What are trends in online consumer shopping behavior? (in particular as it relates to shopping for luxury goods on mobile devices)
Trends in online consumer shopping as it relates to shopping for luxury goods on mobile devices include luxury companies partnering with e-commerce retailers, building social media strategies, and engaging in experimental marketing to attract millennials. A deep dive of my findings is below.
Millenials driven e-commerce — a bright opportunity for luxury brands
According to a study conducted by Bain & Co. for "Fondazione Altagamma, the trade association of Italian luxury goods manufacturers," in 2016, the luxury industry had experienced a 3% sales drop in America and Asia, the two major markets for luxury products. The drop indicates that luxury products are gradually losing their traditionally favorable markets and free-spending customers. With this in mind, the luxury companies are partnering with e-commerce retailers and building social media strategies to increase their products sales online by involving millennials as their potential customers, who are quite active on social media and internet. The main reason of the shift by luxury industry towards the digital presence of their products has been confirmed by a separate study by Bain and Co., according to which, "70% of consumers said their luxury purchases were influenced by online interactions." This is because the luxury consumers are tech-savvy as 80% of them use internet including 100% users between the age of 15 to 35 years. The study results also state that, 14% first-time buyers of luxury products online between are between the age of 18 to 24 years. Moreover, 9% of them are between the age of 25 to 34 years.
The report also suggests that these current trends account to only 8% of total luxury products sales, but it predicts that the same trends will account to 25% of total luxury products sales by 2025. Additionally, the study also predicts that during the same period "mono brand" sales will drop to 25% from the current sales of 30%. According to a joint research by Bain & Co. and Farfetch research, "nearly every selling channel within the global luxury goods market will lose share by 2025, but digital will post a threefold increase."
Separate marketing strategies for millenials and boomers
According to a recent study by Deloitte, millennials account for 99 million while boomers account for 77 million in the category of luxury products consumers for both online and offline platforms. The study quotes that, "Millennials are the ones to cultivate but the boomers are the ones with greater spending impact in the marketplace right now." While most of the luxury brands are currently focusing their attention towards millennials, it will pose a risk to them as boomers have larger spending power than millennials. The currents trend indicate that a luxury brand needs to develop separate marketing strategies for millennials and boomers. On the other hand, the study also highlights a common fact, which is that both consumer types, no matter whether they want to shop online or in-store, need to experience a value in return for their purchase. The brand can make successful online as well offline strategies to offer that value element to every purchase in the form of home deliveries, gifts, personalization, heightened customer service, among many other values gestures. In short, every luxury brand needs to carry out experimental marketing strategies in order to lure the millennials as well boomers.
Lower price and other offers at e-commerce stores
According to a paid report by BI Intelligence on the "luxury spending habits and preferences of high-income earners — including how and where they shop," luxury shoppers also want to enjoy the convenience of the low prices and various other shopping offers, as offered by popular e-commerce sites like Amazon and high end digital destinations like Farfetch, than preferring to shop from the official sites of luxury brands. Since the millennials are quite regular at shopping from e-commerce stores, the preference of low price luxury products may increase as they age. The paid report highlights other details regarding the current online luxury shopping habits, that exist behind the paywalls.
Luxury brands targeting through mobile phones
Since millennials are buying luxury products in large numbers and are always on a lookout for a better shopping experience, whether shopping online or offline, luxury brands are experimenting to attract their attention through various social media apps like Snapchat and Instagram, by developing their marketing strategies based on latest technologies like augmented reality (AR) and high-quality video content that targets them directly through their smartphones. Thus, luxury brands are providing "infotainment" (information + entertainment) in order to attract the millennials. |
The current strategy of luxury brands of targeting millennials through smartphones is supported by eMarketer's report, which highlights that "younger shoppers are more likely to use smartphones to purchase luxury goods than older shoppers, though Gen X and millennials have fairly similar levels of mobile buying."
According to a survey conducted by consulting firm KPMG on 10,000 Chinese customers, 45% of them carried out most of their luxury products shopping online, with most of them using mobile phones. The company estimates that these figures will increase to 50% by 2020. However, a study conducted by Bizrate Insights on 100.000 online customers suggests that online customers are unhappy with the regular pinching and zooming that needs to be done while browsing products on mobiles and slow loading web pages, which calls for a reformation in the mobile and online sites of luxury brands.
On February 8, 2016, Yoox Net-a-Porter Group, a luxury brand, reported that its revenue had grown by 31% in 2015, with nearly 40% of total sales which came from mobile.
The pure online market for luxury perfumes, cosmetics and fashion accessories, currently stands at 68% of pure online sale of luxury goods which aggregates to about $7.5 billion and is expected to reach 8% of the total luxury goods sales as a whole in 2018.
According to a 2014 report by McKinsey (the latest available data), 48% of customers in the world (52% in the US) used their mobile phones to research luxury products before making a purchase. The report also suggests that simply building better web or mobile sites is not enough, a luxury brand needs to make their online experience the same as provided by multi-brand online stores that attract huge traffic of 39% customers for researching about luxury products.
Social media influence
According to a recent report by PMX, in 2016 overall luxury brand followers on social media grew to 27%, with Instagram topping the list with 54% total luxury brands followers, and then came Twitter with 16% and Facebook with just 4% luxury brand followers. Following the lead of Instagram a research firm L2 found that "91% of luxury brands use Instagram influencers — the highest in the retail sector." This is because 74% millennials in a survey claimed that they were influenced by Instagram posts before they made a purchase.
FUTURE OF LUXURY GOODS INDUSTRY
The future of Luxury goods' industry is based on the reliance of improving the customers' experience on both the online and offline platforms and in the words of Tim de Rosen, Chairman of Bianca Mosca, “The future for the luxury goods' industry is Omni-Channel, a synthesis of new digital and traditional retail strategies that will rely upon the analysis of big data whilst simultaneously maintaining a close personal relationship with customers. Understanding, anticipating and adapting to their specific needs will determine success.”
To wrap it up, the research presented above highlights the millenials contribution in shaping both online and offline brand promotion strategies of luxury brand companies, along with the role of internet, social media, and specifically the smartphones impacting directly the online luxury shopping.