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The five steps to help the luxury market recover from Covid-19

The five steps to help the luxury market recover from Covid-19 45

The five steps to help the luxury market recover from Covid-19 46

By Kevin O’Farrell, Associate Vice President at Analytic Partners

Amid the turmoil of the Covid-19 pandemic, while some business sectors thrived, others experienced significant pressures – and luxury products and services invariably fell into the second camp.

However, the luxury market has ultimately proved remarkably resilient. Just as the sector quickly bounced back following the 2009 recession, we are once again seeing personal luxury shoppers return – whether than be shopping digitally or in the real world in physical stores.

But, depending on what region you’re operating in, shopper behaviour will vary based on local market dynamics and specific country approaches.  For example, China was one of the first countries in lockdown with a massive fall in marketing and advertising spend in 2019 and early 2020. However, the country has since returned to full, if not even stronger, economic force.

Our recent report gathered insights and trends on the personal luxury goods industry, and has found among others that the continued rise of the second-hand market and sustainability are crucial to its recovery, as well as investing in brand marketing. Investing in brand not only allows companies to build their inspirational equity but also entice consumers to visit stores as they reopen and drive

long-term growth.

We’ve determined five key steps that will help luxury brands preserve their resilience and be best prepared for any unknown future based on our ROI Genome – this marketing intelligence collects and analyses data from our global clients of the past 20 years. That way we can help companies better understand how factors such as brand health, country dynamics and competitive landscape impact ROI and performance.

  1. Global opportunities

Where once Europe and the Americas ruled, now Asia is the top region for luxury with 35% of sales in 2020. It is expected to reach 25% of worldwide personal luxury goods’ sales by 2025.

Benefiting from its emerging middle-class looking for entry-level luxury products and improved online distribution, the Chinese market will see increased local purchasing – as opposed to tourist-driven shopping.

Brands looking to expand or invest further in China should use measurement frameworks to capture the branding media inside and outside of the large platforms like TMall – because many purchases are from social platforms that can’t be tracked with last click attribution reporting.

  1. Customer-centricity

New generations of luxury shoppers will change the shopping landscape. By 2025, Generation Y (born between 1980 and 1995) and Generation Z (born after 1995) will be the biggest buyers of luxury, representing over two thirds of global purchases. As these shoppers want a more personalised experience luxury brands must move from a product-centric model to a more customer-centric one.

We have witnessed the rise of the influencer but before engaging in influencer marketing, luxury players need to set clear objectives and KPIs to avoid damage to their creative control and brand perception. Given the relatively short duration of influence, companies should manage their influencer portfolio in the same way asset managers manage their financial portfolios.

The ROI Genome shows that influencers tend to be more efficient than Celebrity PR, but less efficient than traditional PR; although Asian markets are an exception here. And not all impressions are created equal – brands must consider meaningful and relevant messages as well as reach.

  1. The omnichannel route

In the short term, restricted travel means companies have had to reinforce their local presence. Chanel and Dior are now selling exclusive products through their stores allowing them to collect immediate feedback on new products and adapt quickly to shoppers’ needs. Collecting brand experience feedback and customer relationship data are key to future growth.

Distribution is changing because of digitisation. The share of online sales channels for the established luxury brands is expected to exceed 30% by 2025 – digital channels have joined TV and OOH as essential touchpoints at the start of the customer journey. Luxury shoppers expect high standards of service in stores and must now maintain that quality in their digital interactions.

  1. Finding a purpose

Luxury brands need to invest in inspiration. Consumer journeys are becoming more complex, so brands need to be active across more touchpoints, especially social such as Instagram and WeChat. Luxury brands also need to be more responsible – CSR will be an essential requirement.

To be culturally credible, brands will have to meaningful contribute to affluent consumers’ lifestyles – while also driving positive change.

However, even the most authentic message can fail to cut through without an effective deploy­ment strategy. As behavioural targeting becomes more challenging for marketers in this world of cookie depreca­tion, brands should look at new ways to serve ads and connect with their prospects and customers.

  1. Technological transformation

Luxury brands have been slow to embrace digital but the shift to online shopping and emerging new digital-first luxury brands including Parachute, Shinola and Away, means they can’t delay any longer. Customised features such as virtual try-ons, private shows or personal shoppers can all improve the online experience.

Advanced analytics can generate competitive advantage and value and establishing an analytic framework such as Commercial Mix Analytics helps optimise marketing investments.

Finally, luxury companies need to collect fitted, agile data and develop analytic roadmaps with a test and learn approach to help identify where future growth may lie.

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