Luxury Online

RAPAPORT… To some, the idea of online luxury retailing might seem like an oxymoron. How can a technology-driven, nonhuman interaction give a customer the same thrill as an in-store, personal interaction? This thorny question has historically kept many luxury retailers and luxury brands from embracing a high-end online customer base.

A recent report from Forrester Research, Inc. titled “Online Shopping Habits Of The Price-Insensitive” states: “Somewhere along the way from 1998, online retailers thought there was a substantial business to come from bottom-feeding. Retailers and the media tend to focus their attention on the typical online shopper, who is generally price-sensitive and motivated by promotions. To that end, online retailers have often focused on competitive pricing and promotions to drive sales. However, selling to the lowest common denominator overlooks the value that can be derived from more lucrative consumers, who are generally price-insensitive.”

More and more, luxury consumers who traditionally sought their buying experiences in exclusive brick-and-mortar boutiques are turning to online retailers — and brick-and-mortar stores with an online presence. Their reasons are convenience, 24/7 availability and unparalleled selection; essentially, many of the same reasons these customers once turned to more traditional outlets.

WHAT IS LUXURY?

In order to better understand how an online luxury customer shops, it’s useful to come up with a clear definition of what a consumer and a retailer mean when referring to a luxury product or a luxury experience. In a Brandchannel.com paper titled “Redefining the Luxury Concept,” business consultant Uche Okonkwo states: “The luxury sector targets its products and services at consumers on the top end of the wealth spectrum. These self-selected elite are price-insensitive and choose to spend their time and money on clothes and accessories that are plainly opulence rather than necessities. For these reasons, luxury and prestige brands have for centuries commanded an unwavering and often illogical customer loyalty.”

This kind of customer loyalty has meant, in recent years, that not only will a customer maintain allegiance to a store or brand that changes its physical location, but that this customer is likely to also follow said store or brand online.

If a brand is going to court and serve an online luxury customer, however, it will have to provide customers with a high-end shopping experience, virtually. And that means providing a great deal of customer service. Greg Furman, founder and chairman of the Luxury Marketing Council, believes strong customer service is the backbone to the luxury experience, both offline and on.

“Luxury shopping is about the complete attentiveness of the salesperson to the person doing the buying,” Furman says. “I would add that socially and businesswise, there’s some knowledge of the customer’s buying habits and the intent to have a long-term relationship.”

WHO IS THE LUXURY CONSUMER?

Fortunately, providing an unparalleled level of service online has its rewards. In fact, some studies indicate that luxury customers are more likely than practically every other segment of the population to shop online. Another Brandchannel.com paper by Okonkwo, titled “Can the Luxury Fashion Brand Store Atmosphere be Transferred to the Internet?” states: “Recent reports indicate that the wealthy are almost all online and are pleased with making online purchases. In most developed economies, internet penetration is as high as 95 percent and the ratio of wealthy people who have bought products worth above $250 online versus the rest of the population is 3 to 1.”

This research is echoed by the Forrester report. The study indicates that “Luxury buyers, in fact, are 36 percent more likely to be comfortable with online transactions involving their credit cards and are 28 percent more likely to be technology optimists than average online shoppers.”

DESIGNING WEBSITES FOR A LUXURY CUSTOMER

In order to capitalize on luxury customers’ price-insensitive natures, etailers need to consider which elements of a traditional luxury shopping experience can be translated to web design. Naturally, luxury consumers expect a higher level of personalized care, and also the element of exclusivity they receive from brick-and-mortar stores.

One way to do this is through elegant, efficient site design. Steve Chesler, owner of Poppy Bagel Web Design, has designed sites for a number of luxury brands, including American Express. He says a site needs to be both beautiful and simple. “An abundance of rich imagery can induce that essence of luxury,” explains Chesler. “These visuals should dominate the layout — trigger and dazzle the senses in the same way a customer would be dazzled upon entering the store. Designers and developers should take advantage of the predominance of high-speed connections for web users to infuse large, high-quality work into the virtual luxury store experience.”

While designing a gorgeous site is key, etailers should not overlook, however, the need for ease of navigation. “The process of shopping and navigating through the store,” says Chesler, “should be as simple and carefree a process as an in-store salesperson escorting the luxury customer from greeting to experiencing the product to buying. There should be a marriage between visual design and site functionality.”

Furman agrees that a site must be simple in design, and adds that it’s especially important in the luxury market to provide an easy, immediate way to contact a live person. “A lot of the smartest online luxury stores have offered the consumers the ability to connect with customer service immediately, which allows for an element of human support,” he says. Moreover, he goes on to say, for a luxury store to successfully present itself, “the product and the service should be shown in a certain way, considering the artistic and aesthetic.” Furman also stresses that “customer progression through the website must be extremely well thought-out.”

One particularly interesting aspect to the online luxury consumer — aside from the amount he can potentially spend — is what he is likely to buy. Particularly notable for the jewelry industry is that this customer more than most buys gifts online. According to Forrester, “Buying and sending gifts through the internet consumes a significant portion of online spending for every consumer segment, but this is particularly so among the most profligate web shoppers.” The report goes on to state that “Convenience-driven and luxury shoppers are 40 percent and 140 percent more likely, respectively, to buy gifts online than the average online shopper.”

To capitalize on this fact, Forrester concludes, “retailers should add clear links from their home pages to features like suggested gifts, market to the recipients of gifts for whom they have mailing and email addresses and consider adding features such as triggered gift or event reminders. In the case of the latter, it may be valuable to consider a relationship with one of the major portals or event reminder sites to broaden the reach of the suggested products.”

EASE, CONVENIENCE AND IMMEDIACY

The need for simple and efficient design is, perhaps, the largest hurdle facing new etailers. But it’s worth noting that, even with the best web design, there are drawbacks, which can prevent a customer from clicking through to a sale. Luxury customers who come across hurdles in their online purchasing will be highly likely to abort a potential online sale and head to a brick-and-mortar store. According to Forrester: “Providing convenience is really the key. While price is often a driver for many consumers, luxury and convenience-driven shoppers are people for whom the ability to save time and avoid hassle is paramount. These consumers are more than 20 percent more likely to say they are time-pressed, compared with the average online shopper. As a result, they are also more likely to research online, but complete a transaction offline. What’s the link? Consumers report that the number one reason for buying products offline is to receive their goods immediately.”

This is one of the reasons many online retailers make their goods available through their corresponding brick-and-mortar shops. An online store that manages to overcome this final obstacle will find that the potential for profit in the luxury sector is incalculable.

Profiles of Convenience-Driven and Luxury Buyers

Base: U.S. online consumers Source: Forrester’s Consumer Technographics® 2005 North American Benchmark Study; Forrester Research, Inc.