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Key takeaways:
- New digital tools elevate customer relationships. From Whatsapp to AI-powered chat, luxury brands are adopting new digital customer service tools that provide humanised support and interaction. While some brands, like Loewe and Tommy Hilfiger, are focusing on facilitating direct contact through Whatsapp, others, like Brunello Cucinelli, are leveraging AI to enhance storytelling and brand discovery.
- Hospitality hotspots create new brand experiences. Several brands, including Kate Spade, Michael Kors and Ferragamo, have created branded gastronomy experiences, joining others like Fendi and Armani, whose hotels provide an immersive brand environment away from the store. These initiatives are helping brands cultivate more lifestyle relevance beyond the products they provide.
- Getting physical in emerging markets. Latin America — particularly Brazil and Mexico — and the Middle East have all seen significant store openings as luxury brands look to establish a stronger physical footprint there. New tax structures in Brazil and favourable joint venture terms in the Middle East are encouraging greater investment in these up-and-coming luxury locales.
A shuffle at the top
While Gucci has defended its top position in omnichannel since the last edition of the Vogue Business Index, there has been a shuffle in the top five brands, with Hugo Boss coming in second — followed by Burberry, Prada and Bottega Veneta — which maintained its fifth position from the last Index. While many of the top 10 performers for omnichannel have previously populated this space in previous Index iterations, some brands have switched places within the ranking. With competition fierce, the addition or removal of a single feature can have a significant impact on the Index ranking. Middle-tier and aspirational luxury brands appear to have been more affected by these minor changes, with a decline in Tory Burch’s live stock visibility and the removal of Longchamp’s offer to shop live with an advisor pushing down the overall performance rankings of both brands.
Elevating human connection
A number of brands have introduced new ways to contact brand advisors or sales staff directly, for example, via Whatsapp, phone or live chat, with the total number of brands offering this access rising from 31 to 35. Despite the growth in automated customer services using AI or chatbots across the fashion industry, this indicates an emphasis on human connection and the value of securing direct relationships with shoppers among luxury brands. Loewe, Michael Kors, Tommy Hilfiger and Isabel Marant were all among the brands to introduce direct contact via Whatsapp. This demonstrates not only a focus on improving the direct support that brands can offer shoppers but also the requirement to reach shoppers through environments that they are already interacting with on a daily basis, beyond the traditionally branded environments where brands seek to lock in customers.
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A number of brands have removed the ability to pre-order collections, with the number providing this option declining from 43 to 33. Rick Owens was the only brand among the 60 assessed to add this feature. Meanwhile, some, like Longchamp, are offering this exclusively to more loyal shoppers based on their profile and status with the company. Historically, pre-orders and “see-now, buy-now” were viewed not only as a way to improve predictability in the performance of collections but also as a way to soften the gap between seasonal cycles, especially by introducing smaller capsules that could be turned around faster in response to the need for instant gratification. As luxury brands struggle to maintain margins and cut back on “nice-to-have” features, many are reverting to more classic seasonal cycles. This means that those who retain such features have an opportunity to differentiate from others by establishing a more exclusive route to access new products.
Store footprint and physical spaces become a key battleground
While little has changed in the number of brands offering click-and-collect or reserve online, there are signs of significant store expansion activity. Loewe, in particular, has celebrated Casa Loewe openings in São Paulo and Seoul, alongside more established destinations like Boston. This is coupled with a number of new locations across Greater China and Southeast Asia. It’s not the only brand that is making a more determined effort in this region. Acne Studios, Givenchy and Kate Spade all opened new stores in increasingly popular markets like Hanoi and Taipei. However, luxury brands are still feeling the pinch from reticent Chinese luxury shoppers. Off-White, in particular, has shuttered six stores in Mainland China, leaving just three.
The Middle East and Mexico are also attracting more physical investment. Since the last Index, Balenciaga and Bottega Veneta have opened new stores in Cancun, while the latter has also relaunched its Mall of the Emirates store in Dubai. A number of others have also pursued an “improve over move” strategy, with Hermès revamping one of its three Beijing flagships and Prada reopening its East Hampton boutique with a new nautical theme. These openings and reopenings follow the money, with the Middle East and China continuing to represent the biggest growth spots for millionaires.
In April, Kate Spade opened a new café concept within Bloomingdale’s at Dubai Mall, welcoming shoppers to relax and unwind within the brand environment. It’s not the only brand seeking new opportunities in the hospitality and leisure sector. In recent years, “branded hotels” from the likes of Fendi and Armani have continued to emerge as new touchpoints for luxury fashion brands away from the retail arena. In Dubai, Ferragamo collaborated with Bungalo34 at the Pearl Jumeirah, where the luxury footwear brand served up Italian-inspired cocktails and cuisine. In May, Michael Kors took over Joia Beach Club in Miami for a week. While in the Innovation chapter, we continue to explore the experimentation with virtual worlds and the impact of immersive phygital experiences, it’s clear that the charm of the physical space remains an important way for brands to define themselves and connect with consumers — even in non-sales environments.
Immersive pop-ups thrive while department stores dive
Western hotspots are not being neglected, as proved by Gucci’s new stores in The Grove, LA and London’s New Bond Street, Dior’s architecturally dazzling new Geneva store and Chanel’s first US store dedicated to hard luxury on Fifth Avenue. Pop-ups have also been a bigger priority among several brands in 2024. Notable examples include Zegna’s “Villa Zegna” multisensory experience in New York City, serving to educate visitors about the brand’s namesake founder, and the “House Bali” pop-up from Hugo Boss at Singapore Changi Airport, featuring a magic mirror with virtual wardrobe and guest appearances from local poets and other creatives.
The coming year will see new wholesale partnerships and some signs of recovery in the department store channel, which struggled for several years. Macy’s plans to shutter 150 stores over the next three years is a case in point. In June, Kadewe, Germany’s most famous department store, was acquired by Thailand’s Central Group after filing for administration earlier this year. Rival Karstadt also faced insolvency — for the third time. Yet, there are some glimmers of hope. The Saks-Neiman mega-deal, which is poised to welcome Amazon and Salesforce as investors, will reinvigorate interest in multi-brand distribution. Next year will also see the arrival of Parisian department store Printemps in New York. However, as many luxury brands continue to prioritise DTC, especially online, those who remain dependent on department store exposure will begin to see even more competition from independent luxury brands seeking to gain a greater physical presence.
Establishing new e-commerce territories
The focus on physical is, unsurprisingly, coupled with increased efforts in e-commerce. A noteworthy development is the number of brands accepting new local currencies via their e-commerce sites. Among them, Longchamp and Etro have both begun accepting Brazilian Real, while the latter joins Tod’s in accepting local currency for several Middle Eastern territories. Both Etro and Zegna have made a concerted effort to establish new owned website offerings in Saudi Arabia and Kuwait.
While the Middle East has long proved itself as a vital growth market for luxury, especially at a time when interest from China has been waning, the renewed investment in Brazilian touchpoints indicates the mounting opportunity luxury brands have identified there. Incoming tax reforms and improvements in the logistics infrastructure are making Brazil more viable — and an increasingly attractive market for luxury brand expansion, especially as consumer demand for luxury remains incredibly high. As this market gains spending power, the importance of customer service grows.
Sixty-four per cent of luxury shoppers within the market place importance on a loyalty programme, versus 59 per cent of global consumers.
AI is also playing a significant role in not only improving the prospects of luxury in emerging markets but also facilitating new relationships between them. It’s a trend that isn’t limited to top luxury performers. For example, Metro Brazil, the Brazilian luxury shapewear specialist, has launched an AI-driven e-commerce platform in Dubai, complete with an AI-powered smart fitting room to help shoppers find their perfect fit. It’s another example of up-and-coming luxury brands borrowing from the playbooks of long-established luxury specialists like Brunello Cucinelli, which also unveiled a new AI-powered e-commerce site in the summer. It uses generative AI to immerse visitors in the philosophy of the brand’s founder.
Whether it’s themed pop-ups or cutting-edge e-commerce platforms, these investments all have one thing in common: the provision of an elevated, interactive experience that boosts storytelling and cultural relevance around the brand in question. In the flaky, fragmented attention economy, these approaches all serve the purpose of enhancing the emotional connection consumers forge with brands, giving them a reason to engage well beyond the path to purchase.
The new look of loyalty: Bosideng
While luxury labels inevitably use incentives to reward their VIP customers, luxury loyalty clubs are typically opaque, with store staff and concierges dedicated to cultivating personal relationships with top spenders. Some brands, like Gucci, have designated VIP spaces at boutiques. Yet conventional points-based loyalty programmes are rare in the premium fashion space. Chinese luxury outerwear brand Bosideng is one of the few to have launched a loyalty programme with a transparent tier system.
Shoppers can sign up online and earn points on purchases. Additionally, members can receive points on their birthday and as a reward for engaging with the brand online, for example by following Bosideng on TikTok or Instagram. Shoppers receive points when they post product reviews and the brand also has a referral scheme, offering 10 per cent discounts when you refer a friend. The new initiative serves multiple purposes, encouraging shoppers to not only buy more but also interact with Bosideng in the digital space and contribute to positive reviews of the brand. The loyalty programme has clearly segmented VIP tiers — silver, gold and diamond — which enables it to segment shoppers between occasional customers and loyal fans. Over time, the programme will enable the brand to glean valuable data on its members’ spending behaviour.
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