Speed up in the slowdown: capturing more luxury retail sales
In the ever-changing world of luxury retail, even established brands like Mulberry and Burberry face their fair share of challenges. Recent reports from The Retail Bulletin about Mulberry and Burberry's announcement highlight the current slowdown in luxury spending.
But we have the luxury of being able to do something about it (boom!).
There are still untapped opportunities to boost sales and make the most of existing traffic. So, let's dive into the challenges and ways to solve them to help retailers seize these opportunities and drive growth, even when consumers are cutting back on spending.
The particular challenges of luxury online retail
Luxury online retail is susceptible to economic slowdowns
As we've just mentioned...
As highlighted by Forbes, economic slowdowns greatly impact luxury online retail, with consumer behaviors shifting towards more conservative spending habits.
It happens.
Luxury brands are often influenced by the macroeconomic climate, which means their consumer demand can be directly affected by economic fluctuations.
Maintaining brand perception while driving eCommerce performance
According to a report by McKinsey & Company, luxury items constitute one of the fastest-growing segments in online retail, but achieving a balance between high-end brand image and eCommerce success can be a tightrope.
eCommerce sometimes needs promotions to boost traffic and conversions, but having too many promotions can make a luxury brand seem less valuable.
Replicating a luxury, personalized experience online is a challenge
The traditional luxury retail experience is about personalized attention, top-notch quality, and an immersive brand experience. But, you know, trying to bring that same level of experience to an online platform? It's not that easy.
According to Deloitte's report on Global Powers of Luxury Goods, translating the luxury retail experience to the digital realm is quite a challenge. Brands have to find that sweet spot between preserving the exclusive allure and using technology to create smooth and personalized online experiences.
What's happening in your luxury retail funnel?
Data suggests, 98% of your visitors won't buy on their first visit and 55% of website visitors leave your website within the first 15 seconds of their visit.
There are a lot of potential customers already visiting your site.
And to capture more sales during a slowdown, it's crucial to really understand what's going on at every stage of your luxury retail funnel. By getting a full picture of the customer journey, you can spot areas where you can improve and optimize your approach.
At RevLifter, we have our own version of the funnel - to put things into the right context:
Different offers can increase conversions or reduce abandonment (one coin, two sides) at specific funnel stages. The key is identifying your biggest gaps and opportunities by benchmarking against your own results or industry averages (IMRG can help there).
Reducing the brand and profit risks for luxury retail from offers and discounts
Overwhelming consumers with elaborate promotions, discounts, coupons, and loyalty rewards can weaken consumer loyalty, tarnish brand reputation, and suppress new revenue opportunities. Instead, retailers should adopt a streamlined, customer-centric approach. Many luxury brands turn to promotions and discounts to drive conversions in the current retail climate. However, this strategy can risk brand perception and profit margins.
To minimize these risks, luxury retailers can think about using targeted and qualified (or smart) promotions. These promotions can be tailored to the customer's purchases and preferences, making them feel special and maintaining the exclusivity of the brand.
How can you make offers smart?
Here are a few examples...
Where they've come from
Target promotions based on the acquisition channel. You might want to offer something exclusive to your email recipients. Or optimize the traffic from PPC or paid social with the right incentive. These are segments for which you can create specific campaigns.
New vs. returning
A classic that everyone tries. Offer new customers something to welcome them - usually 10% off. It's tried and tested. But you might get more cut-through with something different. And do you want to neglect your returning customers? Probably not.
Funnel stage
Context is king. Some people are just browsing; some are building a basket of their favorite things. Some are ready to spend. Understanding the nuances of visitors' goals in each stage means you can formulate much more relevant offers to achieve the results you want.
Results are not just skin-deep
It's not just about conversions from the offers. Any intervention you're implementing should be helping to achieve your business goals.
You need to look across your full funnel. What impact are these offers having? Are you getting more sales but giving up margin? What impact do they have on customer lifetime value (LTV)? What about acquisition? What is the ROI of each offer or the whole offer program?
Optimize offers with testing
Implementing promotions is only the start. The only way to maximize the results from your offers is by continually and systematically testing.
Devise a well-structured optimization plan, make sure you're focused on insights and execute it. The only way to truly know if something will improve your results the way you want is to try it out. But make sure you understand what you're trying to achieve.
