Europe is a mega-market for luxury goods, playing host to many online shoppers, with customers gravitating to buy more.
The continent is “one of the fastest-growing markets in all the verticals we support,” Jason Nyhus, VP of Marketing Strategy and Demand Generation at Digital River, tells MPD CEO Karen Webster.
Digital River’s latest data shows that there are 264 million shoppers in Europe alone, which Nyhus remarks is “a tremendously large and growing opportunity.” Beyond that, he shares, 15 percent of the global population travels internationally every year, spending nearly a trillion dollars annually. Last year, 10 percent of the European Union’s GDP came from overseas visitors, with tourists spending more than $530 billion across the continent.
“No matter where you live,” Nyhus tells Webster, “there is a brand you have a direct connection to and you’ll do crazy things like travel halfway around the world to interact with them.”
Yet, as Webster observes, many brands outside the U.S. — in Europe and elsewhere — remain resistant to embrace digital commerce.
She shares the experience of traveling abroad, stumbling on a branded boutique, falling in love with it …but then not being able to purchase from that brand after returning home. That opportunity is effectively “low-hanging fruit” that brands would benefit from accommodating.
Why aren’t more brands going direct? It’s a simple question, says Nyhus, but the answer is a complex one with many facets, and “it really depends on the brand.”
In its conversations with brands, he shares, Digital River sees channel conflicts “still to this day being a major blocker as to how brands think on whether they go direct or not.”
“They have a huge reliance on their brick-and-mortar stores and they rely on some marketplaces to carry the load for them,” said Nyhus. “That’s where the majority of their revenues are made today and they’re not thinking ahead about the strategic value of a direct strategy and the money to be made in the future.”
It’s also about the customer experience, Webster points out. As digital as the consumer has become, their expectation is that their favorite brand has an online presence — but in some cases you can look at fashion items on websites, but you can’t purchase from them. And that’s frustrating for the consumer.
“Part of the challenge for these brands is they want to deliver a world-class experience that they deliver in their showrooms,” Nyhus explains, “but they can’t replicate that in their online shopping environment.”
It may not be channel conflict that is the problem, but rather that they “don’t have the chops” to create an online experience on par and aligned with where their brand strategies are.
One of the other challenges that Digital River observes is that the customers of some brands — although the brands themselves do have an eCommerce presence in the major markets — are scattered throughout the world.
“We both know that when you travel the globe, any brand you have affinity with needs to become a global brand,” Nyhus tells Webster. “Some of the big brands who have big, expensive online presences in the U.K. and Germany, for example, aren’t able to launch that same experience into other countries where their customers are.”
“It could be channel conflict,” he posits, “it could be technology that doesn’t scale; in other cases, brands don’t see it as strategic and are stuck in old thinking.”
Digital River is working to help retailers and brands — independently and together — resolve this cross-border optimization problem, with a number of approaches.
“Depending on who you are as a brand … you can take an extremely channel-centric strategy that’s incredibly limiting and risky — and plenty of these premium fashion brands do that today,” said Nyhus.
He describes the phenomenon of walking into a store overseas, drawn there by a specific brand, and — in conversation with the merchant — getting pushed to a different product.
“The moral of that story [for brands] is: They’re not loyal to your brand,” Nyhus said. “Even though you’re sending all your traffic to these retail locations, they’re not actually pushing your products as you hope.”
Nyhus explains that Digital River has a capability called “where to buy,” and he said that “some of the largest brands in the world” use it, sending all of their eCommerce business through retailers. He cites a recent statistic that 60 percent of all the transactions that are sent to a retailer site are for a competitor product or an unrelated product.
“If these brands knew their website was a demand generation vehicle for their competitors, they would absolutely change their strategy,” Nyhus attests. “But it’s not something as obvious as you think. The fact of the matter is when you drive them to an Amazon or other retail site, their goal is to get them to buy something, and they have no loyalty to your brand.”
To make a more persuasive case to the brand, explains Nyhus, Digital River recommends — after using the “where to buy” capability to prove that approximately 60-percent case — evolving from a channel-centric approach into a channel-neutral one.
“A brand will always use referential pricing and take advantage of the market promotions and discounts,” he observes, “but you’re not going to differentiate on price. We tell them, ‘you’re going to be the place where people who want to interact with your brand have the ability to do so, and you have the ability to take the money from the consumer when they’re ready to do so. But you differentiate based on services and experience and things that you’re proud of [about] your brand.’”
“Rather than leading your customers to retail,” Nyhus continues, “you’re taking that direct business that you’ve got, probably making a higher margin on it, and using that margin to feed back into creating a world-class experience that is on-brand.”
Webster forwards the notion that another way to differentiate is through product selection, and Nyhus acknowledges that Digital River sees full catalog as one of the main reasons brands are going direct.
“They have all of the products,” he says, “and retail will only carry a handful of those.”
Additionally, Digital River sees an opportunity to create exclusives or bundles, or early access, or VIP programs, or private stores that all accentuate the brand’s ability to have a special relationship with consumers.
“That’s something a retail outlet can never provide for customers the way that the brand can,” notes Nyhus.
Ultimately, the ability for brands to “have their cake and eat it too,” as it were, is based on what Nyhus describes as “a journey.”
“All of these brands need to discover who they are and who they want to compete with, who they want to partner with,” he concludes. “We have a tight relationship with our clients that allows us to navigate that together.”