Chic clicks for a competitive edge

Yolanda Regodón. Associate Director Communication. IE Business School

25 June 2014

Luxury brands have yet to embrace the digital revolution. Most continue to ignore a reality to which they should already be adapting in form and substance.

The following set of figures really bring home all the opportunities that lie ahead. Twenty-five years of the World Wide Web, 2,700 million internauts in the world (approximately 35% of the planet), and the three main things it is used for are e-commerce, entertainment and sport. And yet only 5% of luxury purchases are made online, according to Altagamma’s latest report. There is a huge lack of digital leadership in the premium and luxury sector. The big brands need to take digital strategies on board (beyond advertising) and make them part of their corporate culture.

In an innovative and creative sector like the luxury industry, how come firms continue to use such primitive digital tools while their clients have embraced the online world? What are the luxury and premium sectors doing? Generally speaking, it looks like there is a lack of strategic focus, of digital leadership. Now is the time to center on mobility projects that bring improvements in productivity and a competitive edge, because we must not forget that the Internet is not supposed to replace onsite purchases, but rather complement and support them. With the exception of Burberry and a handful of others, Luxury brands all need to up their game when it comes to online presence.

Companies should be well on the way to implementing more than just digital marketing campaigns by including new technologies in distribution processes. They cannot pretend that global megatrends are not happening, because such trends are shaping consumer values and opinions. The spotlight is currently on optimizing firms’ presence through mobile technology.  Investing in this field would permit companies to obtain more information on customer behavior and thus develop and execute effective strategies based on experience.  Data obtained through mobiles and geolocalization play a key role in forging links with the client, and makes it possible to strengthen client participation and build brand loyalty. Nobody is in any doubt that online purchases now constitute a major distribution channel for consumers, and the importance of mobile phones in this respect is growing by the day.This trend is set to continue in 2014 and consumers will be making increasing use of their tablets to buy anything, anytime, anywhere. Last year only 5.7 % of the total spent on publicity went on smartphone advertising, but that number is about to rise significantly in the course of this year. 

Burberry is an excellent example of a luxury brand that has made a firm commitment to digital marketing and is currently a sector leader when it comes to leveraging advances in technology. The firm has developed numerous lines of action and campaigns, and continues to do so. It recently launched an initiative through a social network for smartphones, WeChat, known in China as Weixin. It is similar to the WhatsApp application, and Burberry has created an account on it where it can chat with Chinese followers. It is an excellent way to reach the profiles its products are aimed at, namely young urbanites with a high level of purchasing power. It also recently carried out a campaign on Instagram with models Kate Moss and Carla Delevingne for the launch of its new fragrance next fall.  The art of executing a successful campaign on social networks depends on knowing your target segment and working on their commitment.

I asked digital expert and IE professor Enrique Dans how luxury firms can prepare themselves for the disruptive impact of technological advances, and he said that disruption is essential and that it needs to be analyzed first-hand. If your company cannot attract people who like to be at the forefront of technology, or if it attracts them but does not permit them to express themselves and offer advice, then your company has a problem, because a significant part of society enjoys cutting edge technology. Dans says that things are changing, even in terms of products, commenting that Hermès has brought out a technology-inspired tie collection, for example.

By 2025 the digital revolution will have totally transformed the corporate landscape as we know it. Not even Steve Case, ex president and co-founder of AOL, knows what the Internet has in store for us, but he is convinced that we have not seen anything yet. We simply do not know what the luxury sector will look like in ten years from now, or how it will evolve if it manages to get to grips with the technological revolution. All we know is that everything has to keep evolving fast to adapt to a fast-changing innovation framework, and that we have to be a part of it now in order to be ready for the changes to come.

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