Written by Peter Niessen, Vice President, American Express Business Insights
Tuesday, 24 July 2012 08:14
The rapid emergence of mobile devices and social platforms in recent years has presented retailers with more channels than ever before through which to grow their brands. In turn, this means that consumers now have countless options to connect and shop. Younger generations, especially, are known for their technological prowess (not to mention growing purchasing power) and growing penchant for luxury, and thus reaching Gen Y in particular now requires branching out from more traditional channels — such as print, radio and television – to today’s latest tech platforms: smart phones, tablets, and social media networks.
With the growing number of digital, mobile and social platforms available, retailers can spend countless hours mining large amounts of data as they struggle to track purchases from different channels in an effort to identify what’s most effective. Determining whether mobile or online advertisements lead to in-store purchases, or vice versa, can be quite daunting as the platform boundaries become increasingly difficult to distinguish. As consumers become ever more “multichannel” shoppers, retailers need to focus on the best ways to woo today’s luxury consumer across these platforms.
Today’s Luxury Consumer
A closer look at today’s luxury retail consumer leads to some interesting conclusions about which message and medium might be most appropriate for whom. Traditionally, luxury brands have considered Baby Boomers — those born between 1945 to 1964 — to be their core customer group, but today’s new luxury consumer is now comprised of shoppers from more than just one generation. While the Boomer segment did still contribute 48% of spending on total premium luxury fashion in 2011, younger generations are gaining spend momentum and exhibiting an appetite for high-end apparel and accessories. In fact, Gen Y — those born after 1982 — increased spend on premium luxury fashion by 33% in 2011, compared to the year prior, demonstrating this group’s growing purchasing power. Add in the multiple mobile devices and social influence commonly associated with this group, and it is easy to see that while they make up just 3% of total luxury spend today, Gen Y is becoming increasingly attractive to retailers for a variety of reasons.
It is important for merchants to recognize how critical it is to appeal to the “next generation” of luxury shoppers — without alienating the traditional consumer — and work to ensure their brand stays relevant for a range of life stages.
Traditional Meets Multichannel
American Express Business Insights data shows that in 2011, multi-channel shoppers made up just 13% of luxury fashion shoppers, but 38% of total luxury fashion spend — and are rapidly growing. For now at least, in-store only consumers are still the majority at 71% of luxury fashion shoppers and 57% of total luxury spend. Given this changing landscape, retailers should take a step back and evaluate their overall multi-channel messaging and develop a holistic strategy that utilizes all appropriate platforms — both traditional and new. Increasingly, for luxury sales, the ability to leverage the right platform for the right audience to ultimately drive multi-channel purchases will help to establish a cohesive brand sell overall.
In fact, at the National Retail Federation Annual Conference & Exhibition in New York earlier this year, Ken Seiff, Executive Vice President of The Direct and Omni-Channel Group at Brooks Brothers, emphasized the importance of storytelling across multiple channels in order to connect with and retain consumers and drive sales. Historically, the Brooks Brothers glossy catalogue, which is an excellent channel for retention, was a staple of the company’s marketing efforts. However, when it comes to acquiring new customers — especially younger generations — in an increasingly digital world, Brooks Brothers has turned to new mediums like paid search and other forms of digital advertising. These channels have been so effective that Brooks Brothers has dramatically increased its investment in them. They have also even begun to treat their customers’ electronic devices differently, since they’ve found, for instance, that the conversion rates on advertisements to iPad users are much higher than those to users on other mobile platforms.
Seiff discussed some of the challenges in distinguishing whether it’s online or in-store outreach that is connecting with customers. As a result, Seiff said he spends more time thinking about how customers migrate between Brooks Brothers channels — including retail stores, factory outlets, web, mobile, and iPad — than on trying to figure out how to treat each channel differently. In this way, Brooks Brothers has been single-mindedly focused on building one omni-channel experience for its customers irrespective of whether they’re shopping online or in-store. They are using data from both channels to both inform ways to improve customer experiences and to validate those efforts.
Certainly, with recent advancements in technology, channel lines have been blurred and the overall customer experience has become front and center. Rather than spending time debating how to classify purchases, retailers should ensure that their product is relevant and that their brand message and customer experience is consistent across all mediums. This will enable retailers to reach a wider audience, including the traditional luxury consumer as well as the growing Gen Y luxury group.
Peter Niessen is Vice President at American Express Business Insights, and has been with American Express for more than 17 years. American Express Business Insights leverages the power and reach of the Company’s information capabilities to help clients develop better-informed strategies to grow their business. Business Insights provides a range of information offerings and consulting services from identifying consumer spending trends to geographic expansion to improved marketing and advertising strategies. The organization identifies strategic opportunities drawn from the aggregate spending patterns on millions of cards in force across worldwide and works with business clients to provide data-drive insights focused on specific customer segments.