Why an article on eCommerce today?
At Systech, the recent decision of extending the Aurum software to a new module enabling our customers to easily set-up and run an eCommerce business, has not been taken lightly.
A final “go” to the project was agreed only after non-obvious debates, well supported by research upon the latest industry trends and academic analysis available.
In this article, we share the main findings of our researches, hoping to support whoever shall stand a decision upon an eCommerce business in the next few years.
Market size and forecasts
While in 2013 the jewelry and watches online sales were barely reaching a 2% of the overall market, the slice of the cake has dramatically increased during the last five years, accounting in 2017 for a bold 8%, growing at a steady rate. McKinsey & Company expects the luxury category’s share of online sales to reach a 12% by 2020, and achieve a meaningful 18% by 2025.
Still according to McKinsey, today’s online market of luxury goods is worth € 14 Billions, and projections to 2025 boost this value up to € 70 Billions by 2025, making “e-commerce the world’s third-largest luxury market, after China and the United States”.
So far, these values have only partially cannibalized the traditional sales channels, their largest component being absorbed by the jewelry and watches 3-4% steady annual market growth registered at global level during the past years.
The question is no longer if and when luxury brands should embrace the digital opportunity, but how they should go about doing it.
Whether the sales take place online or in stores, the purchasing attitude of luxury consumers is strongly conditioned by their brand perception, and this perception is more and more defined by what they see on their Instagram, Facebook, YouTube and finally the brand website. Taking as a target not only the “Rich Millennials” of China, but a wealthy consumer across countries and generations, we identified four tactics that work:
- Screen tactics: 95% of global wealthy consumers, and 100% in developed countries are equipped with at least one smartphone, while 75% have access to multiple mobile devices on a daily basis. Make sure your communication adapts flawlessly to each screen dimension, maintaining consistency on branding, services and displayed elements. Too often an “adaptive” website is not enough: we suggest to design each element of the online communication to grant a top-notch mobile experience in the first instance. Do not hesitate to add telephone numbers to call on one click, or show the closest point of sale automatically, based on geolocation.
- Product tactics: as per 2017 market data, online purchases in value showed the following distribution by category: 50% diamonds, 18% precious metals, 12% other gems and pearls, 12% watches, 8% other products.
- Timing tactics: the seasonality of online sales respects the dynamics of the retail channel. This consideration, that might appear obvious, adds at least two non-obvious levels of complexity: in the first instance, any product, collection or other new proposition and promotion has to be reflected on every channel at the same exact time. Luxury consumers who saw a new model in a shop expect to instantly find the same product online, at the same price and conditions, on the same day; not finding it might seem weird and compromise the brand image. The second consideration is about the boundaries of an online shop: a global approach shall consider celebrations celebrated in Asia as much as those part of a Western culture.
- Channel tactics: 80% of luxury consumers use social media on a monthly basis, and one out of four have daily access to their Instagram, We-Chat, Facebook or Twitter. Two thirds of these users do not only passively absorb content: they elaborate, share and generate an impressive amount of material. Pictures, videos, comments, re-postings have high-impact leverage effect on any brand. On top, users associate the social recognition of a luxury product to the personal satisfaction they will obtain through the product’s possession, improving the product perceived value. McKinsey estimates that for each image that luxury brands post on their official Instagram account, there are on average 10,000 more that consumers have posted containing the brand’s hashtag.
The 5 must-have touchpoints
Researches demonstrate that luxury consumers are highly digital, mobile and social, and because of this have extremely high expectations for what they want in a shopping experience. more than anything, luxury shoppers want a seamless, digitally enabled, multi-channel experience across every touchpoint with the brand.
But how to serve them with what they want?
Among 20 different types of touchpoints commonly adopted by luxury brands, researchers have identified 5 must-havewhen dealing with band relevance. These touchpoints are:
- The city store: Even in the digital age, 80% of luxury customers demonstrate to have regular contacts with luxury stores, and to be heavily influenced by what they see and experience in there. Demonstration is that as of today the majority of luxury sales are still closed in physical shops.
- Word-of-mouth: Luxury shoppers care about what their peers think. Whether in a friend’s conversation or in Instagram comments, 50% of luxury consumers will purchase only after product validation by their peers.
- Online search: Building a pampering and satisfying online experience has demonstrated to be as much important as it is the time spent into a luxury shop. Luxury consumers swing regularly between shops and websites of a brand, and when it comes to find a product, brands have to ensure a consistently elegant and reliable online search bringing their online presence on top of Google search results.
- Sales people: A great experience with a salesperson can leave a lasting positive impact and finally drive a sale. Contact persons can be the shop assistants as well as the online concierge often provided by luxury brands. Digital technologies have a crucial role to harmonize these interactions ensuring consistency across all the touchpoints.
- Brand website: The brand website conditions today’s customer perception in an unprecedented way. Message authenticity, information about products, interaction possibilities are key. Websites are often accessed by mobiles, so location, language, prices and currency shall adapt consistently. Dedicated areas for customers make a difference, enabling services such as guarantee, visibility and extension, indications of the closest shop for repair, free concierge services, brand’s events, sponsorship activities and eventually the request to participation vouchers.
The importance of an integrated digital approach
Luxury consumers’ expectations towards a seamless experience across touchpoints inevitably stress the digital tools to be adopted. Our analysis concentrates into specific requirements any luxury brand digital investment shall take into account:
- Image consistency: In order to achieve product image consistency across sales channels, a luxury brand digital system shall be able to acquire every information about the product, including pictures, videos, digital content and the more traditional information about carats, metals, prices, availability. A unique system, an ERP or an advanced stock management system shall then be able to deploy targeted content towards sales and marketing channels, at once, ensuring immediate and uniform product visibility. In such a way, the website will be synchronous with the product availability in the shops, or with the agent’s digital catalogue in case of external retailers.
- Customer recognition: avoid asking loyal customers who make a purchase in a store if they are registered in the brand’s loyalty program, make sure every touch point has access to customer’s information, including interests and purchasing history. CRM shall be integrated with ERP, and ERP to intelligent mid-layers systems allowing not only to use the most common information, but to make the most appropriate suggestion in order to facilitate the next purchase.
- eCommerce facilitation: entering into an ecommerce world means to face high expectations established by large players such as Amazon or Alibaba: luxury customers expect personalized care and a 24 hrs delivery. A thorough automation of the sales and delivery process, including every warehouse operation is part of the strategy, and the only possibility to meet expectations and enable the necessary scalability.
Finally, brands need to design the digital acceleration approach that will fit their culture. There is a natural tension between the luxury industry’s long-term focus and aim for perfection, on one hand, and the short-term trial, error and risk taking necessary for digital development. Designing the perfectly blended approach that combines the high standards of luxury with the agility of digital is the key to unlocking future success.
Our researches have highlighted a growing opportunity for jewelry and watches online sales, Is an integrated E-commerce strategy the new promise land for Jewelers and Watchmakers?and at the same time have underlined how the eCommerce alone is far from being sufficient to impose a brand. Highly integrated digital systems, constantly gathering, driving and sharing information about products and customers are the key to satisfy the always higher expectations of wealthy consumers.
Since 1994, Systech serves the jewelry market with its Aurum ERP system specifically designed to respond to the luxury brand needs. With a complete and modular solution including production, as well as in-shop sales, external sales agents’ management, and eCommerce modules, Aurum has been adopted by more than 2’000 brands within his 20 years’ business experience.