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It’s no secret consumers are shopping online more frequently and for more types of products than ever before. Notably, the rise in online shopping has even started to reach a tipping point among categories that have historically been slower to adopt new and emerging technology, such as luxury commerce.
Previously, luxury commerce has been at a bit of a standstill. Yet, findings from this year’s Walker Sands Future of Retail report indicate not only a dramatic increase in luxury sales, but also the potential for even greater profitability online for those retailers able to create a smooth transition between the typical luxury retail experience, focused on in store, and a new-wave of standards and capabilities consumer have come to expect when shopping online.
In fact, this year’s report saw a quadruple increase from just two years ago in terms of the number of consumers who say they’ve purchased a luxury item online (27 percent in 2016, compared to just 6 percent in 2014). That number is also up from just 10 percent in 2015.
Still, with more than 3 in 4 consumers (76 percent) reporting they’d be open to purchasing luxury goods on any channel (in-store, online from a brand or third-party retailer) there’s massive room for growth in the coming years.
Findings in the report are also consistent with McKinsey predictions that sales of luxury goods could triple to €70 billion by 2025.
So what is driving this growth, and how can retailers and brands make the most of this rise?
Where luxury retail sales are headed in 2016
With a third of consumers ages 18 to 25 saying they have purchased a luxury item in the past year, compared to just 6 percent of those 61 and older, the Future of Retail report’s findings indicate that future sales opportunities will likely come from younger, more digitally savvy consumers.
These consumers are more in-tune with making frequent online purchases and the dominance of third-party websites such as commerce giant Amazon has conditioned them to expect fast – and free – shipping.
Most importantly, they’re used to an online experience that complements what they experience in store and is fueled by convenience.
But that’s not to say luxury retailers should turn to experiences that completely mirror what consumers are used to from their day-to-day online shopping, either. Brands and retailers must be careful to keep the luxury shopping experience intact, while also integrating elements of the digital experience today’s consumers have come to become comfortable with and expect.
Findings suggest that virtual reality may be one way to bridge that gap. Nearly two in five consumers who have purchased luxury goods in the past year (38 percent) say virtual reality would make them more likely to shop for products online.
Luxury buyers are also more likely than the average consumer to say they’re interested in using an online shopping device (71 percent), such as Oculus Rift, compared to the average consumer (63 percent).
Virtual reality could also offer the opportunity to convert new shoppers – nearly a third (31 percent) of consumers who haven’t made a luxury purchase in the past year would consider using virtual reality shopping. Strategies such as virtual dressing rooms, online try-ons, and personalized in-store technologies are just a few examples of how this technology may be used to bring these worlds together.
While strategies for bridging this gap may take some trial and error, one thing is for certain – luxury commerce is here to stay. When used correctly, new and emerging technologies offer luxury retailers great opportunity to bring these two main channels together. Retailers and brands need to first determine what pieces of the experience are most critical to their audiences and then discern where there is room for growth.