Michelle Beeson, Analyst
The pandemic has shaken luxury brands and will continue to do so into 2021. Luxury consumers have higher expectations of digital customer experiences than mainstream consumers, but luxury brands risk losing their direct customer commerce relationships to online multibrand powerhouses like Farfetch, which has grown sales revenues while other luxury brands’ revenues have shrunk. This report gives insights into luxury consumers’ expectations and what CMOs at luxury brands must do to compete in an omnichannel retail landscape.
Back in the summer of 2017, we warned that luxury brands were out of time to improve their digital customer experiences. Since then, luxury brands have moved from relative inertia to a range of activities, from technology upgrades to partnerships and acquisitions.
But the 2020 pandemic has shaken luxury brands to their core. Nonessential store closures during pandemic lockdowns hurt revenues and removed the most prized, traditional touchpoint for luxury brands: the in-store luxury customer experience. Instead, consumers were forced online — precisely where luxury brands have traditionally lagged in providing great experiences. As a result, many have lost ground. Forrester’s evaluation of luxury brand performance during Q1 2020 showed luxury brands experienced declines of 7% to 44%, while Farfetch achieved 46% year-on-year sales growth.
Forrester’s latest report outlines how the pandemic has shaken the foundations for luxury brands, and what they must do to attract and retain their already digitally mature customers. Key takeaways include:
- Luxury brands must chase digitally mature consumers. Luxury consumers are digitally savvy early adopters with high brand expectations — even more so than mainstream consumers.
- Luxury brands must accept that digital is an imperative to survival. Luxury brands are out of time when it comes to creating excellent digital experiences; most know this and have been playing catch-up with digital investments and partnerships in recent years. But luxury brands have further to go to optimize their operations and meet the expectations of their digitally savvy consumers.
- To succeed, luxury brand organizations must be unified and customer led.Luxury brands must break down traditional online/offline channel siloes by reevaluating roles, responsibilities, and processes. They must evolve their business model, operations, systems, processes, and people to become truly customer obsessed.
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