ENCGK DIGITAL LUXURY SERVICES : TRADITION VS INNOVATION

ECOLE NATIONALE DE GESTION

ET DE COMMERCE - ENITRA

Digital Luxury Services:

2022 Tradition versus Innovation
2023 in Luxury Fashion

“ “
Contributors : Supervised By :
Belamrya Hiba Pr. Tlaty
Benyachou Doha
Chriette reda
EL Ghonnaji Nizar
Erraih Othmane

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DIGITAL LUXURY SERVICES : TRADITION VS INNOVATION ENCGK

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ENCGK DIGITAL LUXURY SERVICES : TRADITION VS INNOVATION

CONTENTS
04. Introduction

07. Luxury brands and digital services

12. The paradox of digital luxury

15. What is the right digital service

strategy for luxury brands

18. How to develop a digital strategy

for a luxury brand?
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INTRO-
DUCTION
The world of luxury is changing quickly as many traditional luxury firms adopt drastically
different tactics to compete with an increasingly digital economy. Some luxury brands, such
as Chanel and Bottega Veneta, have opted to limit the influence of digitalization and instead
place a greater emphasis on the traditional service experience in their shops.

Other luxury companies, such as Dior, Saint Laurent, and Hermes, take a different approach,
focusing on innovative new digital services that have resulted in quickly expanding online
sales. All of these firms continue to offer luxury products, but their approaches to digitizing
the service experience could not be more different while they all wish to remain exclusive.

In this article we will analyses how can luxury fashion brands develop their digital service
strategy and at the same time retain the exclusive and personalized service their customers
expect.

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Price-demand
curve :
The luxury industry differs from
most other commercial areas in
numerous ways, its emphasis
remains firmly on exclusivity rather
than reaching as many people as
possible. Luxury firms are well
aware of the inverted price-demand
curve: when prices rise, luxury

brands frequently find higher demand for their products. The exclusivity that mixes with
excellence to make something appealing for many people is a crucial characteristic of
luxury. Many luxury firms intentionally want to limit the number of consumers they
serve, recognizing the value of exclusivity.

Customer experience in luxury

brands stores :
Most luxury brands are only available in a few chosen locations; their flagship stores
are frequently situated in fashion capitals, and buyers come from all over the world
to visit them. The service in these shops has been meticulously crafted to appeal to all
senses in order to promote the intended brand positioning. The service interaction itself
should live up to the customer’s high expectations. Customers are frequently provided
champagne or other refreshments as part of the service experience, and they receive
individualized and attentive treatment.

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However, the world of luxury is moving at a rapid pace.

Millennials and younger generations who grew up with the
Internet are expected to account for more than half of all luxury
buyers by 2024, highlighting the shift that this historically
conservative corporate industry is currently experiencing.

The pandemic :
Accelerating the shift
toward digital luxury
This shift to a more proactive digital strategy has begun
before the outbreak of COVID-19, but the 2020 pandemic
has accelerated this transformation. Many luxury stores have
had to close for months. Furthermore, more than 50% of
luxury sales in markets such as France and Italy target tourists
mainly from Asian countries. Therefore, travel restrictions are
an additional issue to the traditional service found in luxury
stores.

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Luxury brands and

digital services

According to a Forbes survey, Generation Z only accounted

for 4% of luxury purchases globally in 2018, but by 2020, this
market segment’s share had risen to 10%. Furthermore, they
increased to 15% in places like China. Evidently, it was a result
of the adoption of cutting-edge technologies, content-creating
digital marketing tools (like chatbots with artificial intelligence,
augmented reality, or virtual reality), and collaborations to
produce digital versions of their products or collections (such
as the $12 virtual Gucci sneakers).

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The Opportunity :
Online luxury sales are expected to triple as a
proportion of the total global luxury market
sales by 2025, reaching $91 billion USD.
Nearly one-fifth of all personal luxury sales
will take place online. Consumers’ online
experience influences at least 40 percent of
all luxury purchases.

The Problem :
Luxury brands and high-end retailers need to identify new ways to engage with affluent
consumers online. It is particularly important to avoid cannibalizing performances of their
offline retail stores. Online sales have so far not been able to drive the same level of upsell
opportunities than their offline counterparts. Research shows that luxury consumers spent
overall less per purchase when buying online.

The Solution :
Luxury brands first need to assess the contribution that digital currently has on their total
sales performances and consumers’ purchase behaviors. High-end businesses then need to
define a long-term strategy to utilize digital as an impactful branding and sales component.
Two broad online luxury retail approaches should be explored to drive digital sales: self-
owned platforms and outsourcing
to third-party resellers.

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Chanel’s vision :
While other luxury brands delved deeper
into the expansion of online shopping.
The Chanel fashion house reiterated its
desire not to sell its handbags or its ready-
to-wear online in order to preserve the
« attractiveness and exclusivity » of the
brand.

“Come into the boutique, try things on, decide what you like – that’s part of the experience.
And the people who don’t want that? They don’t come to Chanel,” said Bruno Pavlovsky, in
response to concerns about the brand’s e-commerce strategy. said Bruno Pavlovsky, president
of Chanel Fashion regarding the brand’s decision on staying out of e-commerce.

Five Common Causes of Channel

Conflict in Indirect Sales Ecosystems
Mixing direct and indirect sales

The main challenge with indirect Indirect distribution allows access

distribution is the distance it puts to expertise and pre-established
between you and your customers. infrastructure, while it must
By adding an intermediary, you be built in-house with direct
are also increasing the amount of distribution. Direct distribution
time it takes for your product to allows more control over the
reach the buyer. It’s also harder to entire supply chain, while indirect
establish brand loyalty when you involves third parties with their
are not interacting directly with own ways of handling their
your customer. responsibilities. Combining the
two strategies can be a difficult
task especially for luxury brands. 9
DIGITAL LUXURY SERVICES : TRADITION VS INNOVATION
Giving partners too much
pricing control
The negative effects of price
controls are many. By creating
shortages, they often cause people
to wait in line, they often cause the
quality of products whose prices
are controlled to fall, and they can
lead to favoritism by suppliers. All
those effects remain until the price
controls are ended.
Too many partners
serving too few customers
This tends to happen when a
vendor has poor geographic or
demographic targeting when
signing up sales partners. If the
customer base is too small to
support the number of partners,
two things may happen: either
they lose interest in pushing your
products, or they start competing
directly with each other. The
latter can quickly create a lot of
bad blood, and conflict that spills
over into creating genuine channel
management problems.
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ENCGK
Strategic or marketing
mis-alignment
This form of conflict comes
from situations where the vendor
and one or more partners have
different visions for the product,
or the proper market for it. If
Parter A is pitching your product
as an all-purpose mainstream
solution, while Partner B is trying
to pitch it as an exclusive up-
market product, this is going to
cause a lot of tension and conflict.
Resistance to change
It’s easy for partners to get set
in their ways, and be resistant
to new initiatives, new product
rollouts, or other changes you’re
implementing. In worst cases, this
can lead to situations where some
of your partners enthusiastically
embrace the changes, while others
insist on sticking to the old ways
– confusing buyers and harming
your brand
ENCGK DIGITAL LUXURY SERVICES : TRADITION VS INNOVATION

How technology and personalization

can elevate luxury brands
As luxury brands embrace online channels and also begin advertising more through retargeting,
there are several ways that they can protect and elevate their brands for example offering a
personalized experiences to their clients.

The key to luxury has always been an understanding of what drives customers. What fuels
their aspirations? Are they buying for current prestige or as a long-term investment in class?
Are they looking for something timeless or avant-garde?

Just as luxury brands take a personal, consultative approach towards sales, it helps to
work with marketing partners who ask the right questions about the brand and its own
aspirations and communications. Creating personalized messaging for end-users starts with
understanding the brand and then filtering that understanding through technology.

Deep Learning-powered advertising is particularly important here as it allows for greater

precision in targeting. It can act as that first part of a curated sales journey, showing products
of a selected type, style, and even size that will match each individual customer.

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The paradox of
digital luxury
The luxury sector is in many ways remarkably different
from most other business fields, not least as its focus
remains solidly on exclusivity rather than trying to
reach as many customers as possible.

The luxury world has always faced competing

paradoxes. How can brands grow while maintaining
their aura of exclusivity and rarity? How can they hold
onto their heritage while innovating for the future?
The digital age has supercharged these tensions. A
new generation of consumers is making its way into
the world, with different expectations and shopping
behaviors. The coronavirus pandemic, which forced
luxury brands to shutter their stores, has further
accelerated the digital-first transition. Luxury brands
will have to reconcile these apparent contradictions to
remain relevant and build a global customer base.

Celebrating and promoting heritage still plays an

important role in the future survival of luxury brands.
Creating memorable ways for consumers to be
immersed in a brand’s heritage can strengthen brand
equity and create long-term financial award for the
business.
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Take Land Rover. For the first

time, Land Rover enthusiasts can
experience the brand’s rich heritage
by getting behind the wheels of some
of its most historic vehicles at a new
customer facility in the UK. A variety
of packages are available allowing
customers to focus on a particular
decade, or to journey through Land
Rover’s heritage, right up to the
present-day line-up. The experience
is different to what Land Rover has
offered before, and is a great way
to engage customers in the brand’s
history.

In the digital age, luxury is defined less by products than by experiences, and there is a
continual shift from ‘having’ to ‘being’. Selling luxury products is now not enough – brands
must also give their consumers the sensation of luxury.

Brand heritage, or provenance, shouldn’t be confused with nostalgic marketing. A historical

brand owns its positioning and added value based on heritage, the result of direct use of its
history as key to the brand’s identity. Many brands have a history but only a few are actually
historical brands, able to exploit this asset in a global market where tradition and identity
present themselves as key defenses against the competition.

A successful heritage marketing strategy requires strengthening brand equity, using technology
to create culturally relevant connections with the audience. A panel at The New York Times
International Luxury Conference discussed how luxury brands can be found wading into
political and cause-based discourse, a potentially risky move. But with new generations of
consumers looking for relevance in a brand’s values as much as craftsmanship or heritage,
“There is a new way to be a luxury brand today,” according to Cedric Charbit, CEO of
Balenciaga. “A luxury brand today is about of course the heritage, craftsmanship and

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creativity, but it’s also about the values today, what we

believe in and what we stand for.”

History can play a crucial role in the allure of luxury

brands, but prestigious pasts are no longer the be-all and
end-all for today’s consumers. A 2017 Deloitte study of
Millennials across the US, UK, Italy and China found

that “quality and uniqueness” are the top factors attracting them to luxury products. As a
result, some of the most successful luxury brands are those that manage to make traditional
craftsmanship relevant through innovation.

How can luxury combine exclusivity with the personalized and attentive customer services
with the unlimited access that the Internet offers?

For the exclusivity of luxury products, digitalization does not pose a problem. Top brands
such as Dior and Hermes actively keep track of how many items of their more iconic products
they sell online, and they can temporarily remove a product from the online store if it sells
too much. this corresponds to the practice in physical boutiques to only sell a limited number
of products per month. For services, however, the situation is less clear: luxury brands need
to find a way to offer the same level of personalized and exclusive service encounters online
as they do in their boutiques. To date, many luxury brands still struggle with how to offer
exclusive services in digital settings. Digital luxury is not a paradox at all. The digital element
is the missing part of the formula that will finally allow luxury brands to engage with their
audiences the way they’ve always wanted to.

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ENCGK DIGITAL LUXURY SERVICES : TRADITION VS INNOVATION

What is the right

digital service strategy
for luxury brands ?
Luxury is difficult to transcribe online on a website.
There is no miracle recipe.

On the other hand, we can see that
luxury brands often turn to CMS (content
management system) more expensive than
others such as Salesforce, Adobe, etc.
which are tools that can often go further in
terms of marketing automation. By going
further with marketing automation, we
often see a better use of CRM (customer
relationship management) and emailing.
The personalization is often more advanced
on this kind of websites, but it is difficult
to say if this concept really allows to sell
more or if it is enough to look pretty on
the website. This 360° approach is most
likely more efficient than a more traditional
strategy. Other companies that are not in
the luxury business use more open source
CMS that are less sophisticated (wordpress,
drupal, prestashop, etc.).

Some success stories from the luxury

industry in terms of digital marketing
#1 Cultivate the mystery : Hedi Slimane
Barely appointed artistic director of the house of Saint Laurent in March 2012, Hedi Slimane
marks his territory, especially on the web. Result: the fashion guru has the brilliant idea
of shining by his absence and adopting a minimalist marketing by using as his main image
vector his best asset: the photo, black and white. Facebook becomes a place to broadcast

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suspense (announcement of the new logo, teaser of the fashion shows, etc.). You won’t find
much to read on www.ysl.fr. Nothing about the history of the brand, nothing about the
historical designer, nothing about the universe and values of Saint Laurent Paris. And nothing
about Hedi Slimane himself. The Internet user can only learn more about the collections,
the boutiques and the fashion shows. And above all, admire the designer’s photos that can
be found on his website Hedi Slimane Diary. As for social networks, they are handpicked:
Facebook (more than 1.5 million fans), Youtube and Twitter.

#2 Storytelling to sell the digital dream : Cartier

A communication technique that adopts the narrative form of storytelling, the objective of
storytelling is to make the Internet user adhere to the values and vision of the brands. It is a
tool perfectly adapted to luxury brands that have an ancestral history, a unique know-how
and a strong imagination. “Cartier’s Odyssey” is a masterful illustration of this process. What
is it about? An advertising film released in March 2012 on the internet, before broadcast on
cinema and television screens. The video required a budget of 4 million euros and 2 years of
work, generated more than 16 million views on Youtube and thousands of press coverage
on the web. The pitch: through the journey of Cartier’s emblematic panther, the audience
discovers or revisits the founding inspirations of the house. The event is relayed through
a mini-site where the internet user can go behind the scenes of the film and enjoy luxury
bonuses.

#3 Pampering bloggers : Louis Vuitton

Now invited to the “Front Raw” of the fashion shows, fashion bloggers have become
purchasing influencers, sometimes as powerful as the editors of certain magazines. From
Tavi, to Bryan Boy who gave his name to a Marc Jacobs bag, to Michelle Phan, Garance
Dore, Todd Selby or Tommy Ton, some of them have made a golden place in the fashion
blogosphere. Designers pamper these online influencers and sometimes ask them to promote
their work. For example, Louis Vuitton inaugurated its new Gstaad boutique on the web last
January through the eyes of Swiss blogger Kristina Bazan.

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#4 SoLoMo or cross-channel in all its states : Tiffany&Co

The luxury industry is increasingly exploring SoLoMo (social, local, mobile) to deploy a
marketing operation across multiple channels. The objective: to tell a story in several chapters
on a founding theme of the brand. This is an effective strategy, when it is well mastered, and
puts the brand in charge of the lifestyle orchestra.

Successful examples include the “Amble with Louis Vuitton” application, which anchors
the brand around travel and provides a new service to Internet users. Another example is
the multi-channel campaign “What makes love true” launched in 2011 by Tiffany & Co.,
designed to run over time on the web as well as on an iPhone application. But not for nothing.
In September 2011, an email with the code of the famous American jeweler was sent to
selected targets inviting them to download a reissue of the song “the girl I Love” sung by Tony
Bennet on the occasion of the release of his latest album.

Those who received the email could read: “A limited number of free downloads available
until September 15th”. A perfect call to action operation that demonstrates that inbound
marketing is a strategic marketing approach adapted to the luxury market.

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How to develop a
digital strategy for
a luxury brand?
Over the years, the digital strategy of a luxury brand has become
the most important element when it comes to promoting its image
and that of its products internationally. However, this new factor
has not always been obvious, considering what defines a luxury
brand, i.e. the limited accessibility of its products due to their quality,
synonymous with excellence, and their high prices.

Faced with this new situation, what should luxury brand leaders do to
optimize their digital reach? Without having to change their strategies,
brands must first understand that managing the customer experience
of a brand is the most important thing today. The assimilation of the
impact of digital on the business by the companies’ management is
therefore essential for the digital strategy of a luxury brand to bear
fruit. There are several factors that can help to improve it:

Thinking strategy in terms of digital

The executive team must gain a deep understanding of how digital
technologies affect and drive the company’s business model. Designing
a digital strategy or, more precisely, redefining the business strategy
with digital in mind suggests shifting from a control strategy to a
logic of adaptation. Indeed, this new flexible approach allows the
brand to react to customers’ desires in record time.
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Deepen the knowledge of the consumer thanks to data.

The question, then, is how can companies leverage massive data to better understand
their customers? So that they can then apply these insights across the entire supply
chain to create even more personalized customer experiences. To do this, several digital
tools can be used to analyze and sort through this megadata. They can, for example,
reveal to brands how people perceive their products on a particular social network. A
company with data analytics expertise can initiate countermeasures, if necessary, in
case of service failure, and identify opportunities to delight customers, through digital
or physical offers. This expertise is becoming more and more important in the digital
strategy of a luxury brand.

Optimize the customer experience by developing digital products

and services

Advertising management teams need

to understand how digital products
and services can enhance business
value and customer experience.
Through brand content to build
brand image but also through unique
offerings that adapt to the customer.
A symptomatic example is Disney’s
use of digital technology to improve
its offers in real time. The firm recently

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equipped visitors to its theme parks with a wristband that offers the wearer a variety of
personalized experiences: greeting the wearer by name, connecting Disney PhotoPass images
to your account or charging food and merchandise purchases to your hotel room.

This example applies perfectly to the digital strategy of a luxury brand. It requires thinking
about the multiple interactions that can improve the customer experience. For a luxury brand,
partnering with a technology player could be an interesting way to add a digital element to
their product and service offerings without building deep technological expertise in-house.
As an example, the collaboration between Hermes and Apple shows the benefits of such a
partnership, that of a company that thinks beyond its industry, exploiting the skills of other
sectors, thus creating added value to its image. Similarly, for technology companies, such
partnerships can be an excellent opportunity to improve their products with the aura of a
luxury brand.

Create unique and personalized customer interactions

The marketing manager’s task is to take advantage of new technologies in order to develop
the brand’s image online, but also to improve traditional advertising campaigns through more
precise targeting. This suggests not to systematically target consumer segments, but to create
unique offers for each of his customers. To do this, the marketing manager can use Customer
Relationship Management (CRM) data to personalize the online experience of the Internet
user and make him feel unique, in the same way that a customer can interact in a physical
store. The detailed understanding of the customer’s values, preferences and behaviors allows
to better anticipate their needs and thus to engage in personalized interactions with them.

The management team must orchestrate seamless customer experiences across all channels,
initially training each employee to deliver a consistent experience. The customer, at every
touchpoint, must receive comparable levels of service. To achieve this, the management team
must find ways to ensure close collaboration between the various functions of the company,
from product development to customer service. For example, by optimizing the exchange, in a
physical store, of a product purchased online, or by offering an augmented reality application
to try on the product, as on the Alain Afflelou e-commerce site.

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Partnerships: a new essential element in the digital strategy of luxury

brands

Luxury brand leaders must open up their fields of action, developing new collaborations with
companies that can optimize their visibility. It is therefore essential to have a clear partnership
strategy and to actively manage customer relationships with a wide range of online players,
such as Google, Facebook and Instagram. A concrete example on which the digital strategy of
a luxury brand can take a cue is the digital ecosystem created by Nike, around personalized
products. By cooperating with digital players such as the music streaming platform, Spotify,
the company can therefore interact with consumers both online and offline.

Brand content, or how to offer personalized content

The proven objective of brands when they propose this type of content is to reach the
individual as a person and not as a consumer to whom one would like to sell a product. The
paradox is that consumers know exactly what the commercial approach behind these offers
is, but despite everything, it helps to provoke a carefree feeling of adhesion to the brand
and therefore to a way of life. The person who then buys a product is taken by a feeling of
valorization, of connivance with the luxurious entity. The consumption of luxury does not
only consist in buying a product, but is a state of mind, a cultural experience.

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Constantly optimize your company’s

infrastructure

The CEO must ensure that the company has the

capabilities to scale quickly when a digital experience
drives its economy. This job must be done by the CEO.
He or she must constantly question the organization of
the business so that it can be optimized: are we collecting
and using accurate, actionable data that can provide real-

time consumer insights? Do we have all the data and IT infrastructure needed to manage our
supply chain and inventory in real time? What level of automation is right for us today and
in five years? All of these questions show that a luxury brand’s digital strategy should not
be static, but constantly evolving. Leveraging new digital capabilities is therefore crucial to
ensure that the company is always well positioned in this extremely competitive sector.

The digital strategy of a luxury brand: a matter of life and death ?

Thinking about the digital strategy of a luxury brand in an efficient way, allows to better
understand the new consumption modes of the customers and to improve the experience
and the interactions of the consumer with the brand according to them. Taking into account
the active evolution of digital technology to effectively respond to customer expectations by
offering new experiences has become an essential aspect of a company’s strategy and today
even conditions the success or not of a luxury brand.

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Conclusion
What we can witness is the increasing digital focus and
digitization of luxury brands. As we have seen, this
requires investment in technology in order to benefit
from the value AI and personalization can bring. Just as
significant should be the investment in content through
which to attract and respond to customers and their
desires around luxury

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