6 Key Trends Reinventing the Luxury Retail in 2020

Today luxury companies are reassessing the value of brand history and heritage for the new consumers- millennials and Gen Z. Companies are using digital platforms to engage with Gen-next consumers, while trying to retain brand values. They are finding innovative ways to provide personalized products and services through the use of digital technologies like Artificial Intelligence (AI), Machine Learning (ML) and Virtual Reality (VR).

Let’s look at 6 key trends reinventing the luxury retail in 2020

 Growing importance of Social Media Marketing: The success of luxury brands in future depends on how well they will be able to engage with tech-savvy new age consumers. Social media marketing is becoming an integral part of brand’s communication strategy. In 2017, Prada introduced its advertising campaign # Prada365, thereby making its entrance in the social media world. Similarly, Chanel promote its products on social media by emphasizing their aspirational characteristics. Luxury brands are also building relationships with influencers and niche bloggers to leverage their authenticity and create unique content to reach their target audience. As per a recent study, 90% of consumers trust an influencer’s opinion more than traditional celebrity endorsement.

Note: Luxury brands today cannot ignore social media marketing.

 Omni-Channel to Omni-Personal luxury: Today luxury brands are trying to become highly personalized to develop relationship with young consumers who look for individualized, seamless brand relationship. For instance, Hugo Boss by 2022 seeks to focus on developing unique brand specific shopping experience through design and production of made to measure clothing.

Note: To ensure brand loyalty, brands need to graduate from omni-channel to omni-personal luxury.

 Offline meets Online: In future, there is need to blur the line between physical and digital retail. As per Juniper Research, fashion brands’ retail spend on AI is predicted to rise from $2billion in 2018 to $7.3 billion by 2022. Software developer SAP is working with Harrods to develop technology that provides customers with personalized recommendations from the in-store screens based on what they are wearing. Omnichannel brands are using digital behavior to inform in-store assortment. Nike store in Los Angeles furnished the store with Nike Cortez sneakers after knowing through digital commerce data that its local customers enjoy running.

Note: Data-driven technology with help luxury retailers to design appropriate in-store strategies.

Stores with no inventory: There are many luxury retail brands that focus on ecommerce business model. They can benefit from having physical presence. Various researchers have proposed a novel idea, known as zero-inventory stores (ZIS) which will make physical stores as a platform where shoppers can touch, see and experience the items while orders can be placed online. Less inventory would require smaller store format which would mean huge savings on rental costs. Such stores will enable to gain the best of both physical and digital world. Research suggests this strategy is not only cost effective for retailers but has supercharging impact on digitally native customers. As ZIS provides millennials with an opportunity to experience the product, it would generate more demand and less returns. JLL, the commercial real estate company, predicts more than 800 new stores will open in next five 5 years by top 100 digital players. Will it have any implications on traditional luxury retailers? In my view, this will have lethal impact on age-old retailers, who may have to find alternatives to survive in this complex and challenging environment.

Note: Experience-driven ZIS will help luxury retailers to engage, inform and provide better service to millennials while leveraging online fulfillment.

 Collaboration with sharing platforms: Few years back, high-end brands could never have thought to make partnerships with closet-sharing/ pre-owned apps. However, as luxury consumption patterns of consumers are undergoing drastic changes, brands are exploring new ways such as these to generate traffic into their dying stores, attract millennial clientele and boost sales. Also, because of circular nature of the partnership, it is a way to boost the corporate social image of luxury brands. Lately, Burberry has announced an official partnership with pre-owned luxury site The RealReal. Customers who purchased consigned Burberry items through The RealReal are provided with a unique shopping experience at Burberry stores. Similarly, Rent the Runway and Neiman Marcus teamed up to redefine the way consumers shop.

Note: Luxury retailers have to explore new business partnership opportunities to draw millennials into their stores.

 Concept Stores: Physical retailers like Nordstorm created a POP-IN shop with EverLane, a brand known for its transparency approach, to tap today’s discerning, eco-conscious shoppers. Similarly, many luxury brands like Chanel, Louis Vuitton, etc. are opening pop-up stores to test small before opening a full-fledged store. It helps brands to display their new collections and engage directly with customers. Recently, the Hermes Silk Mix pop-up was held in Munich. The pop-up prioritized on enticing young consumers who feel estranged by flagship stores; for whom sense of community holds great significance.

Note: Luxury retailers have to come up with innovative store formats to excite discerning, new consumers.