- The luxury market has been experiencing many changes and is expected to grow ~5-12% in 2023.
- Luxury has seen a shift online, an increased focus on technology to understand customers, and discrepancies in spending based on geographies.
- To stay ahead in the changing landscape, luxury brands must embrace digital transformation by adopting retail intelligence solutions.
- By adopting this technology, luxury retailers can stay attuned to their customers and competitive market, benchmark effectively, and drive more customer-centric strategies.
- Luxury brands that leverage insights provided by retail intelligence will not only survive evolving market dynamics, but also embrace them as opportunities for growth.
Introduction: The Future of Luxury
The current economic climate has proven challenging for retailers across the board – well, almost. Despite uncertain economic conditions, the global luxury goods market has been on an exhilarating trajectory. Bain & Co. project that the market will grow another 5-12% in 2023, following a record year in 2022.
A few notable trends in the luxury industry for 2023 include:
- A movement online – By 2030, online should be the leading channel for luxury sales with ~32-34% market share.
- Geographical discrepancies – US spending on luxury is slowing, while EU spending is rising.
- Reliance on AI and technology – Luxury brands increasingly utilize technology to create consistent omnichannel experiences and better understand their customers.
Although many brands have successfully navigated the evolving luxury space, this does not mean they can rest on their laurels; they must keep a finger on the pulse of the changing market to remain competitive and customer-centric.
Embracing Digital Transformation in Luxury
Luxury brands have stayed afloat and driven success by pivoting their focus back to the “ultra-luxury” consumer and away from Gen Z, who are more affected by inflation. By paying attention to their customers through data analysis, luxury brands were able to identify this transition. Moreover, successful luxury brands have shifted away from the traditional in-store model and become more omnichannel-focused. In-person sales allow luxury brands to offer highly personalized experiences, which their customers crave. However, to succeed in the ever-changing market, luxury brands must embrace digital technology to drive sales and engage with their ultra-luxury target customers via online channels too.
The journey towards reinvention requires the adoption of a retail intelligence solution. By investing in this advanced technology, luxury brands stay attuned to market shifts, understand their competitive landscape, and keep their customers at the heart of every decision. The brands that make these strategic changes will be able to adapt to the market and prosper.
The Impact of Retail Intelligence on Luxury Brands’ Success
To remain on the cutting edge, brands must synchronize their online and in-store DTC, wholesale, and marketplace channels to reflect what is happening in the market. This process involves utilizing retail intelligence to thoroughly benchmark their brand against competitors and partners to align pricing and positioning strategies with market demands, ensuring their assortments are customer-centric and resonate with affluent customers. However, staying vigilant about broader market conditions is also crucial. This focus on ultra-luxury should be balanced by a readiness to re-target Gen Z when their purchasing power rebounds, as Gen Z and Millennials are expected to account for as much as 70% of global purchases by 2025.
The core objective revolves around staying relevant in the competitive retail industry. By investing in retail intelligence software for benchmarking assortment, pricing, and trends, luxury brands can seamlessly deliver personalized shopping experiences across various channels. This adaptability ensures sustained relevance while appealing to the evolving preferences of target customer segments.
Use Cases for Retail Intelligence in Luxury
To continue appealing to ultra-luxury customers with online sales becoming more regular in the luxury space, brands need to be aware of their positioning in the market relative to competitors and how their customers interact with similar brands. Retail intelligence software provides a window into these insights by providing data needed for effective benchmarking. These insights come from:
1. Omnichannel Price Benchmarking – Brands can quickly evaluate competitor pricing against their core products across multiple regions to understand how their brand is positioned globally to identify the optimal price. By monitoring competitor, DTC, and wholesale prices, luxury brands ensure omnichannel alignment and customer-centric pricing.
2. Retail Trends & Competitor Benchmarking – In such a competitive industry, luxury brands must keep an eye on evolving industry trends and competitors. Retail intelligence allows brands to monitor key products by quickly matching exact or similar items at a competitor retailer across multiple markets to understand how their assortments compare. This process ensures assortments are competitive and relevant to customers in each geographical location.
3. Wholesale Partner & Marketplace Tracking and Analysis – Luxury brands can monitor the same products across multiple retailer websites to uncover whitespace opportunities for additional partnerships or to enhance the value of current partnerships. For example, a luxury brand might monitor marketplace or wholesale partners' brand offering or assortment mix to better pitch their own product. Therefore, luxury brands can increase business with key accounts and ultimately expand market share in newer markets.
4. Product Positioning – Luxury retailers utilize retail intelligence to establish how their assortments differ across marketplaces. Teams can understand how their products are positioned in a single market or multiple territories by matching the same product across several retailers to ensure these align with their positioning strategies.
Retail Intelligence in Action
Retailers who implement this type of software can make many integral adjustments to their business strategies. Using EDITED’s AI-driven merchandising experience platform, one fashion forward retailer was able to access quick insights to make regional price adjustments on certain brands:
“Without access to EDITED, there is no way for us to see what those regional price differences are fast enough to make the right price changes quickly. The regional teams and promo teams have been able to pull this data when it’s needed, meaning they can action changes immediately rather than waiting for a manual review to be complete.”
With geographical discrepancy a significant trend in luxury retail, understanding regional differences is crucial to making customer-centric decisions.
The luxury market's ability to flourish amid economic uncertainties is a testament to its adaptability and innovation. Luxury brands that thrive are the ones that understand the value of retail intelligence in their journey towards customer-centricity in the evolving landscape. By leveraging the insights provided by retail intelligence, luxury brands survive market dynamics and embrace them as opportunities for growth and reinvention. In this transformative era, retail intelligence isn't just a tool; it's a crucial method enabling luxury brands to pivot and reinvent themselves during this opportunistic period.