In 2014, research showed pure online sales of luxury goods were growing at twice the rate of the luxury market overall. This is set to increase to 20 Billion by 2020, but what does this mean for a market that was traditionally face-to-face deal-closing? And how might it affect the sale of high-ticket, high-priced items that could now be bought without even seeing them physically?
For example, the biggest purchase any of us will ever make is a property, but given the next generation of homebuyers and owners now more digitally-savvy than ever, will this change their buying habits? Does this mean we are entering a digital-first future where you really could buy a house purely from your mobile?
Digital has already transformed the estate agency industry
In the past few years, a huge number of internet-only estate agents such as Purple Bricks, Settled, House Simple and Tepilo have flung open their virtual doors, challenging previously-held conventions. They allow people to either sell their home online – being guided through the whole process – or give them the opportunity to do much of the work themselves with real people only used locally to provide them with a valuation.
Digital has democratised the house buying and selling process and crucially driven down costs. These savings can be passed on to the seller, the difference of them paying hundreds of pounds in commission instead of thousands. This cost-saving from using digital effectively makes for a very attractive proposition.
Buyers too have gravitated online to find the home of their dreams, viewing adverts via their smartphones during the day while at work. There is now no need to trudge down to the high street to look in an estate agency window because these online-only companies have aggregated traditional selling elements and transformed them through digital thinking. They meet the changing demands of consumers and how they want to live their daily life.
What about the car industry?
Surely though there’s a difference between buying a dress or pair of trousers online to buying a house or even a car? Well maybe not. In what was seen as a first for the automotive industry, one man bought himself a Hyundai from his tablet while at home without even taking it for a test drive. This could be a purchase habit replicated widely in 2017 according to this report by the BBC.
And like house sales online, it all comes down to the simplicity and speed of the digital experience. Car manufacturers are now investing in technology to make online purchasing a reality. They already offer the chance of 360-degree views of the inside and outside of a car. Soon virtual reality will be able to give consumers a lifelike experience to what it feels like to be sitting behind the steering wheel while you are actually sitting on your sofa.
This digital shift to purchasing such large premium items on a device alone is coming – and retailers may even be able to charge extra for such a service in return for the convenience it offers to the end user.
What other luxury retail areas are transforming?
Goods such as jewellery, cosmetics and watches have always been the preserve of exclusive in-store experiences to make that purchase feel extra special. Bricks and mortar stores were made to look and even smell different - giving those entering the sense of their own style and wealth.
But in India digital transformation is bringing luxury to fore online – driving savings on the ticket price. In China, shoppers are seeking out luxury products at home rather than going overseas to buy them while luxury brands wanting to capture this huge market are using popular digital platforms in the country such as WeChat to boost online reach and presence.
Today, research suggests 75% of luxury brand shoppers not only use their mobile to look at what to buy, but where to buy it and how much they are willing to pay for the goods. This may drive them to make an offline purchase eventually but their initial driver to purchase still begins online, stressing the importance of digital in the luxury retail space.
So what is the future of luxury retail?
What we can learn from those home purchases mentioned as we began this blog post is that right now, an average buyer will have done the majority of their homework online before making the physical purchase. At their fingertips they have historical data on sale prices and average re-sell values, digital floorplans to examine, numbers around energy ratings and crime to consider and also 360-degree or virtual reality tours of properties.
Replicate this across all luxury goods sectors and you begin to see how digital transformation through data can drive purchases of high-ticket goods even further, especially those at the lower end of the price scale compared with a house or a car.
Digital technology allows an incumbent company to reduce its bricks and mortar footprint, cutting associated costs and driving up profits. This could mean in the future we will see more personalised selling in this space with luxury at-home sales and fast delivery. Using digital channels to boost communication and consumer decision-making in the interim, and then going where the customer is, could become the norm. Again there could be a premium price charged for this lower-cost model, going to the customer rather than asking them to come to you.
Confidence in digital purchasing is high. It is no longer treated with the caution it once was. And with luxury items now leading the charge in online sales to global shoppers, who are happy to purchase without physically handling the product, is it any wonder that these changing digital habits are putting us just a few steps away from houses being regularly bought without even stepping through the front door.
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