The growing digital transformation of the luxury sector

the luxury sector, fashion
© White Photography

It’s 2021, and today, almost every interaction happens through digital devices – what does this mean for the luxury sector?

Millennials and Gen Z are now the most affluent luxury brand consumers and are the ones who are driving the global luxury trends and sales growth.

These consumers live and breathe digital, and have manifested strong preferences for personalised and seamless experiences integrated both online and offline. As a result, this tech-savvy generation will continue to force luxury brands to become dramatically more digital.

“Digitally influenced” journeys

Nearly 80% of luxury sales today are already “digitally influenced”, meaning that in their luxury shopping journeys, consumers hit one or more digital touchpoints. E-commerce therefore offers an enormous opportunity for growth for high-end brands to be at the service of their affluent and busy customers. Today, the typical luxury shopper now follows a mixed online journey, seeking the advice of peers on social media or looking for suggestions from trusted bloggers before entering a store, which often ends up with posts about their latest purchases.

The way we think about luxury has changed dramatically in recent years. Historically, when you think luxury, you think of it as an exclusive, unique and inaccessible sector. However, due to the ever-changing consumer trends, luxury companies are now obliged to adapt to the reality of change that has been taking place in the technological field. To survive and thrive, luxury brands need to integrate online experiences and build the bridge between real life and digital realms.

New relationships via analytics and big data

New technologies and AI allow companies to reach specific targets, getting to know customers’ behaviours in a way that was not possible before, building up a strong relationship through the delivery of exceptional and personalised experiences. Today, brands no longer rely solely on hypothesis and past experience to create influential marketing strategies. Analytics and big data play a crucial role in determining the right brand strategies to target potential customers. Having the right data is essential to making accurate and effective marketing decisions. ‘Key Performance Indicators’ can help measure the success of a marketing campaign. Additionally, having the right data can help determine the right target audience.

AI can help brands to optimise their internal strategy, ranging from the consumer’s in-store journey to stock management and product creation. With the continuous development of digital technology, many luxury companies can now accurately locate their target groups and meet the needs of consumers through data analysis, which records past purchases and anticipates consumption preferences.

Indeed, digitalisation within the luxury sector has only been accelerated following the disruption caused by Covid-19. Although luxury brands were already undergoing a gradual digital transformation, 2020 was certainly the year that this intensified. The unprecedented health crisis that proved to be a global economic shock impacted the way luxury consumers buy. Previously, most luxury purchases were made by customers while travelling, however due to the travel restrictions, a lot of purchases are now being made online.

For luxury brands, digital is proving to be an incredibly important sales channel. In fact, digitalisation has helped optimise resources and make each step of the value chain more efficient and cost effective. Digitalisation has definitely made lives easier during these unpredictable and difficult times, and millennials and Gen Z are the generations that are accepting this shift in luxury consumption more swiftly.

How things shifted with COVID-19

Of course, the pandemic also rendered shows and real-life experiences things of the past. As a result, luxury brands have had to rethink ways to market their products. The virtual ‘e-vent’ is nothing new. However, the difference resides in that people are no longer able to attend live events and activities. Therefore, the new experience should be more enjoyable if it means shifting to a livestream. The need for virtual events has indeed encouraged brands to come up with new and innovative ways to interact with their consumers.

For example, many brands that took part in the Shanghai Fashion Week integrated a comment section, virtual ‘after parties’ and a ‘see now, buy now’ e-commerce button. Virtual events hold several advantages, most notably because they allow an increased accessibility for a wider audience. Virtual fashion shows have seen models across the globe turning their own homes into virtual runways. These online events have benefited from a greater participation, and of course have reduced negative environmental impacts as well.

Ultimately, in today’s digital era, almost all brands benefit from a strong digital presence. Digitalisation helps brands create new sales channels with customers so that they can ultimately communicate the brand narrative efficiently. With the help of new data analytics tools, digitalisation improves productivity and efficiency by making the necessary changes. Whether it’s efficient communication between the team, or understanding a brand’s unique selling proposition based on the data collected, digitalisation can drastically help to optimise and allocate existing resources.

The digitalisation of the luxury sector has been growing steadily in recent years, and due to the health crisis in 2020, this has only been intensified. What was previously deemed an inaccessible, exclusive sector, is now evolving for a new generation of consumers. Brands now use digital platforms extensively, with technology advancements being ever more refined. We have entered a new era of luxury, with digitalisation and the influence of millennials and Gen Z at forefront of this transformation.

This article is based on a wider report titled ‘The Future of Luxury’, produced by students from The International Master in Luxury Management (IMLUX) programme. This programme is a double degree created by NEOMA Business School and MIP Politecnico di Milano. You can view the full report here.


Please enter your comment!
Please enter your name here