Why aren’t Luxury Fashion Brands driving in store (offline) sales as much as “everyone else”?

Read an article in Mashable titled “Social Media Fails to Drive Sales for Fashion Brands. Now What?” this morning; and sure, having a story appear in Mashable suggests no truly deep analysis will be in the piecemore of a social “bubble gum” treatment, still Lauren Indvik, Mashable’s associate business editor, got me all riled up and excited at the same time ( if that was her intention, she succeeded).

Volumes could be written (including my next ClickZ article in Converged Analytics appearing later this month) about why some brands and industries get high return on marketing technology investment and others, not so much.

First, not intending to nick-pick Lauren, but the title of the Mashable post is inaccurate – it not “Fashion Brands” but “Luxury Prestige Brands who are retailers” that are having more than average level of difficulty leveraging investments in digital online presence (particularly on Facebook) to in store sales according to L2 Thinktank (Luxury Fashion retail brands could be considered a subset of the former).   Also, the L2 research she cites talks just about the failure of digital to drive in-store profits, not profitability of online efforts for online customers.

Should we expect a “Facebook Store” to drive a lot offline sales?  Does anyone expect this?

Sure, online sales, esp in Facebook, yes – but “offline sales”?

So, if we just forget about where the profit is coming from (online or offline) – I want to examine the main point of her article – which is why Fashion brands aren’t  leveraging technology investments to drive business profit via Social Media as well as your “average brand” (see “site features promoting brick and mortar, below)?

I think L2’s analysis is correct “for some luxury brands, this deficit isn’t necessarily ignorance but stems from the fact that they’ve outsourced e-commerce to a third-party the way Dolce & Gabbana and Zegna have with Yoox”.

My POV – this lack of leveraging technology effectively for ROI (one can argue if investments are really being made  when technology enabled fulfillment is “outsourced” to being with – where was the investment? Perhaps the investment wasn’t really made where it should have been) something that can happen to any brand that outsources control of e-commerce to a third party.

“This decision, while it may make financial sense on one hand, results in the brands’ inability to provide basic services such as brand-tailored customer service and “buy online, return in-store,” a highly popular option with customers that is currently available at three-quarters of the retailers in the study.” – L2 Thinktank

site_features_promotingb&m

The typical “Luxury” brand – based on the chart above – is about half as successful driving “in store” sales of their expensive merchandise as an inexpensive and “Aspirational” brand is (entirely side stepping the issue that a more expensive item of merchandise is a “considered purchase” and the decision to buy it might take a bit longer to make, since most of us don’t have an overflow of money dropping out of pockets).

So I’ll peel a couple of layers of the onion and talk about “why” – “why are luxury fashion brands more comfortable out sourcing their technology fulfillment to third parties?  I think one answer is contained in an article Lauren cites.

“It’s no surprise that among those that have been slowest to the multichannel game are the iconic luxury brands that (for the most part) were also last to e-commerce, last to mobile apps, and still lagging in social media fluency. Given luxury’s general lack of e-commerce and m-commerce sophistication (no cart continuity, limited stock availability, quick shipping/returns, etc.), it is a safe bet that the highest end of high-end brands sell even less than 10.6 percent of their sales online“.

Let’s say this more simply as I did on my Facebook page post (which I’ll soon be able to embed, so I hear) …

“We know FASHION and social media go well together - but FASHION Folks aren’t particularly interested in technology – lets go so far as to say their interest in technology is “Skin Deep” and full frontal.”

And while we can certainly debate  the necessity or not of having an active interest and curiosity about technology and analytics – when it pertains to “Art” and “Fashion” – we also have to admit “the medium is the message” according to McLuhan.

To use online media effectively, including technology implementations that drive profit you should be very interested in those things (and having it done well or not) – along with the Art and Fashion.

But that’s not the picture that Facebook’s own Graph Search paints of your typical Fashion person (stakeholder or customer)  – they’re not interested in technology or analytics – but rather “entertainment” and “lifestyle – cultural“.

Source: WebMetricsGuru Social Intelligence – examining Fashion interest located in the NYC area.

I did another that wasn’t geo-located.

 

What’s important to note in the diagram I shared above is the general dis-interest of people who are Fashion enthusiasts (including people who work at the brands – the stakeholders) in technology (upper left quadrant) – it’s a struggle to find anything in technology – even Twitter and Apple come in late, way down in the Facebook Graph search results.

Is it that Fashion Brands don’t want to be bothered with technology?

So maybe the wrong question is being answered by Lauren’s article –  forget about why Luxury Brands or Fashion Brands aren’t realizing as much return on investment on their social media and online technology investments - it’s obvious, regardless of your technological maturity (or the lack thereof) depending on third parties has it’s pros and cons – and one of them happens to be giving up a bit of control – control that’s needed to make things really happen to create fuller ROI.

Rather – the question we should be asking is …

Why  “Luxury Brands” or “Luxury Prestige Brands who are retailers  – uncomfortable with the necessary technology investments, or perhaps, social and  technologies itself?  Are they so “uncomfortable that they’d rather outsource the darn thing or just ignore the details?

Let’s go with the Counterfactual – if that’s the right term – what about those brands or industries  driving more profit from their online investments – are they inherently more interested in technology and analytics?

My contention is that they are (more comfortable) and that’s why they are able to envision business processes that lead to more return on investment.  And perhaps, they’re also investing more in analytics within social media and online retail to begin with.

So the answer  to Fashion’s issue with ROI might really lie in better education and “cultural DNA” that needs to evolve.

Lets go back to the Counterfactual – who is driving profit – what’s their interests look like? Is technologies that enable effective use of social media and analytics among them?

L2 Multichannel Retail 2013 Report (May 2013) – The L2 Intelligence Report: Multichannel Retail report analyzes how 79 prestige retailers and brands are using digital to drive customers to brick-and-mortar channels. By examining email, site, mobile, and search data, L2 attempts to determine the brands and best practices that are removing organizational and technological barriers and delivering a true multichannel experience.

I don’t have access to L2’s very, very expensive research (wish I did – hint) but if you listen to the video summary of that research report it cites brands hiring multichannel executives – and cites Nordstrom as one of the brands that “gets it” – so the Counterfactual suggests that people who work there (in the right capacity) would have more interest in technology enablement than some of the other Fashion brands that aren’t realizing as much ROI from their online technology investments (or the lack thereof).

So what does Facebook Graph Search say about Nordstrom executives interest?  Gee – Amazon (technology) is right on top!

Source: https://www.facebook.com/search/12854644836/employees/ever-past/108146069213926/job-liker-union/employees/intersect/pages-liked

 

Now, it’s hard to get a query that is going to get exactly what I want – but this is close enough.

People on the “top” – people who are “managing the store” are really “managing the store” because they understand, from what it looks like, how to leverage technology – they have had people who accept and embrace technology.     You can disagree with me that Amazon is really a “technology” interest – though aren’t those the same people who have AWS – the Cloud?

Isn’t Amazon putting everyone out of business these days?

We’ll, no they’re not.

But if you don’t understand Amazon and you’re a retailer who has offline brick and mortar store  you might as well put yourself out of business because Amazon will end up doing it for you, eventually. 

And what is Amazon known for?  Testing – test everything.   They have done it on a more massive scale than just about anyone else save Google.

I was able to get a partial report from L2 on Multichannel – and while I can’t really say this chart (below) is representative of brands that aren’t doing well with the whole Online-Offline technology mix – ROI thing I’m talking about today – it’s a start.

Source: http://www.l2thinktank.com/research/multichannel-retail-2013

 

Look at Victoria’s Secret (who is cited with less than stellar results for Online-Offline)

Source:  https://www.facebook.com/search/79775744089/employees/present/108146069213926/job-liker-union/employees/intersect/pages-liked

 We could dig deeper and deeper (read my ClickZ article later this month) but what it all comes down to – I think – is not that these brands who are “Luxury Fashion” can’t do better – but simply have not embraced the right marketing technology underpinnings – and the reason for that is the people in charge at those brands haven’t really worked out their multi-channel strategies well enough.

And right now – that’s exactly the issue I address with the online Rutgers course I created and the Baruch Web Intelligence course I’m teaching starting late this month.

And if you don’t think this a big problem – look at Dr. Dre – and the 70 million he donated to USC earlier this year.

 

The music moguls, who founded the wildly popular Beats headphone business, are giving $70 million to theUniversity of Southern California to create a degree that blends business, marketing, product development, design and liberal arts. The gift is relatively modest, as donations to universities go. But the founders’ ambitions are lofty, as they explained in an interview Monday in the elaborate presidential dining room on the lush U.S.C. campus.

“If the next start-up that becomes Facebook happens to be one of our kids, that’s what we are looking for,” said Mr. Iovine, an energetic 60-year-old dressed in his trademark uniform of T-shirt and fitted jeans, faded baseball hat and blue-tinted eyeglasses.

The people who run the less “profitable” Luxury Fashion Brands have not, I think, managed to make the connections between what they are designing, marketing and merchandising and the analytics technologies behind it.

It’s not the product that’s the problem.

 

 

 

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