By Martim Avillez Oliveira, Chief Commercial Officer – EMEA and APAC at ESW.
The call to luxury brands to improve their direct to consumer (DTC) operations has now become urgent as a result of Covid and the end of duty-free shopping in key regions
Worldwide demand direct to global brands rose by 50% in the first half of 2021, dominated by consumers in China, UAE, South Korea and India. In fact, our ‘Global Voices: Pre-Peak Pulse 2021’ survey of almost 15,000 consumers across fourteen countries showed that luxury purchases were the fastest-growing cross-border category in those six months.
This is clearly more than just a reaction to the pandemic. The research also showed that 43% of cross-border shoppers were happy to forego the in-store luxury experience for online convenience. In fact, 69% said they are more likely to buy luxury goods online if the online experience mirrors the level of service received in-store.
As a result, online luxury sales are predicted to increase to 30% in 2021, up from 22% in 2020 – a boost that is being driven by Millennial and Gen Z shoppers, who according to Vogue Business will account for a fifth of all luxury fashion spend by 2025.
42% of consumers in the survey will make those purchases from brand websites outside their home country, which is good news from popular British brands. More than half of shoppers in Mexico (54%), China (61%), Russia (50%), and South Africa (57%) said they are comfortable buying luxury products online due to the lack of availability and variety of such goods locally.
Naturally, there has already been some return to normal as restrictions are eased. However, some behaviour looks set to become habitual; 44% of respondents who had previously travelled abroad to shop indicated they would resume taking international shopping holidays once fully vaccinated, with over two-fifths (41%) saying they would shop online as well as travel internationally to purchase. 25% of respondents who identified as ‘shopping tourists’ indicated they would no longer take international shopping holidays.
Luxury brands must be sure to take full advantage of these trends, particularly following the removal in the UK of tax free shopping. Our research shows that 46% of shoppers are more likely to travel to other luxury shopping destinations that offer tax-free shopping than the UK. Of the most valuable cohort of visitors, 59% of Chinese respondents said they will make fewer visits to Britain and nearly two thirds (64%) said they will spend less on British brands once travel restrictions are lifted.
However, with Bain & Company predicting 48% of global luxury spending will come from China by 2025, 70% of China’s luxury purchases are now being completed at home. Overall, 25% of international shopping tourists say they will shop online rather than travel abroad to purchase, further emphasizing the need by brands to improve their DTC capabilities.
However, the DTC offer has to work even harder to replicate what can be lost from the in-store experience. This must include premium customer service, covering tracked, personalised delivery, free returns, luxury packaging and premium courier services, to immersive online experiences.
These include experiences that are not unique to offline but would be restricted to consumers in the real world; now brands can offer livestreams and fashion shows to get their customers as close as possible to the excitement, and build purchase capability alongside so the experiences are seamless. For example, Watches & Wonders’ event drew in 800,000 viewers in 2021 and brands, including Panerai and Cartier, sold online after the Livestream. Meanwhile, Gucci launched Gucci Live, a video service from a new faux luxury store with cameras and TV-style lighting for remote clienteling, an experiment that has now been extended to the entire EMEA region.
For brands to replicate these experiences online themselves, to reach a global audience is almost impossible, not to say expensive. Moreover, they will not want to create permanent infrastructure if that robs them of the flexibility to respond to demand country by country as it changes.
Luxury brands that work with a partner like ESW can enter new international markets in a matter of weeks, many times faster than if they attempted to do so on their own – all while engaging directly with customers and retaining ownership of all the data collected during the shopping process.
