Lagos’ Caviar collection
NEW YORK – As the spending power of millennials grows, the already changing retail climate is going to require an overhauled strategy, according to panelists at the Luxury Retail Summit: Holiday Focus 2015 on Sept. 16.
While they cannot be generalized, millennials as a group are driving brands to embrace digital channels and focus their energies on value-driven marketing that speaks to an idea beyond product. While there is a necessity to change, panelists agreed that those in the luxury sector are generally behind on embracing the new retail world.
“Millennials are the first generation that lives through the screen,” said Diana Verde Nieto, co-founder of Positive Luxury, London. “So it’s not about either/or. It’s not about digital versus traditional. It’s not about online versus offline.
“Through the screen, you wake up in the morning, you pick up your phone, you turn your alarm off and then you start your day,” she said. “You read your news, you look at Facebook, you look when the train comes, you chat with your friends, you have What’s App, you do emails, you get to the office.
“It’s a completely different way, it’s a completely different mindset, but it’s not an either/or.
“I think, and especially with this transition, there’s still room for print and there’s obviously room for events, and I think the biggest challenge that a lot of the traditional luxury brands are facing is the experience. How do you get people to go to the stores again, feel the product, touch the product?”
The Luxury Retail Summit: Holiday Focus 2015 was organized by Luxury Daily.
Emerging consumers
By 2020, millennials will make 40 percent of all retail sales.
With its core demographic being Baby Boomers or Generation X-ers, Lagos has had to retool its product development, marketing and retail strategies. With its average order price $600 and up, Lagos consumers range from the aspirational to the established.
In addition to promoting products in magazine pages, Lagos gets consumers to celebrate the individuality achievable through its jewelry via a digital campaign #MyLagosMyWay. This also shows how pieces can be combined to create a trendier look (see story).
Lagos ecommerce site during Valentine’s Day
Millennials consume media in entirely different ways, living and experiencing content through screens rather than participating in traditional media. Popular platforms are constantly in flux, and marketers have to keep up with frequent platform updates.
Social media has also changed the agency conversation, according to Hyperbolic CEO David Benattar. Whereas Models.com rankings in the past were used as the decision maker when choosing a face for a campaign, now marketers look to statistics such as social media followers or are looking to social media stars themselves for their spokesmodels.
Creative also needs to speak to a message beyond the aspirational aspects of a brand, tapping into millennials’ value systems.
Poised to appeal to the next generation’s cause-centric ideals is Positive Luxury, which rewards sustainable brands with a Trust Button for their ecommerce sites, providing transparency at point of sale (see story).
Positive Luxury’s Trust Button
Positive Luxury cofounder Ms. Verde Nieto explained that without an overwhelming presence of religion and with a high rate of divorce, millennials are looking to form their own communities. This leaves room for brands to step in, allowing consumers to showcase who they are via product.
This community building goes both ways.
A brand is a living entity constantly adapting to external forces, according to an executive from Interbrand at the Luxury Insights Summit 2015 April 29.
The current landscape is consumer-centric, and each individual person will play an active role in shaping brands and deciding which fail or thrive. To be successful, brands will need to focus on creating value and maintaining authenticity for both themselves and consumers (see story).
Selling online
With consumers able to connect with any brand at all times, ecommerce becomes a place for more than just shopping.
Amanda Willinger, vice president of digital and ecommerce at Lagos, explains that the jewelry looks at its Web site as a way to deliver a high-touch, high-tech experience to consumers outside of its one freestanding brand boutique in Philadelphia. This involves not only customer service, but also building a compelling brand experience through imagery and video.
“I’m not going to lie, omnichannel is super intoxicating,” Ms. Willinger said. “Those that have customers that shop in-store and online are our most valuable customers.
“So for me as a digital marketer, my challenge is to create an emotionally compelling experience online, and a lot of times frankly I think you can create an even better experience online than you can in-store,” she said.
While digital can engage, it will not likely replace the in-store experience.
Interior of Burberry’s Regent Street flagship
Mr. Benattar mentioned that the cost of gaining new consumers via online channels is more expensive. Instead, brands can use their bricks-and-mortar locations to gather data and use it to inform an online store.
Digital integration can also be used at the point of sale, either through beacons or by changing how product moves at checkout, changing out piles of merchandise for scannable mobile inventory. However, many still struggle with this.
“I think everybody’s trying to crack the code, but nobody did it really well yet,” Mr. Benattar said. “So I think we just have to acknowledge that it’s a changing landscape, and we have to keep exploring and testing and developing the best solutions.”
The rise in ecommerce has created an atmosphere of price transparency, which has positives and negatives.
This openness of price has driven a race to the bottom, as discounts can no longer kept to one channel or store. Publicly owned companies need to show growth, and therefore flock to the areas where they can make the most money—namely outlet stores. Department stores have been aggressively expanding their outlet retail footprints to capture discount sales from aspirational consumers, but are these off-price stores doing more harm than good?
Discount stores enable a retailer to reach more consumers at varying price points, but a growth strategy that favors off-price bricks-and-mortar may in time hurt the full-line store’s luxury image. This requires a delicate balancing act for retailers to retain their branding, positioning and pricing strategy (see story).
Prada outlet store
Moderator Robin Lewis, author of “The New Rules of Retail,” said he warns retailers against discounting, since it will lower the perceived value of the brand.
Lagos’ Ms. Willinger agreed, saying she thinks going forward, there will be two groups: brands that discount and those that do not. As a private company not under the pressure of the stock market, Lagos is in the latter camp.
However, Ms. Verde Nieto believes that there is a resurgence of focus among younger consumers in looking at cost per wear and desiring quality, a pendulum swing that may bode well for luxury.
“If a brand goes on sale anywhere in some small town, it goes on sale globally now, so that’s pretty powerful,” Ms. Willinger said.
“So I think at a very basic level, good brand operators control their brand, so that’s pricing, that’s image, that’s messaging, that’s the quality of your product, adding value, distribution, whether online or in-store, so I think that’s the secret wallet,” she said.
“There are customers and consumers that are budget conscious, but there are customers that the value proposition and what a brand offers them from a quality, prestige, mystique [perspective] that’s more important than price.”
Final Take
Sarah Jones, staff reporter on Luxury Daily, New York