The Luxury Disconnect

With O2O quickly proving to be the future — if not already the present — of retail, why are so many luxury brands lagging behind in blending their own online and in-store shopping experiences?

Doesn’t seem classy enough, maybe?

Doubtful. The effectiveness of omnichannel commerce in general exists separately from any brand’s particular image, be it high-end, discount or anywhere in between. One of the many benefits of an online-to-offline operation, in fact, is that a retailer can (if it so chooses) put its own stamp on every last detail, using O2O to further enmesh itself with its targeted consumers and their expectations of the company, rather then distancing itself from them.

So, concerns regarding a “brand fit,” then, cannot likely be the excuse for the luxury retailers that are, according to a recent study from customer engagement specialist ContactLab (titled “Digital and Physical Integration: Luxury Retail’s Holy Grail”), failing to connect their in-store and online offerings in large numbers — particularly in comparison to other areas of retail.

As InternetRetailing points out, although the online channel is, at present, a comparatively small one for luxury brands, it’s only rising — and quickly. It is estimated to account for about 40 percent of growth in the space within the next four years.

Luxury consumers, though, are already ahead of the pace in that respect, with the outlet highlighting ContactLab’s finding that those who presently shop both online and offline spend approximately 50 percent more than their peers who only shop in-store. Customers of luxury brands clearly want a blended O2O experience from those retailers; it’s the brands themselves that, for the most part, are currently coming up short in fulfilling that need.

In conducting their study (which was done in partnership with Exane BNP Paribas), ContactLab analysts carried out more than 60 store visits to locations of top luxury brands in New York City, measuring their omnichannel offerings according to 21 parameters. The three key areas of focus were in-store technology, the in-store experience for online consumers and how digital offerings were leveraged to maximize the opportunity of in-person shoppers.

InternetRetailing shares that the last area (leveraging digital for in-store traffic) was found in the study to be a major missed opportunity for many luxury retailers. Those aforementioned “ahead-of-the-curve” consumers — who already spend 50 percent more across online and offline channels than those who only shop offline — are, perhaps unsurprisingly, less inclined to make a return visit to a brick-and-mortar luxury retail location should they find during a previous one that the store does not meet them halfway (or more), as it were, in terms of on-location digital engagement.

While the study found that there are a few luxury retailers that do effectively provide O2O offerings (such as order online and pick up in-store), including Ralph Lauren, Bergdorf Goodman and Burberry — the latter of whose online sales, InternetRetailing notes, are currently completed with in-store pickup at a rate of 15 percent — the same cannot be said for 70 percent of the brands that ContactLab examined.

Massimo Fubini, CEO of ContactLab, addressed the disconnect in a statement shared by InternetRetailing, observing: “It is surprising to see that not many luxury brands are optimizing the relationships they can have with their customers. Luxury brands are faced with competition with online retailers and so need to up their game in order to take advantage of the online sphere.”

Fourteen of the brands in ContactLab’s study have integrated a scant number of digital offerings into their in-store experiences or, in some cases, none at all — including basic elements, like Wi-Fi.

“Modern consumers cannot be categorized as online or offline, as they expect multi-channels as a paradigm to engage with a brand,” continued Fubini. “Brands need to not run their online and in-store business activity as separate but need to bridge the gap and offer a seamless shopping experience.”

While other luxury brands not mentioned in the ContactLab study are slowly getting on board with O2O — such as Kate Spade, which recently announced plans to offer buy online/pick up in-store capabilities — they are largely moving at a pace that doesn’t exactly seem in step with the concept of “high-end.”

At the end of the day, any level of retailer that isn’t making basic strides to facilitate O2O commerce stands to lose money, and that doesn’t seem very classy at all.