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What Are the Digital Solutions and Strategies That Could Enable Luxury Brands to Continue Their Activities Even in a Crisis Period?

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If the pace of the pre-coronavirus world was already fast, the luxury of time now seems to have disappeared completely. Businesses that once mapped digital strategy in one- to three-year phases must now scale their initiatives in a matter of days or weeks. The great consumer shift: Ten charts that show how US shopping behavior is changing

How six companies are using technology and data to transform themselves. Leadership for a new era. In one European survey, about 70 percent of executives from Austria, Germany, and Switzerland said the pandemic is likely to accelerate the pace of their digital transformation. The quickening is evident already across sectors and geographies. Consider how Asian banks have swiftly migrated physical channels online. How healthcare providers have moved rapidly into telehealth, insurers into self-service claims assessment, and retailers into contactless shopping and delivery.

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The luxury sector appeals to a global consumer: 20 to 30 percent of industry revenues are generated by consumers making luxury purchases outside their home countries. In 2018, Chinese consumers took more than 150 million trips abroad; we estimate that purchases outside the mainland accounted for more than half of China’s luxury spending that year.1 Asian shoppers buy luxury goods outside their home countries not only to benefit from lower prices in Europe, but also because shopping has become an integral part of the travel experience: buying a brand in its country of origin comes with a sense of authenticity and excitement. With the recent travel restrictions, an important driver of luxury spending has come to a halt, and we anticipate only a gradual ramp-up in international travel, even after the restrictions are lifted. That said, Chinese consumers remain the biggest growth opportunity for the luxury sector. Brands, clearly, will need a new approach to attracting luxury shoppers. To reactivate Asian luxury consumers in their home countries, brands can focus on creating tailored local experiences, strengthening their digital and omnichannel offerings, and engaging more deeply with consumers in tier-two and -three cities. The latter will be challenging, given the limitations in both retail infrastructure and customer-service capabilities in those cities. Shows without live audiences. Fashion weeks and trade shows have been essential ways that brands have maintained vibrant relationships with consumers and trade partners. While we expect some return to normalcy on this front, we also believe that the luxury industry—in close collaboration with fashion-week organizers and trade associations—should explore alternative ways to deliver the same kind of magic that these events offer when there are restrictions on international travel and large gatherings. Industry players might also consider pushing for a coordinated revamping of the fashion calendar, with brands simplifying and streamlining their presentation calendars. From ownership to experience, and back again. “Experiential luxury”—think high-end hotels, resorts, cruises, and restaurants—has been one of the most dynamic and fast-growing components of the luxury sector. Millennials (those born 1980–95) opted more for experiences and “Instagrammable moments” rather than luxury items. Baby boomers (born 1946–64), too, were moving in this direction, having already accumulated luxury products over the years. While we expect the positive momentum of experiential luxury to persist, it will slow down in the short term as consumers temporarily revert to buying goods over experiences. Hyperpolarization in performance. Even before the crisis, it made little sense to talk about the sector in terms of averages because growth rates and profit margins were so widely spread out

Even within the same segment and price point, luxury brands’ growth varied from 40 percent to negative percentages, and earnings from 50 percent to single-digit percentages. We expect further polarization based on three fundamentals: the health of a brand’s balance sheet prior to the crisis, the resilience of its operating model (including its digital capacity, the agility of its supply chain, and its dependence on wholesale channels), and its response to COVID-19.

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There are limitations to the digital strategies of luxury brands in Thailand where the traditional media channels such as local public relationsand direct marketing are the most significant communication channels to Thai customers. Thai luxury consumers tend to believe that shopping at the flagship store is the ultimate luxury experience with the ultimate accessibility of the brand and the product.Based on the study, selling online was not on the agenda for any of the luxury brands at the moment;therefore the main shopping highlight is on the experience at the store. Furthermore, the interview results showedthat the in-house experience with the right salespeople is the most important aspect that retail and service operations need to better understand to serve the customer in contemporary times. It can be seen thatnot every Thai customer staysconnected with the luxury brands though the new technology as it is more meaningful to the youngertarget customers. The results also showedthat luxury customers online cannot get the same brand experiences including VIP treatment and accessibility of the actual product as in the boutiques. The concept of retailing luxury brands must enhance “wow” factors such as “the extravagant use of the empty of space”, fascinating window displaysand exclusive products to reinforce the brand image and strengthen the emotional bond with the customers. Moreover, Wertime, Kent

& Fenwick, Ian (2008) stated luxury brands should improve customer loyalty by developing service and customer relationships at the store. The study results showedthat luxury brands can deepen their relationship with the local customers through theirsales people,as service is the cornerstone of customer relationships which includesshopping by appointment, sending hand-writtenthank you notes, the availability of sale shopping, delivering purchases and calling or sending messages through chat applications with the customers.Zhang (2013) remarked that luxury marketers are now limiting their marketing and communication platforms through social media, suggesting that the luxury brands should concentrate on improving marketing communications and customer relationships through social media rather than focusing on mass consumption selling of entry products. The study also showed that developing a storytelling of the brand on social media isthe best approach for luxury brands to build brand loyalty with existing customers, foster brand awareness for potential customers and sustain the brand profile.

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To sum up, with the success of Shanghai Fashion Week – the event’s streams totaled over 11 million views and helped generate more than RMB20 million ($2.82 million) in gross merchandise volume – and the announcement that events such as London Fashion Week are also going online, digital events are set to become a new norm for the industry. Brands embracing this shift are also more likely than not to fare well post-virus. The pandemic has impacted retail business worldwide but also presented new opportunities and a sense of urgency for brands to build up their digital capabilities. Those prioritizing their digital transformation will be nimbler and better-equipped for success as the world emerges from the impact of a once-in-a-lifetime pandemic.

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Shirky, Clay. (2010). “Gin, Television, and Cognitive Surplus.” Cognitive surplus: How technology makes consumers into collaborations, 27-19Smith,

Stan. (2013). “Strategic Digital Marketing.” Strategic digital marketing: top digital experts share the formula for tangible returns on your marketing investment,143-172

Wertime, Kent. & Fenwick, Ian. (2008). DigiMarketing: the essential guide to new media and digital marketing.

Zhang, Chengmin. (2013). The challenges of luxury brands’ positioning on social media.

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