By Nigel Wilson, Managing Director, Hitwise
As consumer behaviors shift towards a more digital, social and experiential economy, so does the luxury industry. Both emerging and established luxury brands are constantly working to reinvent themselves, connect digitally and capture the heart of the next luxury consumer. Millennials are still willing to spend money on things they care about — but they find greater value in experiences, lifestyle enhancement, positive impact and social media currency, rather than in physical products themselves.
Within this article, we use Hitwise data to explore and breakdown the different types of audiences that luxury brands attract, and pay particular attention to those winning over today’s new set of millennial shoppers.
Differentiating Digital Audiences
In today’s digitally driven world, it is important to understand how a brand’s customer can differ both in-store and online and especially when compared to direct competitors.
To illustrate this, we use the example of British-born premium lifestyle brands, Ted Baker and Karen Millen. Both brands market to the high-end consumer and have similar store presence in the UK. However, when we breakdown the audiences visiting their sites, each brand attracts very different levels of online audience engagement.
From the Hitwise data graphs above, we can see that Ted Baker has a predominantly younger segment and receives traffic from channels such as Search Engines and Social Media. In contrast, Karen Millen has a higher proportion of people aged 55+ and relies more on traditional channels such as Rewards and Email.
Separating Discount Shoppers from Regular Shoppers
Brands also need to differentiate their discount shoppers from their regular online visitors. In Ted Baker’s case, people who have actively searched for “Ted Baker sales” (and variations of the term) skew higher toward females and older age brackets.
Ted Baker could then differentiate content and product offerings to target both audiences. For instance, sales promotions could be advertised on the Telegraph or Cosmopolitan, whereas new collections and latest trends could be featured on Vogue or Marie Claire.
Millennial Market Share, Over Time
Let’s explore how the top five luxury brands fare at capturing 18-34 year old luxury consumers. As you can see in the graph below, Gucci captures a larger share of luxury Millennials, compared to audiences above the age of 35. Gucci has successfully re-invented its image from “old world” to “new world”, with digital and social technologies that maintain a youthful, edgy approach to high fashion.
Renowned for their progressive embrace of gender fluidity and androgyny, bold granny chic florals and Instagram-exclusive model interviews, by focusing on rich content Gucci has seen an enormous growth in traffic from social media, including a 190% rise from YouTube over the past three months year-on-year.
Louis Vuitton has also seen an upturn, including a 23 per cent increase in searches from January year-on-year and a 332 per cent increase in clicks from Facebook over the past three months’ year-on-year. This may be in part due to their recent partnership with Supreme, a New-York-based skatewear brand which has a global following of millennials. Their landmark collaboration has drawn considerable hype in the UK, with four out of the top ten searches related to “supreme” also including “Louis Vuitton”.
Growing Relationships With (The Right) Retailers
Whilst brand partnerships can be a great way to broaden and grow your audience, working with other companies, especially retailers, does have its pros and cons for brands.
The Hitwise data found that searches for retailer sites, such as Net-A-Porter and Farfetch, have grown by an incredible 45 per cent over the past 3 years, compared to 12 per cent for luxury brand sites. However, whilst these relationships can bring added sales and exposure to different audiences, many luxury brands face the challenge of not knowing how their brand performs and how they are perceived on retailer sites. This is particularly problematic for brands who are sales-reliant on retailers.
A way to overcome this blind spot is through greater data collection, such as page views and search terms. The below example shows branded searches within Selfridges and Net-A-Porter’s websites, where only 3 out of the top 10 brands are present on both lists.
In Mulberry’s case, the brand ranks 3rd on Selfridges compared to 7th on Net-A-Porter. Searches on Selfridges are also more product-specific (e.g. “Mulberry bag”, “Mulberry purse”), than brand-specific on Net-A-Porter (e.g. “Mulberry”). Mulberry could then decide whether investing on Net-A-Porter is worthwhile or not, if product searches implied higher purchase intent.
However, a different story evolves if we look at the audiences behind retailer and brand. Net-A-Porter draws the youngest audience and highest share of young educated and urban people - a key market for luxury millennials. Whereas, Mulberry has a higher skew of older people from key affluent groups, including business professionals, self-employed and high-income families.
There is then a mutually beneficial opportunity for Mulberry and Net-A-Porter to collaborate further, if the brand and retailer wanted to diversify their audiences.
The fact is, Millennials care more about what luxury goods say about them than the luxury goods themselves. Luxury brands are about making a statement, creating an experience, building social capital and making an emotional connection to celebrities who lead incredible lives. To buy a Versace dress that Gigi Hadid wore is to feel part of her world, connected to something more glamorous, opulent and beautiful than ordinary life (and of course, to capture your abundance on social media for all your friends to see).
Creatively embarking on partnerships – like the one between Louis Vuitton and Supreme – and developing digital content will be crucial to shifting perception from out-of-touch luxury brands, into icons of youthful glamour. Ultimately, the luxury brands that understand their audience and shift their mindset to capture both existing consumers as well as the younger generation of big spenders, are proofing themselves for the decades ahead.