuming Luxury in a more “affordable” and recognizable way. In other words, Luxury continued to be sold, but the points of interest became more diversified, making garments less of a focus. If we go back to the Report on Fashion in Spain, we find a graph that is clearly very relevant to us. It indicates that the weight of Ecommerce was essentially concentrated in the sales of footwear (7.5%) and accessories (5.6%) in 2017, leaving a surprising last place to clothing (4, 7%). We understand that this graph considers fashion from a general perspective and without a specific approach to Luxury. However, if we take the idea launched by Bernat Claret, we can imagine what a possible future trend regarding luxury would look like. So, yes, Luxury has a niche within ecommerce. Next, we will provide some brushstrokes to try to understand the relationship between Retail and Ecommerce as allies destined to to understand each other.

Omnicanality is not a trend, it’s a fact

At this point, there is little point in defining omnicanality, but it is very necessary to understand its virtues for the purpose of feedback between classic Retail and Ecommerce. One of the keys is to stop thinking of Ecommerce as a mere transaction instrument for a purchase. The digital framework can greatly enhance a subsequent purchase in store, because, if we pay attention to the data again, up to 64% of physical store sales are influenced by the brand’s different digital channels. The current consumer has become more curious almost by nature: he looks, compares, send links to his relatives, dialogues about the product he intends to consume. That’s why both channels must be in perfect harmony. Daniel Lobato, Global Digital Director of the brand UNOde50 commented in an interview given to Modaes.es: “It is not enough to create a digital or innovation department and that it is isolated, the goal is to achieve the integration of all channels and that the whole company speaks the same language”. These words come to illustrate the idea we want to convey in our blog: both sectors must be understood as allies with enormous potential for feedback. The question does not revolve around displacing one or the other, but that both know to complement each other in accordance with the times.

Hype culture: the digital context as breeding ground

Brands such as Balenciaga or Gucci have known how to surf the wave of hype on the internet at its best. Their creative directors have understood the codes when putting into practice the meme culture. Ikea’s very viral bag at 1,700€ from Balenciaga turned the internet around and captured conversations between followers and not so fashion followers. That’s why they’ve been able to play provocation to perfection by talking to each other, commenting and sharing. They have aroused interest in people who are not even close to being fashion junkies and who are probably not potential buyers either. However, they have generated feelings intimately linked to Luxury: desire and attraction towards these brands. This potentially renews the eagerness to buy from those who can afford it.

Balenciaga and the meme culture

Capsule collections: breaking the rules of the game

Classic Retail, Digital and Ecommerce, omnichannel, Luxury, Fast-Fashion… There are so many components that come into play. For some years now, capsule collections have become very popular and are the result of all the elements we have just mentioned. Capsule collections, that is to say, the occasional collaborations between major Luxury and fast-fashion, do not lose the initial value linked to exclusivity, as one might think at first. When making these collaborations, it breaks with the traditional canon of Autumn-Winter / Spring-Summer seasons: it is a method to be on everyone’s lips beyond fashion shows. As we have already said, it is essential to generate conversation. In what factor does the digital context come into play? A skilful strategy is developed that is intimately linked to the hype culture. By making previews of some photographs with the products that are going to come out and being limited editions, they feed the yearning for the purchase and virality of those images. In fact, the Moschino capsule collection with H&M, which is already available. Brands are clearly renewing the potential that lies in Luxury Fashion by expanding its definition, approaching new frontiers and making use of all the weapons at their disposal.

Capsule’s collection total look

Unity makes strength

The fact that consumers can find a selection of Luxury brands in the same space is nothing new, but it is a concept that keeps reinventing itself and takes on new forms in both the physical and digital environment. Net-a-porter is the great example within the Ecommerce sector. Having the form of a Fashion editorial at first, with blogs and fashion shootings, behind this we find one of the most interesting online points of sale in the Luxury market. What are the virtues? Brands with a physical presence in large cities, foreign brands that have not yet arrived in your city or online brands, find room in the same ecosystem and speak the same language. On this website we find everything from clothing, footwear, jewellery to cosmetics: this polyhedral and differentiated vision of Luxury is very necessary! But this synergy of forces can also be found in classic Retail, with the emblematic Santa Eulalia store in Barcelona, which has been in operation for over a century, almost a historical precedent. This space lies between the concept store and the pop-up store, offering a very particular vision of Luxury Fashion. A new establishment in the Las Salesas district of Madrid was also opened: Abanuc, a concept store focused on perfumery and luxury cosmetics. It brings together top brands from the sector, presented in a space where every detail is carefully thought.

We are definitely living an exciting decade from the point of view of Luxury and Retail and its relation to digital. One thing that seems to be clear is that the arrival of Ecommerce has not devalued the importance of shopping experience. These are forces that not only have to learn to coexist, but also to extract the greatest potential from each other. If we remember the words of Daniel Lobato, to achieve an integration of all channels, departments must work in perfect harmony and speak the same language. From Luxe Talent we put into practice this advice daily to try to offer a more polyhedral and enriching vision of the different sectors we work on.