The way people shop has changed. Technology has made it such that you can window-shop swiping through items on your devices and make a purchase from the comfort of your home.
According to statistics, global retail e-commerce sales will increase up to $4.13 trillion in 2020 and by 2040 about 95 percent of purchases will be done through e-commerce. This might be true for simple cheaper retail items, but luxury items seem to be a little far behind. It’s almost as if high-end products were exclusively meant to be sold in stores and not on a website. Until now.
This belief was built on the assumption that wealthy consumers would not be disposed to paying premium rates for high-end products over the internet and such high-value transactions are best done in person. Some luxury brands were of the opinion that selling high-ticket items on multi-brand retail websites would go contrary to the brand image of premium products in the mind of their affluent customers. At this point in time of the retail climate, I find it best for fashion firms to stay on-brand.
While some were concerned that shoppers of luxury brands would not be able to get personalized service which is impossible to replicate digitally. However, these days, the rules have changed and those old assumptions have been challenged time and time again. Aside from the fact that the average lifestyle is so busy—with little room to make time for shopping, technology has become indispensable and buying things over the internet, a new lifestyle.
E-commerce did not exclude luxury items but rather offered an opportunity for high-end brands to be at the service of their affluent and busy clients. The e-commerce sites for designer fashion brands, Net-A-Porter, Farfetch, and a host of others have proved that there is a market for luxury items online and that affluent customers don’t mind paying the premium rates without the personalized attention they would get at any high-end brick-and-motar store. This stands to show that digital is a medium through which luxury brands can expand to occupy a share of the market.
Digital transformation in the luxury retail market
It was reported in McKinsey that by 2025 online luxury sales to the global high-end market will more than triple to reach $91 billion. Meaning, 20 percent of luxury sales will be done online. However, this would have been impossible if not for the technological advancements, one of which is mobile inclusion.
Marketers know that mobile phone penetration has made it easier for more people to access the internet. The internet is and will continue to be one of the major means through which people first get introduced to the existence of a luxury item.
Janel Tanna, a multiple award-winning indie film actress, producer and fashion model, who is also a medical doctor, has a similar line of thought. As both an artist and caregiver working as an essential worker during the COVID pandemic as a resident psychiatrist, she says “the value of human interaction cannot be understated.”
However, she believes that “technology in all realms as well as fashion and art, has enabled more opportunities around traditional gatekeepers of the industry to allow unique individuals and companies to create their own niche and reach markets they likely would not have reached prior.”
Most, if not all, luxury brands sport their own websites today. Their website is a platform from which their high profile target audience can learn more about them. Luxury brands who take advantage of this could make it easy for their buyers to purchase one of their high-end collections if they have online shopping functionalities in place.
Luis Vuitton, a luxury fashion brand, caught on with the increasing importance of e-commerce early such that they went on an e-commerce launching spree. Now they have e-commerce platforms for their various outlets around the world including the UAE, Sweden, Singapore and New Zealand.
Luxury makeup brand, Sephora, took providing excellent customer experience to another level by introducing Augmented Reality (AR). Now customers can go to their website and view their products in greater detail through AR as if they’re checking through products in the physical store. Their website provides 3D images of the products, so you don’t have to leave your house.
As online marketplaces are making great waves in the retail market, Janel recommends that all owners of luxury brands should start looking at their website as a potential extension of their brands online and should start integrating FinTech systems to facilitate transactions. According to her, “financial technology could allow more seamless transactions and interaction than seen previously.”
Financial Technology making payment so much easier
Financial technology fondly referred to as Fintech, is the practice of applying technology to financial services. Fintech has contributed immensely to the growth of the internet by creating seamless and secure systems that help facilitate and improve online payment.
Since the internet opens the market to customers from all over the world, there may be customers who don’t have credit or debit cards or even a bank account to make payments online. This is where Fintech companies come in. They create technological innovations that provide alternative payment methods for such customers.
One of such innovations is L3COS. L3COS is the first regulated blockchain platform in the world to offer individual authorities the opportunity to regulate digital economies in a verifiable and legal manner, making fraud, money laundering, or any other black-market financing impossible. The platform will facilitate a central bank digital currency (CBDC), this would be an electronic form of central bank money that could be used by households and businesses to make payments
Their unique triple-layer consensus technology is transformative for the global economy, empowering governments and corporations for the first time to regulate digital economies while providing security and legitimacy to transactions. L3COS is a perfect platform for building a much needed global supply chain and marketplace that will eliminate the counterfeit and black market for luxury goods.
I had the privilege of speaking with L3COS Founder and CEO Zurab Ashvil how fashion luxury brands are reacting to sales strategies, how he saw a void in the marketplace to create new business and how his company is using blockchain to bring consumers and luxury brands to a better place in a modified world.
JD: How is L3COS changing the financial technology market?
Zurab Ashvil: L3COS is the first regulated blockchain platform in the world to offer individual authorities the opportunity to regulate digital economies in a verifiable and legal manner, making fraud, money laundering, or any other black-market financing impossible. The L3COS platform will facilitate a central bank digital currency (CBDC), this would be an electronic form of central bank money that could be used by households and businesses to make payments.
JD: Do you see a situation where your company will contribute to the advancement of the luxury market? If so, how?
Zurab Ashvil: L3COS’s unique triple-layer consensus technology is transformative for the global economy, empowering governments and corporations for the first time to regulate digital economies while providing security and legitimacy to transactions. L3COS is a perfect platform for building a much needed global supply chain and marketplace that will eliminate the counterfeit and black market for luxury goods.
These Fintech efforts have given rise to payment platforms like Stripe that can be integrated with any online platform. The same goes for Fintech payment platforms like PayPal, Apple Pay, and Google Wallet.
Some Fintech companies have banking functionalities that can work as stand-alone solutions for your platform. And major luxury brands are already embracing these digital features.
Curbie, a Canadian car-platform is a good example. By embracing FinTech, Curbie has created a direct-to-consumer market in the second-hand auto-sales business, thereby getting rid of middlemen to help their buyers save on cost.
“Curbie utilizes cutting-edge technology to more accurately price our fleet of used vehicles. By automating and simplifying car-buying online we reduce overhead costs that typical dealerships have, like, pushy salespeople, sales commissions, expensive showrooms and costly land-leases. Curbie is able to provide a great price while delivering an easy, convenient and stress-free online car-buying experience to our customers.” says Brent Gudelot, Chief Operating Officer and Co-Founder of Curbie
By enhancing online transaction platforms, Fintech has helped open doors to customers who have peculiar preferences for certain kinds of denominations. Through Fintech, digital stores are able to allow customers to transact using cryptocurrencies as a medium of exchange for items purchased. Doing this could help win the hearts of the affluent customers who have a penchant for new-age digital currencies.
On the customer side, blockchain-based Fintech company Crypterium is empowering digital currency holders with an all-in-one wallet and card that enables them to make purchases online as well as in physical stores. The objective is to make available similar payment models for their blockchain-based counterparts.
Speaking on this, Caroline Matusso, CMO of Crypterium said, “As of 2020, there are over 1.7 billion adults around the world without access to financial services. In most cases, they need to walk miles to reach the closest bank branch or exchange office. Yet, two-thirds of them own mobile phones. Through digital currencies, we’re able to provide these people quality services from the comfort of their phones. Crypterium is focused in making digital currencies as easy to spend as cash.”
Luxury brands that embrace the all-inclusive approach to accepting various payment options will ensure that they have the field covered for their wealthy clientele. It’s also a subtle sign of their interest in and respect for the latest innovative technologies.
Digitize or die
With so many things working in favor of digital marketplaces, it is only a matter of time when luxury brands catch on to the reality of how much they’re leaving on the table, sticking to their “traditions” and selling only via a physical store. In order to survive and thrive in the digital age, there’s a need for luxury brands to innovate to include online selling as part of their business strategy.
For its own part, SUP.VC, an intensive accelerator program based in Azerbaijan and with offices in Budapest, Hungary helps startups grow and expand to international markets.
During its 3-month program, startups build their products, learn different practices that are applied in the international environment, and the program is finalized by Demo Day.
Sup VC intends to be a melting pot for our startups by providing access to capital, mentorship, customer acquisition, and everything needed to digitize and take on the market.
Ordering things online is fast becoming a way of life, whether it be to buy something worth a couple of hundreds of dollars or a couple of thousands or even millions. In the end, the goal is the same – fulfilling a need.
An online platform will not in any way lower the perceived value of a luxury item, it only makes it more accessible to the customer. As long as goods are in stock, the luxury brand’s store will always have its lights on.
And since the prevailing disruptions caused by the coronavirus pandemic has “forced” consumers to buy products online from the safety of their homes, the pandemic could be the one thing that will give luxury brands that much needed push to embrace digitization.