Monday, July 28, 2008

Luxury Retailers: Stay Chic, but Sell Cross-Channel

Drew Wofford is the Lead Product Manager responsible for WebSphere Commerce In-Store Solutions. He has over 30 years of retail experience and recently spoke at the Luxury Interactive Conference in New York. I have invited Drew to share his insights on luxury retailing:

Luxury Retailers: Stay Chic, but Sell Cross-Channel

By Drew Wofford

No other segment in retail places a higher value on service, quality, brand integrity, and most importantly, the customer, than the luxury and premium brand segments. While mainstream retail today is working overtime, trying to get a "single view of the customer," trying to personalize the shopping experience, and implementing various forms of customer relationship management, this segment has never done anything but that. They have always placed the customer first, by knowing the customer’s preferences and habits and exceptional service; it is the core of their business strategy. And that, in fact, sets up the basic challenge luxury and premium brand retailers face with e-commerce. They have struggled to see how they could continue to provide that same level of service in what they have seen as a far less personal channel.

Imram Amed, the founder and CEO of Byesse Group Ltd., has been quoted as saying that customers in the luxury segment are already making their buying decisions on the web – already using e-commerce sites to augment their buying experience. But most executives of luxury goods believe that from the retailers’ perspective – the jury is still out on e-commerce. The problem is – and really, more importantly, the opportunity is – the jury is NOT out from the customers’ perspective. Customers have already embraced the web and the e-commerce channel; it is now time for luxury retailers to embrace the web, and even more importantly, a cross-channel shopping experience.

Earlier this year Forrester Research surveyed 178 retailers in the luxury retail segment around the world, asking a number of questions about how they view e-commerce within their segment and how they believe their customers view it. 32% of the Luxury retailers said that the web does not fit their brand or sales strategies, and 26% said that customers would not use the web to buy their products. By in large, most luxury retailers have a web presence – over 90% said they have a site. Yet only 32% actually sell or transact business on those sites. At the same time, the same retailers responded that they believe 22% of their revenue will come from an electronic channel in 2012, and over 40% believe that the majority of their revenue will come from e-commerce within the next 10 years. To reach growth goals, Luxury retailers will need to make significant investments in building e-commerce solutions, starting now. Further, research conducted by Luxury Institute researchers’ Doug Harrison and Jim Taylor, shows that today’s customers in this segment spend an average of 14 hours per week surfing the web; that over 88% use the web to research in support of buying decisions, and over 50% buy through e-commerce sites. Many luxury customers today are hard working, highly successful executives working in the world of global business. Only 6% of luxury retail customers have inherited wealth. Increasingly, the luxury customer values the shopping experience, convenience and service – just as the 19,600 mainstream shoppers indicated in the IBM Institute of Business Value’s customer advocacy 2007 survey. To paraphrase that famous dialogue between authors Ernest Hemingway and F. Scott Fitzgerald, the rich as NO different from other shoppers, except for having significantly more discretionary income to spend.

Some Luxury retailers are in fact embracing the web and many are deploying exciting and compelling sites. For example, Bergdorf Goodman, a leading luxury Department Store in New York City has created a merchandise search page that reflects their store layout. They assume that shoppers on their e-commerce site know the store layout, and where to find merchandise in the store, so their website reflects the same navigation. And Godiva, the luxury retailer of gourmet chocolate is supporting mobile commerce - and we all know, any problem can be made better with chocolate. You can now buy Godiva chocolates from your mobile phone! Why? Well, I can personally imagine sitting in a taxi, on the way to the airport, and realizing it’s my anniversary or a family birthday. I would value being able to quickly send a gift using my mobile device. As well, WebSphere Commerce® powers all luxury retail sites such as Hermes, Coach, and Maui Jim, as well as premium sites such as Sony Electronics.

To allow modern day shoppers to choose how, when, and where to shop, more of the Luxury retail segment needs to embrace selling across channels - especially leveraging the e-commerce channel, via mobile and web touch points. When luxury goods customers in New York, needs to provide a gift for an associate in Tokyo, and the retailer transacts business from London, there is no channel more appropriate, more convenient, and in fact, more service focused than the web. Capture the opportunity!

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