Ed. Note: This article was previously posted at Retail TouchPoints.
Once reserved for ultra-affluent clientele with disposable income to spend on shopping trips in the world’s most fashionable cities, the luxury category is undergoing a significant transformation. As younger consumers gain greater spending power, once notoriously inaccessible brands are now expanding from exclusive boutiques into virtual worlds and experiences. Many luxury brands have realized that virtual tools can enhance their storytelling by highlighting the elements that set them apart and make them luxurious.
To create stories that relay a sense of exclusivity and scarcity, luxury brands are embracing augmented reality, virtual reality, non-fungible tokens (NFTs), 3D imagery and the metaverse. Despite worldwide challenges including an ongoing conflict in Ukraine, global inflation and continued COVID-19 worries—particularly in China, where the demand for premium goods is typically high—the luxury business remains strong. During its July 26, 2022, earnings release, LVMH reported revenue of approximately $37.3 billion, which is a 28 percent increase compared to the same period in 2021.
Kering—owner of brands such as Gucci, Yves Saint Laurent and Bottega Veneta—reported revenue of more than $10 billion during the first half of 2022, a 16 percent increase compared to the first six months of 2021. These luxury houses remained healthy over the first half of 2022, while they also embraced virtual components to enhance their businesses.
Image courtesy of LVMH.
A New Look for the Old Guard
There is a common belief that heritage luxury brands are stuck in their old ways. But the reality is that some of the industry’s most cutting-edge virtual offerings have been implemented by brands that have been around for decades—some even centuries. These luxury houses are helping break boundaries and set new standards across the supply chain and customer experience.
For example, LVMH, Prada Group and Richemont’s Cartier founded the Aura Blockchain Consortium in 2021 as a nonprofit organization to develop the first luxury blockchain to help increase transparency. The group welcomed OTB and Mercedes Benz as founding members in 2021 and 2022 respectively, and the consortium grew to include Bulgari, Hennessy, Hublot, Louis Vuitton, Maison Margiela, Miu Miu and Prada. Using the secure capabilities of blockchain, the Aura Blockchain Consortium seeks to fortify the trust of luxury consumers through transparency by monitoring the product lifecycle in terms of ethics, sustainability, authenticity, transparency and responsible sourcing.
In addition to its group efforts, LVMH recently introduced Livi (short for LVMH Innovation Virtual Insider), a virtual avatar who was appointed in May 2022 to the company’s Face of Innovation role. Within this role, Livi serves as a spokesperson for the brand, especially when promoting its technology interests and advancements. For example, Livi played a key role in promoting VivaTech, the innovation and startup event, for which LVMH is a founding partner, where the company explores the future of luxury.
Virtual events have also extended to its individual brands, such as the Sephora “Sephoria: Virtual House of Beauty.” Introduced in September 2021, the metaverse-style experience featured 3D and a 360-degree game atmosphere in which guests were invited into the beauty house but could also purchase a physical Experience Kit.
At Gucci, the luxury fashion house has developed a number of virtual initiatives, such as its personal live-call shopping service, which supported the brand during the early days of the COVID-19 pandemic. Recently, Gucci has been moving ahead full-steam into a new digital world with Vault, a metaverse-heavy initiative that tests the creative potential for virtual spaces through NFTs and Web3 technology.
Creating a Virtual Presence Beyond Hype
In June 2022, Farfetch began accepting cryptocurrency payments on its marketplace following a test at Browns retail locations and select Off-White flagships. Customers’ cryptocurrency wallets are accessible simply by scanning a QR code. The luxury platform revealed that it would expand the service to private clients and customers in the United States, the United Kingdom and Europe by late 2022.
In an effort to refresh its image, iconic jeweler Tiffany & Co., also recently released a collection of NFTs on Aug. 5, 2022, which included physical counterparts—pendants referred to as NFTiffs. Available for purchase at a cost of 30 ETH, or more than $52,100 as of Aug. 5, the NFTs were sourced from CryptoPunks. One hundred CryptoPunk owners were registered to participate in an Aug. 3 presale.
Though many virtual tools and platforms were once regarded as niche elements used by kids, gamers and graphic artists, retail has now caught on. Luxury, in particular, is leading the progress of digital innovation. Within the luxury category, brands are known for delivering exquisite experiences to their customers.
While the next generation of luxury consumers might include young customers, these clients still expect the highest quality and superb delivery on shopping experiences—including the latest and greatest tech-driven experiences. Luxury brands must identify virtual tools that will relay their stories authentically for their discerning clientele. The pool of options is vast, so download this report to explore new ideas and get tailored recommendations from experts.