How technology is changing the way luxury brands operate

Abstract

Technology is rapidly shaping the luxury retail landscape, transforming the ways brands reach out to customers and how customers interact with the brands. In the present-day scenario, the luxury brand world is increasingly characterized by digital shows, augmented reality, virtual reality, data analysis capabilities, fictional models and influencers, etc. Online sale of personal luxury goods accounted for 8% of the €254 billion global luxury market as of 2018, and it is expected to more than triple by 2025, commanding approx. one-fifth share of personal luxury sales (L, 2021). It has been reported that approx. 80% of luxury sales are “digitally influenced” in the present-day scenario, that is, a consumer hits atleast one digital touchpoints in his/her luxury-shopping journey. House (2022) argues that the words that historically characterized luxury goods industry such as “Highly stylized displays, prestigious high street locations, exclusive experiences, up close and personal sales assistance” no longer fit into a post-pandemic world. Recent studies highlight that losses to luxury and premium brands could amount to $ 35 billion worth of brand value as a result of the COVID-19 pandemic. Thus, in such a post-pandemic context, luxury brands need to adapt to new ways of interacting with customers to remain relevant. (Celia et. al, 2022). Novoseltseva (2021) reports that a large number of brands have instituted numerous positions such as an innovation director, digital innovation director, and digital transformation director. Further, the brands have made substantial investments to optimize efficient delivery such as electronic inventory control system, central databases, point of sales systems, automated statistical forecasting, etc. Some of the brands have embraced the usage of technology on an altogether different level. Nike’s Cryptokicks collection provides users with a digital token for their physical shoes, authenticating exclusive shoes through a unique digital identifier for each pair in a digital blockchain (Mohanta, 2021). Burberry collaborated with Google to create The Burberry Booth, which films a consumer dancing to the Cosmic Dancer, similar to what is shown in the company’s TV ad. (Mckinsey & Co., 2018). Gucci and The North Face teamed up with Pokemon-Go to offer a special collection of avatars. (K, 2022). 4 Historically, luxury and premium brands have functioned to help consumers project their social status. To do so, they have been anchored around the need to project differentiation and exclusivity. Such differentiation is linked with different purchasing patterns and different lifestyles of its customers. (Celia et. al, 2022). Thus, the fact of luxury being unique is what makes the journey of digital transformation challenging for such brands, as the strategy that might seem obvious for a typical large MNC may seem problematic for a heritage luxury brand with rich histories, culture and reputation tied to it. (L, 2021). Thus, the challenge for the business is to create a marketing platform that will empower sales while being respectful of the heritage and ensuring brand safety. (House, 2022) The study aims at uncovering whether the brands and luxury retailers have been able to balance the above tradeoff with their usage of the technology. The methodology followed in this report entails case studies of certain legacy brands and e-tailers in this space. In each case, the technologies used in their digital transformation has been identified and examined to understand how it is transforming the customer interaction with the brand.