Luxury Retail and Digital Management

Developing Customer Experience in a Digital World

Michel Chevalier, Michel Gutsatz

• Publisher: Wiley
• Year: 2020
• ISBN:
  9781119542353
• Edition: 2
• Topic: Business
• Subtopic: Retail Industry
• Index: Business

Develop a winning customer experience in the digital world

Luxury consumers are changing – they come from all over the world, they are young and they are digital natives. How can luxury brands that have built themselves as pure physical players adapt their business model and practices to address their expectations without abandoning their luxury DNA?

Luxury Retail and Digital Management, 2 nd Edition sets focus on the major retailing challenges and customer evolutions luxury brands are facing today: the digitalisation and the emergence of the millennials and Chinese luxury consumers. These major changes have been affecting the distribution and communication channels of luxury brands; they now have to think simultaneously physical stores and e-commerce, global marketing and digital marketing.

• Defines all the tools that are necessary to manage luxury stores including analysis of location and design concept

•Explores the selection, training and motivation of the staff

• Covers everything executives, managers and retail staff need to know in order to enter, expand, understand and succeed in the world of luxury retail

Written by luxury retail experts Michel Chevalier and Michel Gutsatz, who lend their solid academic credentials and professional expertise to the subject, Luxury Retail and Digital Management, 2 nd Edition provides deep insight into the main challenges that luxury brands are facing in this digital age.

Part I
Important Choices in Luxury Distribution

Chapter 1
The Various Models in Luxury Distribution

Luxury today no longer sells because of rarity but on a feeling of exclusivity, which depends primarily upon the selectivity of its distribution, both physical and digital.

–Jean-Noël Kapferer¹

From the outside, observers may believe that all luxury brands are distributed in the same way – through exclusive stores owned by the brand – and that they are able to manage them from their head offices. In fact, the reality is much more complex.

Some luxury products, such as perfumes and watches, are sold for the most part in multi-brand stores that do not belong to them. These stores generally do what they think is most efficient for their multi-brand businesses and they are never easy to motivate or mobilise.

In some countries (e.g. Thailand and Vietnam) a foreign company that imports and distributes products manufactured abroad is not allowed to be a majority owner of its local subsidiary (it is only possible in China since 2018). It has to associate with a majority-holding partner that is a national of the country. So, no luxury group can, even if it initially wanted to, become the owner of all its sales outlets in the world.

Building a global network of outlets demands an enormous amount of time and money. Indeed, for a large luxury brand, having its own store in Ulaanbaatar would be wonderful, but how can it ensure that customers will find the same service there (hospitality, advice, prices and after-sales service, for example) as they receive in Paris or Milan?

Also, although Gucci or Chanel might have the means to invest in opening a store in New York, a small brand that is already struggling to make profits in its Paris store would find it much more difficult to do so.

A discussion on the sales points of luxury brands all over the world therefore involves describing all models, physical or digital, that can or should be used to present the products to customers the world over.

Direct and Indirect Distribution

Luxury brands did not start out with exclusive stores in every city in the world. Their distribution systems grew. They often opened a single store in one city (the city of origin) and then used a network of multi-brand outlets that afforded them initial exposure and international turnover. The business environment has also evolved over the last 150 years; the main store categories have changed and found their raison d'être and their stability.

A Historical Perspective

Retail trade is doubtlessly one of the oldest professions in the world. From the dawn of history, when people realised that they could not obtain everything they required for their own survival by themselves, they had to turn to others who were capable of searching for and gathering together the various commodities they required, and who exchanged these items for a monetary consideration. This act of selecting and gathering various goods that would be subsequently sold to others saw the emergence of the trader and retail trade.

Later, during the Middle Ages, as trade developed, merchants from the same domain often tended to cluster together in the same street. They seemed to believe that it was better to place themselves in proximity to their competitors, assuming that customers would be more likely to enter their shops, and those of their competitors as well when they went around all the shops on the street. Those that set up shop elsewhere, resolutely isolated from their peers, found themselves away from the shopping circuits and missed out on sales opportunities. Being located far away from other shops but close to residential areas was nevertheless an advantage for everyday services such as food – in other words, as convenience stores.

This distinction between proximity purchases and others has always existed and explains the differences in localising strategy. The fact that merchants from the same sector wished to group together and concentrate their pulling power is not very different from what we see today in big cities with the concentration of luxury stores in the same neighbourhood.

The foundational event worth mentioning here is the creation in 1851 of the world's first department store, Le Bon Marché, in Paris. The idea behind it was that, for the first time, ready-to-wear clothes for men and women, shoes, kitchen utensils and suchlike would all be sold together in the same store. As always, when an idea is good, it is quickly emulated and in 1856 the first American department store, Macy's, opened in New York, where it still stands now.

As time went on, the appearance and the system of presentation of the products in department stores were strongly influenced by technical innovation. In 1869, the first elevator was installed in a Parisian store, making it easy for customers to go from one floor to another, and also making it possible to present products on four or five different levels.

Yet another innovation, which dates back to 1892, influenced the cadence in all department stores in the world: the escalator. This allowed customers to go from one floor to another at their own pace, without having to wait for a lift. Escalators have thus defined the space of almost every department store today: a central well in the middle of a hall as large and impressive as possible, sometimes crowned with a dome; the escalators moving through this well, allowing customers to go from one floor to another as and when they wish. The first escalators were installed in Harrods in London in 1895.

Mitsukoshi Nihonbashi, the first Japanese department store, was opened in Tokyo in 1915.

The year 1919 is also another very important date: the first air conditioning system was installed at Abraham & Strauss in New York. Since then, department stores no longer need windows. Air conditioning does away with the need for windows for ventilation and, in some cases, for doors that open onto the street: stores could be integrated into a gallery or mall. Boutiques therefore do not need windows anymore, except, of course, as showcases for presenting products. The appearance of department store buildings remained more or less unchanged after that, much like we know them today.

In 1922, the first shopping centre, the Country Club Plaza, was opened in Kansas City and the appearance of these centres has remained virtually unchanged for the past 95 years, with very little innovation, except for the first duty-free store that opened in 1957 in Shannon Airport, Ireland.

On another plane, we should mention the appearance of the first electronic cash register in 1970 and the...