Changing buying habits of the most wealthy are transforming the luxury industry

The Drum 18 Mar 2020 10:00
By Rumble Romagnoli-18 March 2020 10:00am

The marketing sector can be a complicated place as new marketing tools and techniques are launched, almost on a weekly basis. Powered by The Drum Network, this regular column invites The Drum Network's members to demystify the marketing trade and offer expert insight and opinion on what is happening in the marketing industry today that can help your business tomorrow.

According to the Wealth Report 2019, the global Ultra-High-Net-Worth (UHNWIs) population is set to grow by 22% over the next five years. If you are not sitting up already, this means that an extra 43,000 people will be worth more than US$30 million by 2023, with existing UHNWIs all expecting their wealth to increase in the next 12 months.

Much of this growth is being driven by a new generation of UHNWIs, most notably Generation Z (born mid- to late-1990s) and millenials (born in the 1980s and 1990s), digital natives who are dramatically changing the luxury market and the way in which they search and purchase luxury goods. A recent report by Bain & Company noted that Generation Z and millennials will represent around 55 percent of the 2025 luxury market, contributing 130 percent of market growth.

So how are the online habits of the ultra wealthy changing? How can luxury brands capture the attention of UHNWIs online? I reached out to this elite audience, to find out what makes them tick, and which brands have managed to capture their imagination in this ever-changing market... and how they've done it.

Omnichannel marketing, a digital marketing strategy that offers customers a completely seamless online shopping experience from the first touchpoint to the last subtly building your relationship with a brand, is now being cleverly used by the world’s leading luxury brands.

At Relevance, a Monaco-based digital marketing agency that is focused on helping business from across the world target UHNWIs, we have identified 26 touchpoints that UHNWIs go through when purchasing a yacht, from starting with a simple Google search through to the final purchase. Just four of these touchpoints were offline, demonstrating the power of digital in the world of luxury marketing.

Sophisticated digital platforms, from websites to social media channels, can now allow UHWNIs to manage the whole process of purchasing luxury goods online.

A luxury villa rental company based in St Tropez, France, CEO Emilia Jedamska says she has seen a spike in the number of transactions that are done entirely online, by North American property tycoons, Middle Eastern royalty, and British financiers, for example, highlighting the shared behaviours of UHNWIs from across the globe.

“We have closed deals, worth more than a quarter of a million, over Instagram messages and emails. These new, ultra-wealthy clients usually define a particular search in Google, land on our website, check our Instagram profile, and then send an enquiry form. Our sophisticated digital content, including details of our villas, ultra-luxurious photos and slick drone videos, enables potential customers to view our offerings all digitally. Our team then takes over by email, securing an agreement and payment details.”

“All my shopping is online,” she explains. “From the food in my fridge to the clothes I wear, I do not visit physical stores unless I have a specific purpose. With two children and two businesses I just don't have the time. I think for people of my generation there is a real sense of trust when it comes to online retail - even for big ticket items. I have friends who buy all their luxury items like Hermes handbags and Rolex watches online. Our generation has complete confidence in the process and this is what’s driving growth for online luxury platforms.”

As a digital native, Hanushka also utilises a wide array of online tools across her businesses, including for her London luxury consignment store, Sellier Knightsbridge.

Stepping out of our own reality

In shopping mode the client will wear AR glasses so as when they look into the shop’s display window they’ll see a digital and personalised selection on the mannequins based on their previous purchases or recent browsing history. The clothes could even be in the client’s sizes and new releases shown in the client’s favourite colour. The display windows of luxury boutiques have always been beautifully assembled, but now they could be even more enticing by being personalised to each client’s preferences.

Augmented reality

Other novel digital tools luxury brands are utilising is the ability for clients to try on goods digitally. For example, Pinterest has recently released an AR tool for users in the US called Try On. This innovative tool is powered by the platform’s Lens visual search tool. Utilising the front-facing camera purchasers can, for example, try on different shades of lipstick from beauty retailers such as Sephora, while a swipe up feature takes them straight to the brand’s website should they wish to purchase. Gucci is another luxury brand embracing this type of technology, giving clients the option of trying on apparel such as hats and shoes on digitally. This combination of AR and ecommerce is set to revolutionise luxury purchases, making luxury transactions easier and more seamless than ever before.

Experiential and emotional

Legacy luxury fashion brand Hermes offers playful content that entices users to engage with the brand on its Instagram feed. This artistic and abstract approach to content takes users on a journey of discovery, evoking a connection between the user and the brand. Hermes' Instagram posts make clever use of sound, enlightening the senses of users and forming a sense of nostalgia and familiarity.

This user-generated approach encourages customers to share their journey, inviting users into the brand’s elite community, creating a sense of belonging and further boosting brand awareness. These aspirational images are accompanied with carefully crafted captions which truly bring the images to life. Further, Belmond shows their followers destinations and places they may not have been to, giving people a reason to follow their page. Belmond’s clever use of Instagram Stories take users behind the scenes at events, inviting followers into the brand’s exclusive world.

TV moves online

Google has now integrated YouTube results on their main search page. Video is highly interactive, encouraging users to go on a journey, through links to purchasing pages and websites. A well-executed video can offer an incredible return on investment, especially if a video goes viral. According to the online learning platform SmartInsights, video offers the highest return on investment, followed by photos, blog posts, texts and quotes, and infographics.

Dior's YouTube channel is filled with exquisite behind-the-scenes views of their atelier and the magic their artisans and seamstresses create. You’ll discover videos such as Precious couture tailoring takes shape, Embroidering fields of gold and The meticulous art of lace appliqué. They also have dynamic interviews with Maria Grazia Chiuri, the creative director at Dior, where she speaks about her inspiration for collections and her personal values. There are videos of fashion shows, special releases of items and collaborations with artists.

Podcasts are another marketing tool that luxury brands are utilising to reach UHNWIs. Indeed, podcasts are becoming a popular communications tool for high-end fashion companies, for example the high-end department store Saks in the U.S.

Luxury brands keen to target UHNWIs are now experimenting with the medium too, including Chanel, which debuted a 3.55 podcast in-store in 2017, and Gucci, which in 2018 launched The Gucci Podcast.

The benefits of podcasts are numerous. The fact that all people need to do is “listen” makes Podcasts highly portable, with people being able to access them while on the move, from exercising to travelling, or even while at work. The fact that potential consumers can engage with your brand wherever and whenever, no matter what they might be doing, makes podcasts highly accessible and a unique, flexible tool for digital marketers.

Nimble luxury

Not even the most valued and successful businesses can afford to ignore this shift in culture, and need to embrace new digital strategies in these changing times, where the world’s wealthiest prefer to buy over VR rather than visit a physical shop.

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