McKinsey: luxury’s future is digital
The future of luxury sales is online: that’s the message in a new report from McKinsey, The Age of Digital Darwinism. Researchers suggest that as much as a fifth of all luxury sales could take place via Ecommerce by 2025. That’s up from about 8% today, which itself is a five-fold increase from 2009. This means that digital sales could account for as much as €74 billion worldwide in just seven years.
While 8% might not sound like a huge number, given the global luxury market’s size (€254 billion) it sits at a not-unimpressive €20 billion. And this figure just accounts for sales themselves: McKinsey wrote: “nearly 80% of luxury sales today are ‘digitally influenced’, meaning that, in their luxury shopping journeys, consumers hit one or more digital touchpoints.”
What this digital influence means is that people check out products and reviews online, price compare with Ecommerce websites like Yoox Net-a-Porter and Zalando, then go into store after the event to make a purchase. It highlights the already-vital role that company’s digital strategies have in regards to influencing customers.
While the luxury sector itself may have initially resisted the move towards digital, the same cannot be said of its consumers, who have embraced it wholeheartedly. Nearly all (98%) of luxury consumers have smartphones, compared to just 65% of the general population.
Millennials lead the way in digital behavior, teaching their parents and grandparents how this new world works. And mobile has replaced desktop as users’ medium of choice for internet access. These facts have important ramifications for luxury brands: do products retain their beauty on smaller, handheld screens?
As digital channels multiply, and consumers become ever-more Ecommerce friendly, social media is a touch point that cannot be ignored. Louis Vuitton has been mentioned in well over 25 million hashtags on Instagram since its inception. This “social proof” may well be what brands use to catapault themselves to even greater heights over the coming years.
Dominion’s Global Trends Luxury Fund considers effective digital strategies to be a condition of investment. Amongst many others, Dominion holds LVMH, the parent company of Louis Vuitton, in its Global Trends Luxury Fund.
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