BrazilHow BearingPoint helps luxury retailers prepare for the digital era
Luxury retailers are facing unprecedented change. BearingPoint, a consulting firm with around 4,500 employees across mainly Europe, supports luxury brands to navigate through changes hitting their sector. In a conversation with Consultancy.eu, Partner Jaco van Zijll Langhout and Senior Consultant Digital & Strategy Victor Besnard explain how BearingPoint is equipping clients with the business plans and tools to prepare themselves for the digital era.
The luxury retail industry, which spans high-end clothing, shoes, watches, bags, jewellery and more, is valued at around $420 billion today. Despite a rosy growth outlook – the sector is set to reach a size of nearly $500 billion by 2020 – the industry is in the midst of a major period of change, leaving many players struggling to adapt or monetise on opportunities.
In general, the trends which are reshaping retail are also remodelling the luxury market. As top brands across Europe such as LVMH, Hermes and Gucci bid to reposition themselves for changes such as this, consulting firms are playing a key role in their repositioning. BearingPoint supports such brands in their main digital areas E-commerce, Omnichannel and Customer Experience.
E-commerce
One continuing trend in luxury retail is e-commerce. According to a report by Ecommerce Europe, the e-commerce retail industry in Europe is now worth more than €600 billion, double the size noted in 2013 on the back of year on year double-digit growth. While Western European markets dominate the scene, accounting for approximately 68% of total European online retail turnover, other regions are playing catch-up and so, combined with the continued smartphone boom, the industry is forecast to see continued fast growth in the coming years. This is not to say that traditional retailers have to be bypassed by this new order. Indeed, retailers currently succeeding have all recently launched new initiatives to better blend e-commerce and in-store shopping.
Van Zijll Langhout says “having a clear digital strategy is key”, before adding that it revolves around gaining good insight in market sizing, growth opportunities and customer behavior patterns combined with main principles for execution. Tapping into ecommerce has a high impact on current processes, systems and operations. Therefore, the deployment approach should be in line with the organisation’s current state and defined ambition. Moreover, the e-commerce processes should be tied into existing retail processes, to ensure smooth delivery.
Omnichannel
Besnard mentions that it is “not only about ecommerce, but that it is the combination with brick-and-mortar that wins”. On the back of e-commerce, an omnichannel proposition is essential for retailers that operate in both worlds. A great online experience is backed by physical capabilities.
Some successful examples come in the shapes of Walmart, Target, Nordstrom and Kohl's, all of which reported strong earnings results in the most recent data available, after launching new initiatives to blend e-commerce and in-store shopping. This combination has helped beef up the in-store experience of these organisations and is providing bottom-line paying. Kohl's, for example, launched a programme to allow customers to make Amazon returns in-store, while Target and Walmart both offer several different options for picking up orders.
As luxury retailers bid to emulate such successful approaches, BearingPoint was recently approached by the parent company of multiple leading luxury brands. The objective was to enhance the “omnichannel experience” of their consumers by introducing a click and collect and return in store service. “By leveraging digital technology, our client was able to blend its offline and online channels while maintaining the personal relationship that made their brand special,” Van Zijll Langhout explains. Besnard adds; “The design as well as implementation of an omnichannel experience can be quite challenging. Many departments are impacted by these types of projects, IT, logistics and finance, to name a few. Collaboration of departments and a shared commitment are crucial for success.”
Maintaining a stringent focus on in-store operation optimisation however remains essential to the success of such transformations. Van Zijll Langhout: “There must be KPIs to monitor store performance, alongside resource scheduling based on traffic and lean management for store processes such as inventory and maintenance.” These can help retailers improve turnover by square metre, and improve lead time, by making group management easier.
“To succeed in the new era for luxury retail, collaboration of departments, top management involvement and a shared commitment are crucial for success.”
– Jaco van Zijll Langhout and Victor Besnard
Customer journey
A great online platform or app and store is however no guarantee for success. Customer expectations constantly change. Many sites are primarily focused on transactions. But the customer experience is more, it is about the journey customers make, the personal relevance of the interactions with the brand and the proposition they see. This demands a continuous changing IT landscape and requires a different way of working from IT. Everything from search to buy and after service must be tailored, as the customer brand loyalty is low and the competitor only one click away. To still satisfy a customer’s expectations, personalisation is key.
Data collection gives luxury brands a base on which to obtain invaluable data on the habits of their customers. 63% of consumers are interested in personalised recommendations, according to a study by the Retail Industry Leaders Association. On top of this, the majority of them are willing to share their data in exchange for benefits such as access to exclusive deals (60% of those surveyed), the ability to gain points and rewards (56%), or special offers for items that interest them (53%). This data could help luxury retailers understand which aspects of their brand best engage customers and yield the largest portions of revenues as a result.
At the same time, in the store, customers expect digital to rule. “Physical stores are becoming more of a showroom for customers to experience the brand and get inspired. Online pure players, such as Amazon, are now opening stores, pop-ups or using alternative locations, the points of sale are shifting,” says Besnard. With the introduction of VR and robotics, the physical store experience is projected to change drastically across retail. To this end, BearingPoint recently helped a global cosmetic brand develop what was dubbed a “disruptive concept store” by experts. Using intelligent technologies and digital innovations, the advisors designed an in-store blueprint aligned to the brand DNA and to existing retail channels, while paving the way for a few completely new omnichannel journeys.
Concluding, Van Zijll Langhout says, “The rise of new technology will continue. The expectations of today’s consumers are clear but high: a seamless shopping experience, regardless of the moment, location and channel. To achieve this, collaboration of departments, top management involvement and a shared commitment are crucial for success. But those who manage to be present in the micro moments of customers, have a bright future ahead.”
