This year’s Altagamma-McKinsey Digital Luxury Experience analysis of the omnichannel decision journeys of +/– 7,000 luxury shoppers across eight geographies, four product categories, and three pricepoints.
The merger of Yoox and Net-a-porter, the increased visibility of platforms like Farfetch or Gilt, the recent conversion to e-shops of emblematic luxury brands … E-commerce is one of the hottest topics of Spring/Summer 2015 for luxury brands. Indeed luxury sales realized online have accelerated in 2014 reaching 14€bn—a +50% from 2013. They now represent 6% of the global luxury market for personal goods. And it is likely that percentage will continue to rise.
But as big as the luxury e-commerce opportunity is, it remains only the tip of the digital iceberg. A full assessment of the transformative effect of digital technologies on luxury consumers’ attitudes and behaviors requires looking at the sum total of these consumers’ digital activities—their texting, Instagramming, Facebooking, YouTubing, and web surfing. Our latest research shows that three out of four luxury purchases, even if they still take place in stores, are influenced by what consumers see, do and hear online. Digital, in other words, is now the engine of the luxury shopping experience.
The question is no longer if and when luxury brands should embrace the digital opportunity, but how they should go about doing it. Our findings, which are based on the ongoing work of the Altagamma-McKinsey Digital Luxury Experience observatory, reveal that the answer lies in understanding the complex and lengthy journeys that today’s screen-staring, button- clicking luxury consumers embark upon when considering and making purchases.
Embracing this new digital reality calls for a complete shift of luxury brands’ approach to engaging with consumers. This will require luxury brands to ultimately adjust many of their models of how they operate—their vision, governance, talents, culture, resources and tools. In this report we outline our latest findings on how digital luxury consumers have become and discuss the ways luxury brands can get wired to fully capture the enormity of the digital opportunity.
This year’s edition of Altagamma-McKinsey Digital Luxury Experience observatory analyzed the omnichannel decision journeys of about 7,000 luxury shoppers across 8 geographies, 4 products categories and 3 pricepoints.
The paradox of digital luxury experience
Not only are wealthy consumers equipped with mobile devices, they are very well equipped. Nearly all luxury buyers have at least one smartphone—globally, the figure is 95 percent and in most mature countries, it’s 100 percent. These figures reveal a much higher rate of ownership than that of the general population, where an average of 60 percent of US adults have a smartphone. But beyond that, a large majority of luxury consumers (75 percent) juggle multiple mobile devices, whereas only 33 percent of Americans own more than one.
This is a critical insight because smartphones are the first truly personal devices—much more so than our so-called personal computers. Smartphone, and sometimes tablets, are carried with us wherever we go and as a result, are driving the rapid development of new consumer behavior patterns, such as the “always on, anytime, anywhere, but only when and where I want it” attitude.
Luxury consumers are also highly social, in digital sense. Some 80 percent of these shoppers use social media on a monthly basis, whether it’s Instagram, We-Chat, Facebook or Twitter. Half are weekly users and more than 25 percent are daily social media users. And they’re not passive users. Two-thirds generate social media content—photographs, videos, product reviews or re-postings of content created by others—at least once a month. Fifteen percent do it daily.
In this way, luxury consumers are amassing more and more power relative to luxury brands. For each image that luxury brands post on their official Instagram account, for instance, there are on average 10,000 more that consumers have posted containing the brand’s hashtag. This raises the inevitable question of who is creating the messages and information that define a brand’s identity—the brand itself or its consumers.
This story of digital transformation is not just one of Millenials or of China, because these findings hold true across countries and generations. Generation Y luxury consumers and Baby Boomers own similar amounts of mobile devices on average and spend approximately the same amount of time on the Internet, around 15 hours per week—in addition to any work-related usage. The only little generational difference we see is in social media, where 87 percent of Millennials use it monthly vs. 71 percent of Baby Boomers.
The results of our research paint a very clear picture of luxury consumers: They are highly digital, mobile and social, and because of this have extremely high expectations for what they want in a shopping experience. More so than most, luxury shoppers want a seamless, digitally enabled, multi-channel experience—one that unfortunately most luxury players are not yet ready to deliver. Luxury players have historically been very cautious about digital and e-commerce. The Internet and digital more broadly have been indeed once perceived by the luxury industry as a loss of control over its brand image and storytelling—combined with the challenge of tier distantiation towards customers. E-commerce has even more been seen as a threat: with CtoC platforms favoring the development of counterfeits and grey markets and with pure players becoming a conflicting channel with the brands’ own stores.
In addition, new players from adjacent industries like Amazon, T-Mall, Best Buy or even Tesla are now setting the bar in terms of digital and omnichannel experiences. And it keeps rising…
This has created a gap between what shoppers are looking for and what brands are delivering. The good news is that most brands are growing increasingly aware of the need to embrace digital and bridge this divide.