I discuss six important areas for Luxury Retail competitiveness and key considerations in each area for business success. As each area is dependent on the others, their integration is important for seamless customer experience and business growth. A pervasive and integrated technology, process, and people talent are the underlying enablers. It is incumbent on leadership to consider each area individually and collectively for strategic business planning and execution.
Over-Leveraged disasters: Years 2017-2018 have been marked with multiple retail bankruptcies with Nine West, Claire’s, Toys R Us, BCBG Max Azria, and Charlotte Olympia among them. One of the key levers behind the bankruptcies is the over leveraging of the company balance sheet by private equity companies during acquisition. The result is an enormous debt burden and unsustainable interest payments. This disables the company from making required investments in innovation, technology, talent, and supply chain, among others, with no recourse but to apply for bankruptcies and/or liquidation. For luxury retail, there is a lesson here: be very judicious in private equity led acquisitions as the very nature and objective of PE led M&As have been proven to be disastrous for all parties in the long-run.
Product cycle velocity: It is clear that one competitive lever is the adept and nimble management of long and short product cycles. Statement and fast fashion jewelry or luxury clothing collections are examples: the design, manufacture, and selling of these types of products have two distinct cycles and velocity. The fast fashion type requires a faster, shorter, and nimbler life-cycle. This is further accelerated by the “see now buy now” consumer mentality and live new product launches. Therefore, it is imperative that luxury retail realize these differences and manage product life-cycles accordingly. Machine learning, AI and AR, and rapid customization using technology such as 3D Printing and collaborative and “group technology and cellular manufacturing” philosophy and processes must be leveraged for differentiated product life-cycles.
Social media: The impact of social media on every aspect of our lives is unquestionable. Every organization in luxury retail is in the race for premier digital presence and harness of social media influencers – it has its job category now. However, the ROI of influencers on actual product sales is not understood well and some companies are attempting to internalize the influencer role to better understand the impact. This is further complicated by content faking to drive click-through, ad blockers, lack of clarity as to how influencers calculate fees, and the general human instinct to trust recommendations from known people than influencing promotions, often paid and in any guise. Also, social media drivers are different by continent and country. For example, Chinese influencers are community builders and product sales are a by-product of this relationship, whereas, in the West, customers are constantly barraged with sales pitches first. Amplified social media presence must ensure that the entire support system is well functioning to serve the social media purpose: increased omni-channel sales. In luxury retail, this implies proficient integrated processes for in-store product trial and service, in-store product view and on-line purchase capability, relationship building, and deeper insights into influencer conversion rates for appropriate budget and spends.
Customer Service: Personalized and customer centric service is probably the most important arbiter of brand loyalty. Wherever possible, the relationship and communication with an actual person must be a prioritized part of the business model. While digital innovation is a fundamental building block, augmenting digital capabilities with live and empathetic customer service is a winner anytime: one company inserts a hand-written note with the packaged product; the customer will remember the exclusivity. All customer service channels- in-store, on-line, off-line, and customer touch-points – must be seamlessly integrated for pricing, promotion, messaging, policies, assortment layout, store planning, and information. Accomplishing this requires a process and people outlook with seamless technology support.
Supply Chain Management: Superior SCM capability is a requirement for executing variable product life-cycles and superior customer service. This must start with Demand Management and link to procurement, manufacturing, distribution and service. The key capabilities to invest in includes platforms for disaggregating products into components, visibility into partner inventory for raw materials and finished goods ordering and replenishment planning and execution, visibility into product current state, and effective communication of exception events, such as, potential stock outs, “act of god” impacts, etc.
It is without doubt that technology, process, and customer empathy talents will be a key differentiator in business competitiveness, and more so in Luxury Retail. The winners will be able to integrate these capabilities seamlessly for the customers. For example, how is multi-channel customer experience data, synthesized into proactive meaningful and actionable feedback into upstream and downstream processes, such as design or maintenance?
Talent and Community Investment: Accomplishing the above will require not only technology competence and integration, superior analytics, but human talent. A regular holistic examination of the strategy and business must be the foundation to determine talent needs. There are examples of companies interacting extensively with millennials as a source of inspiration, direction, and employees. The most appealing talent will be a mix of problem solvers, human factors and user engineering exponents, with a technology bent.
Investment in communities is key towards customer acquisition and loyalty. There are examples of luxury houses actively contributing towards community growth. It is not only philanthropic; people remember and return good deeds. The engagement should be more than financial; it should be an on-going active engagement, for example, in developing vocational activities needed, regular participation in community activities, etc. These activities grow a community with demonstrable skills.
The above are six important areas for enabling Luxury Retail competitiveness and seamless customer experience requires efficient and tight integration among them. The belief is that a pervasive and integrated technology, process, and talent capability is the underlying enabler and community investment is very meaningful and rewarding. Leadership should consider each area individually and in combination for strategic business planning and execution.
This article was originally published in Linkedin.