Digital Marketing for Luxury Brands 2019 – 2020

Estimated Reading Time 16 minutes

This post looks at the opportunities and challenges luxury brands are facing in a constantly changing environment.

What does the future hold for the luxury market this year and into 2020? Why is it important to go beyond Social Media and embrace PPC and SEO?

There is no denying that over the last ten years, social media marketing has been instrumental in growing luxury brands. This is true for both well established brands, as well as relatively new and obscure brands that have come from nowhere and are somehow generating sales and customer loyalty.

Though the growth in social platforms is undeniable, one area that has been overlooked for some time in this rush to get social has been the core drivers of brand engagement, execution, sales, loyalty and store footfall, namely paid search and SEO.

Nearly 80 percent of luxury sales today are “digitally influenced”: consumers hit one or more digital touchpoints in their luxury-shopping journeys.

McKinsey & Co

According to the McKinsey & Co Luxury Report from last year, digital luxury is increasingly a customer-to-customer (C2C) economy. The consumer is central to the shopping journey, from advocacy to sales. Luxury consumers, highly engaged on social media, are evolving from paying observers of the show into actors on the stage.

The challenges

With a changing economic climate and shift in consumer attitude, luxury brands are having to rethink not only their business model, but also what the ‘brand’ stands for in 2020 and beyond.

In certain quarters, the opulence and splendour of certain luxury goods may seem like something from a bygone age. Once celebrated, they may come across as a little vulgar and irrelevant in today’s polite society.

This sentiment is being echoed by emerging markets who currently look for direction from more established markets like the US and Western Europe.

The way consumers discover and acquire luxury brands are equally in flux and have been for quite some time. Some areas that brands need to think about are listed below.

  1. The continued rise of online purchases
  2. The emerging younger consumer
  3. The growth young buyers from emerging markets  – China
  4. Sustainability

1.The continued rise of online

According to data from Bain Future of Luxury Report, of all the factors affecting luxury brands, this is probably the largest. In 2018 online luxury shopping grew a whopping 22% continuing to rise to €27 billion.

Growth in Luxury Brands via Bain & Co

By 2025, the online channel will make up 25% of all luxury sales with ‘digital’ facilitating over 50% of all purchases.

Asia (especially China and India) will be one of the fastest growing future markets. Of the figures last year 44% of growth came from The Americas with Asia nudging Europe to third place.

Top selling items were accessories that were just ahead of online luxury fashion. The growth of jewellery and watches also saw a significant increase as consumers became far more confident online.

Interestingly, in certain sectors, consumers were increasingly looking to purchase directly from the luxury brands websites as e-commerce functionality for certain brands improved. The growth in second-hand luxury goods also increased rapidly to €22 billion in 2018.

2. The emerging younger consumer

Writing about luxury brands without mentioning millennials would be like having calamari without a dash of lemon.

An amazing 33% of all luxury purchases in 2018 were driven by Generation Y and growth in this market seems no bounds. This new younger ‘aspirational’ consumer is forcing many traditional brands to adapt to a changing social landscape. A change which is paying dividends as brands like LVMH’s Louis Vuitton are taking advantage of street brands like Milan-based Off White, who is driving trainer (sneakers) sales driven by the designs of Virgil Abloh.

3. The growth young buyers from emerging markets  – China

According to the McKinsey China Luxury 2019 Report, over half of those born in 1990, only started buying luxury last year.

Emerging consumers from China are also being influenced from off and online channels. The challenge for luxury brands is to be aware that one size definitely does not fit all.

According to Consumer Barometer by Google, Millennials look for answers online. Search engines such as Google are the first port of call. When shopping, online researchers normally turn to search engines first (55%), followed by brand websites (27%). For this young audience, mobile is a key resource while researching and making purchase decisions. 40% of Millennials (in other words over twice as many as those 35+) research their purchases on a smartphone.

4. Sustainability

Sustainability is another area that is a key driver for luxury brands. Driven by millennials, this is now something of a universal issue spanning all ages, continents and brands.

With brands like Gucci launching Gucci Equilibrium  and focussing on Corporate and Social Responsibility, luxury is not just following suit but in many ways, leading the charge.

Brands like Vivienne Westwood have launched ecotricity along with super group LVMH which last year announced it is investing in sustainability starting with a carbon fund that will raise money for every ton of CO2 emission the brands generate.

These initiatives and many like them are an attempt by luxury brands to give something back and hone in on the sentiment about waste and what our future planet may look like. The upside and some may say cynically, that by addressing these modern day issues, customers both old and new will feel far more comfortable about purchasing.

Why do people buy luxury?

Aspiration, status, quality…all of these adjectives have been associated with luxury brands. The reality is that there is a perceived and real cachet in owning a luxury asset. The perception can sometimes be greater than the reality.

Economic and financial site Investopedia cites a variety of factors in the psychology of why people buy luxury goods. It focuses on everything from self-esteem and brand loyalty through to authenticity and self-achievement.

The reality is that our relationship with luxury is personal. In the main, our purchase of a luxury watch, for example, maybe a self-congratulatory reward, the achievement of a milestone. From seeking recognition and attention through to acceptance into a special club associated with the purchase of that luxury item – e.g. a Ferrari, the motive and the aim is personal, the luxury brand’s role, is to fulfil it – a hundred times over.

The Kadence Luxury Index groups luxury brands by 8 key principle components:

Luxury Index Principal Components

Of these principal components, there are two main categories that stand out from the rest. These are QUALITY and HISTORY.

In essence, the consumer is looking to buy something that evokes heritage and will have a distinct level of quality.

This is particularly interesting as many luxury brands with quality and heritage are obsessed with focussing on status or feel-good factors, especially on social media. Though it is important to touch on these elements, both old and new customers are looking for the same.

“Innovation in luxury, therefore, is about leveraging heritage to a new audience whilst keeping quality”

What can we learn from the top 10?

 

Data from the Deloitte Global Powers of Luxury Report tells us that the top ten luxury power player brands make up 48.2% of luxury sales of the top 100 luxury brands. What can we learn from these brands?

Innovation and adaptation to an evolving customer base have allowed the top 10 luxury brands to continue their dominance in the market. Adapting to changing buying patterns sometimes driven by economic factors allows these brands to appear nimble and on-trend.

According to Deloitte, the longevity of the top 10 is also the investment made in digital innovation and digital marketing. This has been a key element.

How do people buy?

According to Google, wealthy consumers are amongst the most digital-savvy: Almost all buyers are online, they use multiple devices to stay connected, and most go online to research before they purchase in-store.

Offline vs Online – where do luxury buyers search?

Source: Google

In all three markets above, nearly all (98-99%) use the internet on a daily basis. Even more commonly used than luxury magazines.

“the internet is the only medium that can reach almost all luxury buyers in all markets”

The power of Google

Did you know the world’s top 15 luxury brands generate more than 45 million web searches per year?

This should come as no great surprise as many of these searches are being driven by a variety of different touchpoints or as Google terms these – micro-moments.

Micro-moments can be anything from a social media post e.g on Instagram, through to an online piece of PR e.g. an article on Vogue.

These pieces of content trigger search queries and allow the prospective customer to passively discover more about the content they have seen.

Without a strategically planned search campaign running alongside social media, analytics shows that opportunities for deeper engagement and even execution or sale are lost at this point.

Equally search results can lead to a discovery on social platforms.

As Google does not actively index social media posts (Instagram, Facebook etc.), it is vital that keywords centred around core social media campaigns are built out into a paid search strategy.

Social media and search go hand in hand across the various segments of the sales funnel.

What to do now

Knowing what we know, it is important for luxury brands to review their current search and social footprint. Brands are investing heavily in content and posting non-stop and wondering why they’re getting little or no traction on their posts.

A good agency/brand partnership will highlight these points above. Many of the best agencies will build-in these strategies from the start and be benchmarking and measuring results.

Google Analytics is an excellent starting point and will show sources of traffic to the website as well as any goals or conversions, providing they are correctly setup.

If you would like to learn more about the changing face of luxury and the impact of digital, please contact Reggie James at Digital Clarity.

Reggie James
Reggie James is a seasoned internet brand strategist who has been at the forefront of digital marketing since its inception. Reggie has worked with major search engines and commercial brands to create and build successful business models that are commonplace today. Reggie has a passion for helping companies develop and scale their business through digital application. Reggie is the founder of Digital Clarity and is in demand as a digital strategy consultant in the UK and US.
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