Commodities today are defined to a greater extent by their abstract value rather than their utility. This situation is characterized best by the luxury goods industry that has always catered to a largely predictable audience in the past. This, however, is no longer the case, as millennials have now come to disrupt this smooth cycle and present in new challenges to be addressed.
Luxury goods market was valued at almost $250 billion in 2015, accounting for almost a quarter of the total retail market. With the retail industry slated to grow by 4 – 6% in the next two years, luxury retail is set to become a major player. Within this sector, online retail is seen as an important component, forming a deceptively small 5% of the luxury retail market now, though it is projected to increase to as much as 18% in the next decade. Of this share, fashion is seen to dominate in terms of luxury items bought (accessories, beauty products etc.) These changes can be credited to the rise of new technologies and solutions to persisting problems that plagues the industry.Customers too have undergone a significant evolution – lifestyle transformation – which in its simplest essence ensures products and services instead of being pushed to the consumer are now governed and dictated by the consumer. eCommerece, FoodTech and even FinTech are illustrious examples of the said transformation. Consequently, there have been significant changes over the past few years in terms of shopping patterns. Traditionally, the web was used simply to canvas for options which would later be bought in person at the store. These roles have been reversed in today’s world as the store becomes the testing ground for the product which will later be bought online. This migration of ‘touch and feel’ to the shopping experience prompts brands to focus on what the customer wants rather than where the customer is.
Thus, social media is now a major indicator of both customer and brand satisfaction. These new developments however, raise certain challenges for brands and the customers they serve. One of the major concerns is targeted marketing on a global scale for brands that wish to increase their presence in the industry. This involves making the product accessible over great geographical distances. E-commerce represents the most viable tool to achieve this, though many brands are usually forced into utilizing it rather than doing so voluntarily.
A change in customer mindset also prompts challenges for brands. Customers now demand personalized products that in turn raise the cost of production, a consequence that customers wish brands to mitigate. This issue of cost leads to the flourishing counterfeit trade that benefits customers in the present but affects the brand loyalty and image in the long run due to a lack of quality checks.
Addressing these challenges, hence, becomes the primary focus of the industry. A solution that has steadily gained traction is digitization. The move towards becoming ‘GloTal’ (global and digital) is one of the major trends today and customers expect brands to utilize digital media effectively in order to appeal to them. Digital solutions hence must cater to the following needs:
For the seller
For the consumer
Know product information- heritage, production, availability
Supply chain effectiveness
Virtual reality any time, any place
In store & at home user experience
Personalized product and experience
Feedback and review mechanism
Some of the solutions that can be used to meet these needs are listed below:
- Convenience is the ultimate luxury. Hence, e-commerce must be able to effectively convey the product’s content, restrict itself to only potential customers and provide both customer and industry reviews.
- Digital media must be able to integrate customer data from multiple media and converge it in order to deliver a uniquely optimised product to the customer.
- Augmented reality can be used in retails stores with mannequins displaying people of all body types.
- Based on previous data, experience shopping can be introduced where customers are automatically guided to the product they wish to purchase as soon as they enter the store.
- One click checkout options such as PayPal and AliPay.
- Blockchain technology can be used to curb counterfeiting by creating logs and a unique identity for every sales transaction.
The fashion retail sector is well and truly on its way towards its goal of being ‘glotal’, as these solutions indicate. Thus, digital solutions are the way forward for the retail industry as a whole as it works towards increasing profit margins while also providing effective services to customers by steadily integrating technological advancements.