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This is one of the six chapters comprising the Vogue Business Index: Spring/Summer 2023 edition and should be read in conjunction with the others. Please use the table of contents below to navigate between the chapters of the Vogue Business Index: Spring/Summer 2023 edition.
Key takeaways:
- Cutting through the noise in gaming: Luxury brands looking to find a digital world partnership may find it hard to top Burberry’s collab with the best-selling game of all time: Minecraft. Some brands are electing instead to focus on their own branded gaming experiences, but it will be tough to match the standard established by joining forces with other big-name titles, such as Roblox and Fortnite.
- Who will crack AR? An application for AR technology that radically changes the way that consumers, on mass, shop for luxury is yet to materialise, despite clear enthusiasm from brands and supporters. There is hope the answer will be found in digital clienteling, and the race is now on to become the first brand to make this tech useful and appealing enough to become ubiquitous in luxury shopping.
- Any way to pay: Despite the NFT market cooling, brands have not totally given up on cryptocurrency. Ralph Lauren and Kering have recently developed ways for luxury consumers to use Ethereum and other currencies to pay for goods. Brands’ efforts in this and other emerging payment forms are good for consumers but come with regulatory risks if brands don’t keep abreast of fluctuating rules.
Gaming the system
The most innovative luxury brands have not been shy about their growing love for gaming. Gucci, once again leading in the innovation pillar, recently launched the first cross-brand collaboration in virtual world Roblox by linking up with iconic skater shoe brand Vans. Second-placed Burberry meanwhile came together with the best-selling video game in history, Minecraft, late last year, for a physical capsule collection and in-game adventure.
Despite these high-profile examples, there is evidence that some fashion brands’ appetite for collaborating with game developers is waning in favour of going it alone. The number of active collaborations has decreased since October from 25 per cent to 22 per cent. At the same time, the share of brands offering their own branded gamified experiences has gone up from 18 per cent to 23 per cent.
Chanel’s Moon Walk game, launched for the holiday season, ranks among the most notable new examples. Carolina Herrera marketed its 212 Fragrance with a skateboarding game (complete with little Ukrainian flags offered as collectibles), while metaverse enthusiast Kenzo offered fans the chance to win a ticket to Paris Fashion Week by playing their own seasonal virtual adventure. All of these activations are linked to traditional moments in the fashion calendar, demonstrating the continued dominance of fashion weeks as periods of high investment, even as the marketing experiences become ever more innovative.
A preference for solo-branded gaming experiences makes sense, given the desire for high levels of control in marketing efforts. In principle, brands should be able to fully realise the look and feel of the virtual worlds they are creating, as well as ensure that the gameplay and mechanics match their own brand values. In reality, it’s not so easy. Making good games can be expensive and hard, with the final product often falling short of comparable efforts by specialist gaming studios.
Nevertheless, there is still a chance for significant reward. A successful game can underline a brand’s status as a digital innovator; it can also keep attention on the brand for longer. If a shopper plays and completes a game in a virtual store, their time spent in the virtual store increases by 367 per cent. Eight of the 14 brands that have made their own games perform at or above average in terms of how luxury consumers rate the digital experience they offer.
The challenges of AR innovation
Experimentation in augmented reality (AR) and virtual reality (VR) is growing fast. Nearly half (48 per cent) of brands now have some sort of AR or VR application, up from 43 per cent from the recent winter edition of the Index. Thanks, in part, to the extensive efforts of tech industry players like Snap Inc., AR try-on is becoming an important tool in many brands’ lockers, though it remains limited in scope.
The preferred use case still seems to be accessories and footwear. Snap has recently been helping Tiffany capture the sparkle of diamonds more accurately while giving Cartier fans a historical tour of their watches when they try a virtual timepiece on. Coach’s AR try-on window has brought the technology to stores and quickly captures the attention of passing consumers. And yet, the dream of a try-on app with realistic apparel rendering is yet to materialise. It may come from outside luxury, given recent efforts by Snap and mass market retailer H&M in collaboration with the Institute of Digital Fashion, although these one-of-a-kind otherworldly looks sought to expand the expressive possibilities of fashion, rather than dress people in digital renders of real clothes.
There have been hiccups for brands that have been experimenting with the tech, with a number facing recent legal difficulties around the collection of biometric data through AR try-on apps.
Even so, the potential for a more holistic digital experience that includes virtual changing rooms seems a clear target for many brands. The share of brands now offering virtual consultations has increased from 47 per cent to 50 per cent since the last edition of the Index. Boss, the millennial-focused segment of the Hugo Boss group, recently demonstrated its commitment to the see-now-buy-now approach, and workable virtual try-on could be one additional lever to get consumers to commit to purchases they have only seen on the runway.
Not everything needs to be explicitly commercially driven either, with Balenciaga recently launching an AR experience to demonstrate the importance of regenerative agriculture in honour of Earth Day.
What do consumers make of all these activations? Survey responses show that luxury consumers express more enthusiasm about brands’ presence in digital fashion through efforts like AR try-on (36 per cent say it’s important) than they do about projects in virtual worlds such as collabs with gaming studios (24 per cent). This suggests digital efforts that bring consumers closer to the physical clothes they love may gain stronger traction.
Fashion cools on NFTs
The decline of the NFT market has coincided with a clear stalling of brand interest in the emerging technology space. For the first time since Vogue Business started tracking adoption, the share of brands offering an NFT in the previous 12 months has declined slightly from just over 28 per cent to just under 27 per cent.
This reflects the tone at the latest Metaverse Fashion Week, which Vogue Business reported had a greater focus on quests and giveaways than digital fashion shows, with lower attendance than the 2022 edition. When fashion brands started launching NFTs during the booming sales period, the guaranteed financial returns seemed obvious, but now that is less clear, brands need to figure out whether or not this technology has a lucrative role to play in fashion.
Driving customer loyalty through exclusive invites and digital collectibles that reward engagement is one such approach. Ralph Lauren recently gave owners of the Ralph Lauren x Poolsuite NFT access to a three-day event in the Miami Design District.
Enhanced traceability remains another innovation that luxury consumers are most excited about, with 47 per cent expressing enthusiasm. NFTs were, by contrast, rated lowest by luxury consumers of all the innovations they were excited about (21 per cent). However, NFTs do not have exclusivity over the function of traceability, with other more accessible technologies, such as near-field communication (NFC) chips, also vying for a slice of the action. The potential connection between NFC technology and traceability is covered in more depth in the ESG chapter.
While this consumer apathy and the wider decline in enthusiasm for NFTs could make it easy to dismiss the experiments that brands have made thus far, there is little doubt that these forays are helping brands to engage with their audiences and create unique experiences, particularly when it comes to building community and loyalty. China also remains relatively enthusiastic about NFTs, by global standards, despite significant government restrictions on trading. Brands continuing to work with NFTs should focus on retaining and engaging these exciting new consumer segments.
Alternative payments bloom
Miami is becoming a hub for brands looking to push new strategies. The Boss see-now-buy-now show took place in the Florida city, and Balmain unveiled its metaverse mansion Villa Balmain in the same locale as part of Art Basel Miami. Now, on the heels of its NFT launch, Ralph Lauren has also decided to allow payments in cryptocurrency in its Miami store. These efforts, alongside the introduction of virtual consultations, mean Ralph Lauren jumps four places to enter the top five most innovative brands.
It joins a minority of brands (7 per cent) that allow the alternative form of payment, although most are restricting it to certain stores or specific cryptocurrencies. Kering also recently showed its support for crypto payments through the launch of its new KNXT platform, where consumers can pay for products in Ethereum.
Much more common now is the use of buy-now, pay-later (BNPL), which 57 per cent of brands now offer as a checkout option in our UK test market. Versace is among the most recent luxury names to allow consumers to pay in instalments, reflecting its significant popularity among younger consumers.
BNPL has attracted added scrutiny during the cost-of-living crisis, and the UK, US and EU are all lining up regulation for it in the near future. Brands should be able to adapt once the rules become clearer. Payment service providers were keen to delay the introduction of multi-factor authentication when it was introduced as part of a new EU package of payment regulation (PSD2), but it is now a common part of shopping online for many in Europe. Tuning in closely to any regulatory changes around BNPL is still key to ensure brands continue making the most of this increasingly popular way of paying for luxury goods.
Case study: Canada Goose and circular outerwear
New forays into rental and resale have propelled Canada Goose up 15 places in the innovation rankings to enter the top 10 most innovative brands. Famous for its high-quality weather-protective parkas, the outerwear brand has partnered with tech firm Trove to develop its own resale platform. Shoppers will be able to buy and sell used parkas and other Canada Goose products on the Canada Goose Generations site.
Those in the UK unwilling to commit to a new or used purchase will also be able to rent Canada Goose from department store Selfridges. Prices will start from £55 for four-day rentals.
The technical qualities of outerwear, which require an enduring build, seem to make the category a natural fit for resale and rental. Consumers remain more enthusiastic about resale than they do about almost all other innovations in the luxury sector, with 47 per cent expressing enthusiasm (34 per cent say the same about rental).
It also makes sense for Canada Goose to pursue resale as a brand which lags behind outerwear rival Moncler in terms of how innovative consumers feel the brands are. By targeting resale, Canada Goose is expanding its audience while also underlining its strong digital capabilities in a bid to change its narrative.
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