Business & Tech

High Street vs. Ultra Luxury – how will the future of retail look like?

The world’s retailers currently face a host of challenges. Even before the start of the pandemic, many brick-and-mortar retailers were struggling as online business has increasingly attracted customers and was able to secure significant market share. But will the traditional retail business really die out for all segments of the industry?
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© Laura Gilchrist

Physical distancing could continue in the post-COVID-19 world, making shoppers anxious and even less likely to visit brick-and-mortar stores. A contact-free economy could emerge, raising e-commerce and automation to a new level.

For luxury brands, the physical experience has always been part of their core identity. Beautiful flagship stores in A-locations, the ability to touch-and-feel the product, the relationship consumers have with staff, and in particular the knowledge and service that sales associates provide, not to forget to mention the feeling a big Gucci bag gives to shoppers while strolling down the shopping street.

In the past, luxury brands used to consider e-commerce as a channel reserved for selling low to mid-range luxury goods. Selling online was indeed perceived as being inappropriate for a luxury brand, high-end items were thus reserved for the boutique stores. However, due to the ongoing pandemic and its social consequences, life itself becomes increasingly digital and brands must start to consider what bold, innovative, and luxurious approaches can be adopted and at the same time the core and the heritage of the brand be protected. It is expected that by 2025, one-fifth of luxury sales will take place online, as Net-A-Porter and Farfetch have successfully demonstrated that luxury consumers are willing to purchase high-end goods online, at full retail price.

But still, up till now among European luxury consumers, stores remain the dominant channel. And wouldn’t luxury shoppers always prefer a personalized customer service and extraordinary experience for the prices they pay?

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© Desenio Design Studio

For that answer it´s worth understanding the future luxury shopper as we are in the middle of a generation shift. Generation Z (defined as those born after 1996) as a population, won’t peak for another ten years, but are according to many market research companies the core influencers of today with big impact on both Millennials and Gen Xers in terms of what they buy. Gen Z is looking beyond tangible products and is actually trying to understand what makes a brand tick. What’s its mission? What’s its purpose? And what is it actually trying to build for us as a society? Based on that, you would expect that Gen Z is only investing in sustainable products, but according to a recent McKinsey survey Gen Z is definitely willing to spend on luxury, which is different to what you hear a lot of times before. The difference is that Gen Z doesn’t think of luxury as a name or a brand that they want to showcase as a status. They are rather looking for unique items that set them apart and express their individuality. And if they find it from a luxury brand, then they are absolutely willing to pay for it!

Nevertheless, for that generation which is spending on average eight hours per day on their smart phone, online is still edging ahead. But as long luxury brands understand to personalize the shopping and product experience, there is a good chance to keep their flagship stores alive and prevent the future luxury consumer to a large extend churn to online – well knowing that getting the Gen Z consumer to be loyal to your brick-and-mortar will be more challenging than ever.

What sounds like a promising future for the luxury segment, might be the end for the high street retail business. Many high street brands have been hit hard by the consequences of the pandemic by still following a “zero-online” strategy and by that missing future generations. Knowing the impersonal shopping experience high street stores offer and the transparency to compare products online, are not supporting the way to engage Gen Z to high street brands. Also speaks the fast fashion of high street brands, consisting of garments made at cheap quality in low-wage countries where the working conditions and salary levels are below ethical standards and the mass-produced fashion is most likely to end up in landfills very soon, against the mentioned values of Gen Z. In order to survive, high street retailers need to think about a digital, sustainable and collaborative strategy. The high street has had continuously adapt to changing consumer behaviors over the years. Lockdown is no difference. Nevertheless, considering omni-channel, adding eco-initiatives and leveraging new tech might help building long-lasting emotional engagement with the new generation of consumers, knowing that it will be an even more challenging way than for the luxury industry.

 

 

 

 

 

Sabrina Gildehaus is a fashion expert and specialist from Berlin who now lives in Kiev in the Ukraine.
She is the founder of the fashion consultancy Gildehaus. Her mission is to support and develop fashion brands and create a community of fashion experts.

She has more than 10 years of professional experience in the fashion industry. Previously she worked with Tom Tailor, Joop! and Zalando SE. 

https://gildehaus.com.ua/

https://www.instagram.com/sabrina.gildehaus/

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