The global luxury brands market, like all other global markets, has suffered as a result of the coronavirus pandemic since March 2020.
Being one of the slower segments of the fashion market to adopt selling online, it has suffered unnecessarily due to lagging behind on consumer buying behaviours.
This has meant during lockdown, sales have been hit harder and luxury brands need to adapt to changing consumer habits and macroeconomic threats.
This article discusses the need for luxury brands to focus on one particular area, customer feedback, and how they can do this keeping their brand and exclusivity sensitivities in mind.
The Impact of Coronavirus on the Luxury Brands Market
With stores being closed, but fixed overheads remaining, this has challenged some brands for their very survival.
Arguably, the effect is even more pronounced for boutique, and new and up and coming luxury brands who are not as well known but will have built a loyal though smaller customer base, and who rely on footfall to increase their brand and grow.
Despite the lockdown having eased in many countries, albeit gradually, there is no saying if some sort of a lockdown will return. Even if this is not on a national basis, regional lockdowns have already become a more frequent occurrence, unfortunately.
This is likely to mean that the way luxury brands were used to doing business is inevitably going to change.
Global strategic consulting firm Bain expects six consumer trends growing for the luxury brands market as a result of the pandemic.
Consequently, luxury brands themselves will have to see how they adapt to these new challenges.
Changing Consumer Habits in Buying Online
Beyond the impacts of coronavirus, however, consumer habits in shopping for high-end fashion were already changing, and in some instances, had changed unrecognisably from only a few years ago, with a greater focus on digital and social media.
Many luxury brands, in particular, had already started to invest in online retail.
The percentage of consumers shopping online for luxury brands has been increasing, and is expected to continue to increase going forwards. This is indicative of the way consumer habits were moving.
Research firm, Global Web Index identified three key areas that was increasingly becoming important for luxury brands.
Source: Global Web Index
Consulting firm McKinsey&Company analysed that the online sales of personal luxury goods accounted for 8% of the €254 billion global luxury market in 2018. This had increased by €20 billion since 2009, a fivefold increase.
McKinsey expected online luxury sales to more than triple by 2025 reaching c. €74 billion.
The graph below shows what this trend has been like, and how it is expected to grow in the next five years.
Source: via McKinsey&Company
But consumer habits when it comes to buying luxury goods are a little more complex and are dependent on a number of other factors as opposed to people just visiting a website and making a purchase.
The impact of social media on buying luxury goods is more prevalent now than for any other segment of the fashion market. Celebrities and influencers have broadened the appeal of luxury goods from the traditional groups who used to be the target market.
Now a younger group of buyers, for example, will be more influenced to find means to purchase luxury goods because they see their favourite singer or sports star fashioning them on Instagram. This is more pronounced outside of the US.
These groups of buyers are very accustomed to buying online in a manner that the luxury brands market has yet to catch up with.
They expect ease, convenience, and means to overcome objections online that other mid-tier fashion brands already provide and have been providing for a number of years now.
Although luxury brands have made strides in some areas to embrace online, there is clearly more to do.
Conversions from Customer Feedback
One of the key areas that has facilitated the ease with buying anything online has been the advent and growth of online customer feedback.
Online reviews have been around for almost two decades now and with good reason; because they work to convert visitors to buyers.
Some interesting statistics from BrightLocal relating to the use of customer feedback online are shown below:
- Improving the review star rating by 1.5 could lead to 13,000 more leads
- The average consumer spends 13 minutes and 45 seconds reading reviews before making a decision
- 48% of consumers only pay attention to reviews written in the past two weeks
- 76% of consumers that are asked to leave a review go on to write one
Source: Spiegel Research Center
These statistics apply irrespective of the nature of items being purchased and there is no data to suggest that these conversions would be much different for luxury brands.
As such, the key question that is raised is why have luxury brands (established as well as new) been reluctant to use online reviews in order to help grow their business, given we know they work?
Why Luxury Brands have Historically Resisted Courting Online Customer Feedback
The reason for this is understandable to some extent given brand reputation is deemed to be more exclusive to the brands themselves, but also to consumers.
Many luxury brands are rightly concerned that the ‘luxury brand’ term itself is being diluted with a slew of new entrants that have broadened and compromised the meaning of the term.
Luxury brands go a long way to ensure their brand value is not compromised in any way as there can be any number of risks.
Typically customer feedback is used to articulate the quality of the product, value for money, ease of buying online, delivery and overall service.
The thinking may well be that of those criteria, the quality of the product and value for money are moot points given luxury brands are some of the best known and admired brands in the world.
Also if you are in the market to buy a £1,500 handbag, value for money may not be top of mind.
Having said this, consumers (old and new) still want to get comfortable with the online buying process and that’s where customer feedback can be very helpful.
Feedback can explain the ease of buying and reliability of delivery.
However, a more important feature of online customer feedback is that it helps consumers choose between the range of products on offer, and so in their decision-making process.
The problem with luxury brands not taking control of their reviews and managing the relationships themselves is that it results in questions about the brand online that the brand cannot reasonably answer.
The company CustomerThink did an investigation into customer feedback for four luxury brands to see what transpires.
In addition to a range of other interesting outcomes, the graph below shows what consumers thought of the online buying experience with four of the most revered luxury brands in the world.
As you can see, clearly, it seems there is much work for some of these brands still to do.
Online reviews provide a strong buying signal to other like-minded consumers who can be influenced into making a similar purchase if they are weighing up options.
In the first half of 2019, the global cart abandonment rate stood at 84%. That means, an overwhelming majority of people were seriously considering buying, but then at the last minute decided not to.
The revenue impact of this is massive.
The difference is huge and represents large losses for the online assets of luxury brands worldwide.
Challenges for Established Luxury Brands
If you wanted to purchase a Patek Phillipe watch, it is not commonly done or easy to do online. You can check out their website to see for yourself. These watches can sell for tens of thousands, and even hundreds of thousands of pounds.
Similarly if you wanted to buy a Prada handbag, although you could easily do that, you will not be able to get an understanding of how good the process is to buy online, or what consumers thought of their purchase.
In-store, experienced retail managers guide customers by addressing their objections and helping them to make the right choice. Importantly, the focus is on getting customers to make a choice.
This is the key role online customer feedback has for established luxury brands. Feedback gives website visitors the confidence to go ahead and make the purchase.
Arguably this approach should work better for luxury brands than for other types of brands online as frequent customers of established luxury brands are typically very loyal and can be excellent ambassadors for the brand.
Challenge for Less Established or Smaller Luxury Brands
For smaller or new and upcoming luxury brands many of the points outlined above still apply.
Even more so than established brands, for smaller luxury brands the focus is increasingly on exclusivity in addition to spreading the message to build a loyal customer base.
The key thing irrespective, is about having a pipeline of keen and willing customers to create brand excitement in the earlier stages of the lifecycle of a new or small luxury brand.
When a brand is not as well known, or is known only to a subset of its target market, customer feedback can be great to spread the message and make decision making easier amongst like-minded individuals.
The fact that search engine optimisation (SEO) is critical to building awareness online is well known. As such, newer luxury brands should invest in this. Customer feedback is like rocket fuel to help improve SEO for luxury brands in this situation.
In that regard, it is a very easy win.
There is a commonly held view with luxury brands, established or new, that maintaining an element of exclusivity and inaccessibility could be good for business. After all, there is value in scarcity.
There is no reason this cannot be maintained whilst at the same time optimising online presence. After all, providing an exceptional customer experience is synonymous with luxury brands. Customer feedback can help to facilitate this.
Consequently, having a reasoned approach to collecting customer feedback is something that luxury brands are likely to consider more seriously going forwards, and they need to think about the right way that works for them.
Practical Steps for Luxury Brands to Start Collecting Feedback Online
The approach most consumer brands (including mid-tier fashion brands) have taken online has to court feedback directly on their own website.
Take the example below from H&M.
The advantage of this is that the focus on quantity means there is no shortage of reviews for potential buyers to browse.
However, given some of these platforms are open in nature, they can also be open to abuse and manipulation which can have a profound effect on the brand value of a business.
76% of customers who are asked to provide a review go ahead to write one, and as such, this, as an approach to collect online feedback, remains the strongest with highest conversions.
The issue then becomes how to present this feedback, and indeed, where to present this feedback.
The challenges of presenting feedback on your own site for an established brand are that it can potentially distract from the aesthetics of the site and can lead to a cluttered customer experience.
If there were to be any negative feedback (which is not uncommon even for the strongest brands out there), it is questionable if you would like to have that featured on your own website real estate.
For smaller sites, the above issues are also true.
However, if you use a third-party plugin on your website this can lead to issues of formatting, design and glitches which are all outside of your control.
As such, and with the aim to allow a means to increase website conversion from visitors to buyers, for luxury brands the best option is to host all online customer feedback entirely on a third-party site.
The advantage of this is that the customer feedback is ‘at a distance’ though still provides consumers with the data they need to make the decision to go on to buy.
This approach leads to no technical issues and consumer data can be safeguarded in accordance with GDPR.
This methodology also circumvents any issues with fake reviews as only those consumers are asked to leave a review who the third-party site confirms are verified and authentic customers. Critically, this confirmation is provided by the business itself, so there can be no chance of manipulation.
Research firm Which? searched Amazon for 14 different technology products and found that a lot of the highest-rated products were from brands that the Which? technology team experts had not heard of.
They looked deeper to see if there were more fake reviews at play and found the following:
It is partly due to this that at Syntellio we have opted for a closed and exclusive framework that is a third-party site and collects reviews only for luxury brands.
Our model focuses exclusively on the luxury brands market. The added and compounding advantage of this is that we are able to build a community of consumers globally who have affinity for a certain type of product. This can bring new sources of direct traffic for the benefit of all luxury brands on our site.
This is the reason we built Syntellio.
The coronavirus pandemic has meant luxury brands have had to rethink how they optimise for online sales. Consumer behaviours for luxury brands were already trending towards more digital.
Collecting and presenting online reviews has shown to work massively in converting website visitors to paying customers.
For luxury brands, extra sensitivity is required so as not to erode brand value, which is a key asset for any brand-oriented business, but especially so for a business that operates at the high-end.
Assuming it is done carefully, collecting customer feedback online could prove to further endear luxury brands to a wider audience, and help them survive in difficult circumstances.
If you’re a luxury brand, let us know in the comments what your business approach is to collecting feedback online.