How to turn a luxury business into an online success

Negócio de luxo

The luxury goods market has been growing steadily – in 2014 it represented 1.4 billion euros1, encompassing two categories: products (680 billion) and experiences (720 billion). This last category has registered larger growth than the first. The reason behind this fact is the change in consumption patterns – people began to prefer a unique and luxurious experience (such as a stay in a luxury hotel) rather than accumulating products. However, succeeding in this market is not an easy task!

The luxury market in Portugal

In Portugal, the luxury goods market also registers a significant size – 800 million euros2 – 60% of which results from sales to Angolan, Chinese, Brazilian and Russian consumers: it should be noted that 50%3 of the sales of these type of goods occur outside the consumers’ native country.

A product is always an experience

One of the most crucial points in the luxury market is the notion that a product is always the result of a product/service combined with an experience, and this should be guided by excellent customer service. Luxury brands must ensure that employees who deal with clients on a daily basis, convey their brand values and tell them the entire story behind the product. Moreover, they must know their customers and how they like to be treated. In the case of companies that provide luxury services, the materialization of the service is also important, which means that the client should receive something that will serve as a reminder of the experience later on.

Online luxury brands

Although it is harder to provide such a personalized and exceptional experience in the online world, luxury brands are investing heavily in e-commerce platforms, not only as a distribution channel but also in terms of positionment, in order to connect the offline experience with the online one, in the best possible way. There are very few success stories where luxury can effectively express itself online, because there is always a physical side associated with luxury, and that customers expect. However, there are ways to do this while maintaining the brand philosophy. For example, luxury customer service and exceptional delivery.

Interestingly, there are luxury brands that started with the hardest part first: online. Brands like JosefinasNet-a-Porter and Farfetch are some of the online success stories that not only provide a fabulous experience to their customers, but also ensure a luxury service that is different from the one offered offline, but that these days has become more valuable than the latter.

What does a product need to be considered luxury?

For a product to be considered luxury, it is necessary to bring together two aspects simultaneously: the individual function that is related to the substance of the product – its qualities and characteristics – and the social function that is associated to status, wherein everyone has to recognize the product as something exclusive and difficult to access.

How to promote a luxury product

As a result of this market’s specifics, some of the marketing laws that generally apply have to undergo a slight change. One of the basic principles is that one should not pressure the client to make a purchase – advertising must be done in such a way as to feed the desire to own the product, making "waiting lists" even more appealing to the consumer's eyes. Moreover, communication should also be crafted for the non-target public, in order to ensure that everyone knows and identifies the product as luxury (social function).

Developed countries vs. emerging economies

When opening a physical or virtual store in a new country, the definition of luxury adopted must be taken into account. Here, it is important to distinguish between the approach used by developed countries and by emerging economies. Developed countries associate luxury with exclusivity and use these products in order to differentiate themselves from others (brands and lesser known products are seen as an advantage and unique), unlike the emerging economies, where these products are used as an integrative element (visible logos and world-renowned brands function well).

Therefore, when implementing this type of business, whether online or offline, different aspects should be taken into account. This is a market that is growing, where products must be accompanied by a unique shopping experience, ensuring that both functions – personal and social – are met.