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Digital Luxury how digital integration can add value to the luxury shopping experience

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Misfit Ray Premium Fitness + Sleep Tracker


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A C K N O W L E D G E M E N T S

September 2017 marks the end of my thesis and the end of my journey as a masters student at Northumbria University. To begin, I would like to declare that this thesis has been created in partial fulfilment of the requirements of Northumbria University’s Design Management masters program. I declare that the contents of this thesis are entirely my own. This work contains references, literary ideas, and opinions of others that add value to the context, however, are all cited and referenced correctly according to University guidelines. This thesis has also been submitted to a plagiarism service as part of the University’s anti-plagiarism procedures. In addition to this, any primary information obtained through interviews has been conducted with the written consent of the parties involved. Publication of this thesis on my website as part of the submission has also been agreed upon by third parties involved. To everyone participating in the process of this study and throughout my whole MA journey, I would like to express my deepest gratitude. Without the support of the many parties involved, I would not have gotten this far and have had such a wealth of experience. I would like to especially thank my parents, Rizal Jogiastra and Christiana Indrayanti, for their unending support and faith in me. I would also like to thank my supervisor, Mersha Aftab, for being the most helpful supervisor a student can ask for. It was only through her guidance, knowledge, and support that I was able to get this far. While I only had the chance to be under his supervision for a little more than one semester, Bruce Montgomery’s guidance and knowledge have helped me not only learn more about fashion but gain confidence in my work and opinions. To all the friends I’ve made while in this course, thank you for being with me throughout the whole journey. I hope that we will someday meet again! Thank you for making my time in Northumbria as enjoyable as it was.


F O R E W O R D

“Luxury is in each detail” Hubert de Givenchy

Fashion represents creativity, inspiration, and a cultural époque. An article of clothing can say a lot about not only its designer, but also the time and era that it was from, conveying a story that has been weaved into its every seam. It is also, however, a business that requires strategy and management unlike any other, which is especially complex for luxury as it is centered on humans, emotions, and value. As Renzo Rosso states, the current state of fashion presents a wide range of challenges fueled by the increasing sophistication of customers, the constant need of innovation, the crucial importance of meeting specific numbers in order to grow, micro-segmentation, an increasingly saturated industry, and the shortage of professionals who are able to “manage creativity” (as cited in Corbellini & Saviolo, 2009). Mismanaged creativity, as seen with the influx of designers leaving their houses despite continuously creating beautiful designs (as with the case of Alber Elbaz who recently opened up about his dissatisfaction after “finishing a collection and being half dead and knowing that you’re late with the next collection” [as told to Edelson, 2016]). There is also the issue of loss of quality due to mass producing goods, especially leather goods within luxury brands to increase manufacturing speed and meeting consumer demands (Thomas, 2008). It is clear that design management within fashion is pressingly needed. With the entrance of digital into the fashion picture, a concept of New Luxury has emerged where it is accessible from everywhere yet always exclusive. Despite luxury being constantly associated with innovation and being ahead of the fashion curve, it is surprisingly slow in adapting to the changing habits of consumers worldwide. The case of digital luxury is one that is increasingly garnering attention and media, but is still lacking in solid empirical studies. In the words of Federico Marchetti, founder and CEO of YOOX group, “In the end, the Internet isn’t so distant, different or difficult to understand. The rules of the game online and offline are the same. When all is said and done, my job is the oldest in the world–I’m a shopkeeper. As far as customers are concerned, it’s no different.”


A B S T R A C T

Digital is ‘now’, but how can luxury capitalise? Luxury fashion is in a state of revolution where the industry is seeking to cater to the changing consumer base. In the midst of a fluctuating fashion scene as a whole, more the ever the fundamentals of luxury are being tested: quality, desirability and uniqueness, healthy margins, and the ability to engage and cater service excellence through multiple channels (Mallevays, 2017). According to the e-Retail Sales Index from Capgemini and IMRG, online retail sales in the UK alone peaked at £133 billion in 2016 with a 16% increase from 2015, beating expectations (BI Intelligence via Business Insider UK, 2017). Goldman Sachs Equity Research forecasted that digital transactions will equate to 36% of overall transactions by 2025 and that the majority of said percentage will be made on the brands’ own site. This presents a great opportunity for luxury brands to engage in e- and m-commerce and aims to create synergy between tangible stores and online stores. According to Popomaronis (2017), however, as of February 2017, about 40% of luxury brands are still not selling online, and with those that do, frequently do not offer the full collection to purchase online. There is also the problem of having digital channels that would otherwise be irrelevant to their primary customers and do not add enough value. This study seeks to look at how brands can successfully integrate digital into the business model to add value to the experiential shopping experience. Case study analysis in addition to literature analysis and expert opinion was used as the design methodology with data was collected from various luxury fashionfocused sources. Results were then used as analytical tools to modify an existing luxury path-to-purchase model by Deloitte to make a digital integration framework usable luxury brands. The framework takes into account the different structures and channels the brand has in place. This study embraces the idea of ‘new luxury’ with the changing view of accessibility vs exclusivity. It also acknowledges the changing role of the customer in today’s businesses and places clients at the centre of the framework. The findings of this research have significant implications for companies looking to integrate digital into their businesses as well as scholars who seek to delve further into digital luxury. By addressing not only the elements essential to digital luxury but also the changing habits of the luxury clientele, this study can prove to be beneficial to drive growth and stimulate customer experiences.

Keywords: Luxury fashion brand management, digital luxury, brand evolution, digital strategy, design management.

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Con tents

PROJECT INTRODUCTION My Learning Journey Research Question Aims of the Study Objectives of the Study Problem Space METHODOLOGY Research Methodology Research Methods PA R T 1 : P U T T I N G L U X U R Y I N P E R S P E C T I V E The Framework: Changing Luxury’s Path-to-Purchase Luxury: A Problematic Definition The Values of ‘True Luxury’ The Slow Evolution of Luxury Retail The Road to Omnichannel Luxury PA R T 2 : C A S E E X A M P L E S Moda Operandi: The Luxury Retail Disruptor Burberry: The Omnichannel Pioneer PA R T 3 : R E S E A R C H F I N D I N G S Findings: The Case for Digital Value Creation Framework Development Framework in Context PA R T 4 : D I S C U S S I O N & C O N C L U S I O N Growing Value Creation in Luxury Discussion Recommendations Reflection REFERENCES BIBLIOGRAPHY APPENDICES


Moda Operandi New York Showroom ‘Moda Madison’


Apple Watch Hermès


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F I G U R E S

F I G U R E 1 - Evolving percentages of brick-and-mortar vs digital transactions for branded goods

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F I G U R E 2 - Chart comparing conclusive and exploratory researches

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F I G U R E 3 - Research design

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F I G U R E 4 - Deloitte’s luxury path-to-purchase used as the base of the framework

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F I G U R E 5 - Fashion hierarchy by Posner

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F I G U R E 6 - Luxury fashion hierarchy by Corbellini & Saviolo

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F I G U R E 7 - Luxury value chart by Hennigs et al.

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F I G U R E 8 - Evolution of retail channels and systems

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F I G U R E 9 - Digital abandonment rate per/second based on Amazon data

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F I G U R E 1 0 - Moda Operandi’s app featuring the stylist messenger

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F I G U R E 1 1 - Moda Operandi’s exclusive stylist services

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F I G U R E 1 2 - Moda Operandi’s personal stylist roster

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F I G U R E 1 3 - Luxury fashion hierarchy by Corbellini & Saviolo

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F I G U R E 1 4 - Omnichannel retail barriers

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F I G U R E 1 5 - Burberry’s business model chart

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F I G U R E 1 6 - Burberry’s scarf bar for personalisation & customisation

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F I G U R E 1 7 - Monogrammed Burberry heritage trench coat

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F I G U R E 1 8 - ‘ Burberry Bespoke’ monogrammable fragrance range

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F I G U R E 1 9 - Digital integration framework for luxury fashion

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F I G U R E 2 0 - Original Deloitte ‘framework’

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F I G U R E 2 1 - Shopping experience quadrant extracted from Deloitte’s chart

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F I G U R E 2 2 - First framework design

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F I G U R E 2 3 - Current framework design

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I N T R O D U C T I O N

Project Background


P E R S O N A L

L E A R N I N G

P L A N

My learning journey up to this point has been very insightful and eye-opening. Coming out of my Bachelor’s degree in Graphic Design, I craved more knowledge and was wanting to learn about fashion. I felt a void that needed filling–I wanted to know how the business works and what someone with a background in graphic design like me can do. In the first semester of design management, I decided to focus not only on fashion but the luxury industry and luxury fashion. The research that I did to kick-start my journey involved trying to redefine what luxury fashion means to today’s consumers and what defines ‘true luxury’. This research led me to my second project which included a case study about Kering and Christopher Kane. The case study looked at how luxury conglomerates help formerly independent brands grow through acquisition and the capital and support provided by the parent company. It was through this case study that I was able to identify the importance of digital integration in luxury companies not only to make processes more efficient while still maintaining craftsmanship, it is also important as a means to speak to today’s audience. From the past two projects I have worked on as well as the other two from Design Thinking/ Design Process modules, I learnt how to utilise design thinking to come up with creative solutions to an existing problem. Throughout this project, it became almost innate to me to use the things I have learnt in my analysis and thought processes. Value creation is something that is instinctual in designers–we design to add value. In addition to this, I have also gone and did an internship for one month during winter break in BrandOpus London, where I learnt more about strategy and branding. With all that has been discovered throughout the year, the knowledge forms a strong triangulation leading to my final project which includes a bigger proposition based all of my previous work. The full PDP progression can be viewed in the appendices.

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R E S E A R C H

Q U E S T I O N

“How can digital integration add value and enrich the luxury fashion shopping experience?�


Aims of the Study This study aims to research comprehensively the elements required to create a seamless and organic digital integration in an elegant framework for luxury companies. The framework would aim to address issues regarding the inconsistent use of digital channels as well as the irrelevancy in certain channels for different companies. As stated in the Problem Space section of this paper, 40% of luxury brands do not offer e-commerce and with a younger average age of luxury shoppers, down from 48 to 34 (González as cited in Popomaronis, 2017), it is imperative for luxury brands to cater to these nouveau riche millennials to drive growth that is sustainable. In addition to polishing the framework to ensure applicability in real-life scenarios, this study also aims to see the implications of digital integration through case studies of two very influential and many consider to be successful brands. Through these two case studies, the framework is not only tested, it is also made sense through tangible results as seen in the two cases. Moreover, this study aims to complete my 3-semester long plan to become a balanced creative entrepreneurial design in the fashion and beauty sector and investigate new possibilities in the luxury sector. Semester one’s research focused primarily on redefining the values of luxury fashion while semester two was a case study on Christopher Kane, a young luxury fashion label under French luxury conglomerate Kering to identify acquisition benefits and gaps to fill as well as the elements due for improvement within Christopher Kane in order to bring value to both the brand and its parent company, Kering. During the case study, it was identified that Christopher Kane was still lacking in terms of digital integration, only doing so with the help of Kering Corporate with a shared infrastructure. The shopping experience online and in-store was identified as disconnected in the case study. This study aims to aid companies like Christopher Kane who is still in the process of digital integration to build an even more solid digital infrastructure to drive growth that, to the customer, would feel organic. For myself, research of this topic would hopefully give me an edge in my career pursuits as it is a case that is being widely discussed but with very few design management and creative management perspectives. The problem of ‘what’ is reaching saturation within research but the ‘how’ presents a gap that is important to fill. This research aims to fill that gap.

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Research Objectives The objectives of the study are as the following:

Determine problem space Identify framework Conduct case study Extract information through the case study to determine the elements of the framework Through case study analysis, reshape the framework and adapt into a usable format

Through these objectives, a concrete knowledge of how to successfully integrate digital into luxury fashion can be obtained along with a theoretical framework that can be presented to experiment on in real time.


Problem Space

Figure 1: Evolving percentages of brick-and-mortar vs digital transactions for branded goods (Deloitte, 2016)

When luxury e-commerce site Net-aPorter’s founder Natalie Massenet first came to investors to propose her business concept, there was a lot of reluctance met from investors. At that time (circa 2000), designers and luxury conglomerates were convinced that people would never seek to buy luxury products online because the experience would never be on par with the tangible experience of visiting a real store. As such, the industry was slow to respond. As of FY 2016, Net-a-Porter is worth €105 million rising from €62 million at the end of FY 2015, nearly doubled in growth. Meanwhile, a lot of other luxury brands who employ more conventional strategies are struggling to stay relevant especially with the rapid improvement of high street fashion along with their premium branding strategies. In the midst of a fluctuating fashion scene as a whole, more the ever the fundamentals of luxury are being tested: quality, desirability and uniqueness, healthy margins, and the ability to engage and cater service excellence through multiple channels (Mallevays, 2017). According to the e-Retail Sales Index from Capgemini and IMRG, online retail sales in the UK alone peaked at £133 billion in 2016 with a 16% increase from 2015, beating expectations (BI Intelligence via Business Insider UK, 2017). Goldman Sachs Equity Research forecasted

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that digital transactions will equate to 36% of overall transactions by 2025 and that the majority of said percentage will be made on the brands’ own site. This presents a great opportunity for luxury brands to engage in e- and m-commerce and aims to create synergy between tangible stores and online stores. According to Popomaronis (2017), however, as of February 2017, about 40% of luxury brands are still not selling online, and with those that do, frequently do not offer the full collection to purchase online. It is clear that luxury needs to reinvent itself to cater to today’s consumers. Even more importantly, the integration of digital into the shopping experience needs to feel organic and wholesome–the digital space needs to be part of the brand’s infrastructure. As such, a sustainable framework is to be put to the test to see which methods of digital integration can add value to a brand and drive growth. This paper seeks to form a framework based on a path-to-purchase model by Deloitte (2016) detailed in Part 1: Putting Luxury Retail in Perspective, modify it to focus on the retail experience, and through theoretical case studies apply the elements of the framework to see how it fares in real case scenarios.


M E T H O D O L O G Y

Research Methodology


Research Methodology A strong research design requires a research paradigm congruent to the researcher’s view of reality and its nature (Mills et al., 2006). According to Collins (2010), a research paradigm can be seen as a vehicle or tool in which to see the world in–which in this case means the subject, environment, data, etc. Collins likens it to a camera lens that, through different lenses, the same subject can be seen differently and convey different meanings. According to Scotland (2012), a paradigm consists of ontology (the study of being [Crotty, 1998, p. 10 as cited in Scotland, 2012]), epistemology (what it means to know; the nature and forms of knowledge), methodology (the plan of action), and methods (specific procedures of research [Crotty 1998, p. 3 as cited in Scotland, 2012]). Each paradigm is unique in their ontological and epistemological views which is then reflected in the methodology and methods used. While there are many types of different paradigms, the most common used in creative research are positivism and alternative paradigms such as constructivism, interpretivism, critical theory and phenomenology. Positivism relies on factual knowledge and data while social constructivism, for example, includes human thoughts and interests as part of the research. Constructivism is, like its name suggests, building understanding through research much like ‘construction work’. Constructivist theories deny the existence of an objective reality and that realities are constructions of the mind–that humans give meaning to objects of research (Guba & Lincoln, 1989 as cited in Mills et al., 2006). As such, the ontological perspective of constructivism is relativism where reality is individually constructed, thus differing from person to person. In the words of Scotland (2012, p. 11), “a tree is not a tree without someone to call it a tree”. Interpretivism is defined as part of the wider scope of constructivism and is referred to as inductive or qualitative research. According to Creswell (2009, as cited in Scotland, 2012), interpretive methodology seeks to understand phenomenon from an individual’s perspective; investigating social interactions as well as cultural and historical contexts through methods such as case studies, which is used in this paper, phenomenology and ethnography. Due to the nature of this study, constructivism is the most suitable research paradigm to adopt due to the study putting a lot of emphasis on human interactions and consumer behaviour as it seeks to find what is valuable for the consumer. Luxury itself is the very product of constructivism where it is only considered luxury because humans give meaning and value to it. The methods of constructivism are qualitative as opposed to quantitative, gathering data from sources relevant to luxury fashion–especially because there are common misconceptions about luxury fashion that only those who have been exposed to luxury might otherwise have understood.

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R E S E A R C H

M E T H O D O L O G Y

The study in this paper seeks to explore the methods of which luxury fashion can integrate emerging technology to enrich retail value for the customers. Through exploring the different methods in an available framework, a case study is then used to validate those methods looking at brands who are already at the forefront of luxury retail innovation. As such, it can be said that knowledge is enriched through exploration, thus making the research an explorative research. Dudovskiy (n.d.) states that exploratory research intends to explore the research question, providing several solution routes to the problem and is not final or conclusive, instead is more malleable in nature through the deep understanding of the problem space and possible solution space.

Figure 2: Chart comparing conclusive and exploratory researches (Dudovskiy, n.d., accessed from: http://research-methodology. net/research-methodology/research-design/conclusive-research/)

Digital integration and emerging technologies within the luxury industry can be said is still in its early development stages and as such is tackling a new problem for which there is little previous research for (Brown, 2006 as cited in Dudovskiy, n.d.). The issue with explorative methodology is that it is subject to bias. The same can be said about the constructivist paradigm which because of the fact that it constructs its own reality and knowledge its validity can become an issue. To avoid this bias, information is gathered from multiple sources, adding validity and viability into the data gathered.

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Research Methods The different methods used within this research are:

Literature review Critical analysis of current events and news Theoretical case study Framework analysis of case study subjects Expert interviews

The literature review includes current available knowledge and findings of digital luxury, which builds the foundation of knowledge of the subject. According to the Royal Literary Fund (n.d.), the literature review has four primary objectives; to survey current literature, synthesise information into a summary, critically analyse information to identify gaps in current knowledge, and to present literature in an organised way. As such, the literature review in this thesis will be categorised into sub-sections that explore the different contextual data related to digital luxury to construct valuable knowledge. The literature review uses both data published in journals and books, however also uses updated news about the topic as digital luxury is still in progression and a lot of valuable knowledge lies in the current news. A theoretical case study, a form of case study used frequently by marketing and trend analysts, takes in secondary resources on a particular case to critically analyse it in the given context. According to Flyvbjerg (2004 as cited in Løkke & Sørensen, 2014), case study is advantageous as it can provide an in-depth view on real-life situations and test views directly in relation to the context. In this case, the case studies will provide insight on how the framework can be shaped into something that is viable in real-life situations. This thesis uses the case study not only as additional secondary research, but also to learn from the past experiences of successful digitally-integrated brands and translate the knowledge into the framework. To support the case study and literature review, an interview with several experts in the field was also done. From the interview, a lot of valuable information was obtained especially regarding what the industry is not thinking about and the key to successful digital integration. The interview was done with the people at VERB, an industry insider specialising in digital luxury. This serves as the final layer of information to finally shape the framework from its first stages and into the final stage.

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P R O B L E M S PA C E 1 : How luxury can innovate meaningfully through digital integration

ISSUE: Luxury industry & digital integration

L I T E R AT U R E REVIEW

Collecting past knowledge/ Pre-research mind mapping

P R O B L E M S PA C E 2 : How luxury brands can transform retail experiences through digital integration

P R O B L E M S PA C E 3 : How digital integration can add value to the luxury shopping experience

FU T U R E A P P L I CAT I O N

3RD PHASE

2ND PHASE

END PHASE

INTERVIEW

INITIAL F R AM EWO R K D ES I G N

VA L I D A T I O N THROUGH CASE STUDY AND THEORETICAL A N A LY S I S

F R AM EWO R K R EWO R K

1ST PHASE

CASE STUDY

REFLECTION

Figure 3: Research design & progression chart

D ATA A N A LY S I S


Invertex’s 3D-scanning technology for shoes

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P A R T

O N E

Putting Luxury Retail in Perspective

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T H E

F R A M E W O R K

Changing Luxury’s Path-to-Purchase “Empowered by social networks and digital devices, luxury goods consumers are dictating increasingly when, where and how they engage with luxury brands.” – Deloitte, 2016

Figure 4: The evolution of luxury customers’ path-to-purchase (Deloitte, 2016, p.10)

The luxury path-to-purchase have changed and evolved, creating room for a wider range of different channels. Deloitte explored the luxury path-to-purchase in a chart showcasing the different channels across yesterday’s, today’s, and emerging technology. The chart above shows the luxury path-to-purchase starting from awareness to after-purchase service. For the purpose of this study, this chart is adapted into a theoretical framework which encompasses the luxury path-to-purchase with a focus on the retail-level. As such, although the concepts in the chart work in synergy with each other, some parts of it will be omitted to ensure relevancy and the chart will be adapted into a framework of emerging digital integration within luxury fashion.

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T H E F R A M E W O R K : C H A N G I N G P A T H - T O - P U R C H A S E

L U X U R Y ’ S

Within the original framework, the customer’s journey begins with product or brand awareness which is separated into three evolutionary stages. Print media, television, and word-of-mouth is considered yesterday’s technology, evolving then into social media, smart search, iBeacons, and the one brands are keen to focus on, bloggers. In emerging technologies however, in addition to advocacy and travel channel innovation (of which the travel aspect has been noted as one of the key forces of luxury [Deloitte, 2016]), celebrity endorsement is considered emerging technology. While there has been a steady increase in celebrity-boosted endorsements and brand collaborations (Crutchfield, 2010), especially with mega influencers like the Kardashians and celebrity-endorsed sneaker culture, celebrity endorsement cannot be said as ‘emerging technology’. The earliest recorded ‘celebrity endorsement’ was seen in the 1760s (a time when royal endorsements were considered equivalent to celebrity endorsements) when the pottery and chinaware brand Wedgwood used royal endorsement as part of their marketing strategy (Almquist & Roberts, 2000). Ever since then, endorsement or marketing using public figures has been a tried-and-tested marketing strategy for a lot of brands. The escalation of social media usage might have made celebrity endorsements look more organic, especially with celebrities making their own brands and being the face of said brand, however, in concept, it is nothing new and as such could not be considered emerging technology. The evaluate & select section details the part of the journey in which customers see the options available to them to then decide what works for them. In terms of evolutionary segmentation, the evolution shows less disparity between stages as most, if not all, channels are available today–albeit changing in structure or explicit definition. Runway shows are in a state of revolution (Rabkin, 2017), trunk shows are being reinvented by Moda Operandi, in-store and online relations are reinventing itself (Sim, 2014) and the role of people’s voices are being reshaped (Weiss as cited in Avins, 2016). Augmented reality is gaining steady popularity with the idea of AR-enhanced dressing rooms. The concept is widely known and is relatively well-received, however, as of time of writing, there has not been a stable, reliable technology that supports seamless AR dressing rooms (Alvarez, 2017; Jiang, 2017). The shopping experience is where this paper will focus most. This section of the consumer journey is when customers are ready to purchase after deliberation in the previous stage. From the evolutionary perspective, the progression is somewhat agreeable, with the exception being that omnichannel within luxury is still emerging and m-commerce, powered by luxury retailers Farfetch, Net-A-Porter and 24 Sèvres, is slowly becoming more common. For the sake of focus, the transact section will not be discussed in this paper. While it is an important aspect of the purchase experience, it is very much a personal decision how customers would like to (or are comfortable with) spend their money and through which methods. Service & advocacy will also be omitted for the purpose of this research because while it is part of the customer experience, it is not an explicit factor and thus, will not be used to keep the paper concise. As seen from the arguments above, an incremental change is to be made to the chart to adapt it to become a framework that could be applied to luxury brands seeking to create an organic digital integration and update the shopping experience.

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L U X U R Y

A Problematic Definition “Some perhaps concentrate on luxury goods; others might believe that the only true luxury is time. Some might associate the concept of luxury with positive feelings, while those who consider luxury to be unnecessary may perceive the word to have negative connotations.” – Brun, 2017

Throughout its history, the term ‘luxury’ has been ill-defined and very dependent on its time and époque. Over time, the definition of luxury has evolved and varied–being seen as possessing both (exclusively or at the same time) negative and positive connotations. Brun (2017) stated that there is rarely ever an agreed definition, rather a perceived notion of what luxury represents or its values. There is disparity in literature where some would define luxury as products that contain precious, rare materials while others would associate luxury with the lifestyle of a privileged elite. Some people would even consider any expensive product of “at least two or three times as much as a cheaper version” (Brun, 2017, p.2) to be luxury items, which means that its financial values are being accounted as the cornerstone of luxury values. What comes with the concept of luxury that has always been fairly consistent throughout history is craftsmanship and time being the only true luxury. Present day luxury is being made even more complicated with the emergence and impending saturation of premium or ‘accessible luxury’ brands such as Coach and Hugo Boss which exude an image of luxury but sits at a much lower price point compared to true luxury brands such as Hermès (Bain & Altagamma as cited in Brun, 2017). In addition to that, mass market products are adopting the word ‘luxury’ to denote a slightly higher quality amongst the product range such as ‘luxury toilet rolls’ or ‘luxury chocolate’. This creates a highly subjective, situational, contingent, and conditional definition of value (Hennigs et al., 2015). Contrary to Bain & Altagamma’s distinction of three different luxury fashion categories (absolute, aspirational, and accessible luxury), Posner in her chart of fashion hierarchy (below) puts luxury and premium fashion in the same level just below Haute Couture.

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L U X U R Y :

A

P R O B L E M A T I C

D E F I N I T I O N

Figure 5: Fashion hierarchy chart placing luxury brands and premium brands together in one tier (Posner, 2015, p.13).

Luxury’s concepts in history has always been viewed as something with negative connotations up until the emergence of the bourgeoisie of France and the European royal courts setting the standards for luxurious living. In the times of the Ancient Greeks and Romans, indulging in luxury was seen as a threat as it distracts citizens from the polis. According to Dubois et al. (2005), the latin term “luxus” meaning “soft or extravagant living, sumptuousness, opulence” shares a root meaning with the term “luxuria” meaning “excess, lasciviousness, negative self-indulgence”. The latin root word “lux” which means “light” was also often associated with luxury and materialised as precious objects such as gold and gems used in precious texts, royalty and the clergy. This association with precious materials is still being associated with today as mentioned by Brun (2017). It is only in nineteenth-century Europe that the present day luxury goods that we are familiar with was birthed. What was initially primarily a family-run business is now saturated with large multi-brand corporations run by business tycoons with little to no background in luxury fashion (Thomas, 2008). In the early ages of luxury goods, products attained the title due to their superior quality, durability, performance or design (Brun, 2017), whereas today, the image and brand story has become the most relevant factor in luxury brands. Because of this, many luxury brands, especially ‘accessible’ and ‘aspirational’ brands have streamlined their production process to allow for quicker, more mass produced products. Brands such as Louis Vuitton has since lost

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its technical status as a ‘true luxury brand’ due to its ‘assembly line’ production process (Thomas, 2008), however is still one of the world’s most aspirational luxury brands because of their hard selling and branding strategy. As a result of the evolution of luxury brands, according to Corbellini and Saviolo (2009) luxury itself has a hierarchical segmentation which can be seen as a similar model to Bain & Altagamma’s distinction of luxury brands and that of Posner’s hierarchy chart seen above except disregarding mass market and value market and instead introducing the concept of ‘Masstige’ or mass-prestige which dominates the market through limited edition designer collaborations and diffusion lines with style, aesthetics, and distribution likened of that from luxury goods but with the quality and price of regular consumer goods. These pieces tend to be higher in price than the regular line to exude a sense of exclusivity and luxury, a strategy used by luxury companies and brands because of the inexplicable link between higher pricing range and perceived quality & worth.

Figure 6: The luxury fashion hierarchy (Corbellini & Saviolo, 2009, p.113)

As evident above, the concept of luxury applies to a wide range of brands and products. This raises the question of ‘what is true luxury in this day and age’ and whether it even matters to people buying these luxury goods.

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‘ T R U E

L U X U R Y ’

The Values of ‘True Luxury’ “The superior qualities of a luxury brand have to emphasize the individual value orientation and needs of luxury shoppers in all consumer touch points” –Hennigs et al., 2015

Traditional luxury relies on values such as aspiration, conspicuousness, craftsmanship, exclusivity and uniqueness. These values are still seen in luxury goods today, however are translated differently. Conspicuousness, for example, among luxury-savvy customers is less about the logo and more about the design of a luxury product that is, while discreet, unique to the brand that is then recognisable by people in-the-know. This phenomenon is called ‘new luxury’, fuelled by relatively newer contemporary luxury brand such as Protagonist and Dries van Noten (Wilson et al., 2015). Wilson further adds that luxury is becoming more personal and less social. This means that brands and companies need to rethink what values are important for the consumer. Perhaps what Hennigs et al. (2015, figure below) suggested as social value now stands for personal value as a new form of social value. Hennigs et al. (2015) separates the different values forming luxury value into three: financial, functional, and social value.

Figure 7: Luxury value perception created by three value antecedents (Hennigs et al., 2015, p.924)

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An aspect that this approach does not take into account is the importance of personal/ emotional value such as self-indulgence which is seems to be very important to today’s consumers (Jogiastra, 2017). In the same report done during semester 1 of Design Management in Northumbria University, the ultimate value of luxury was explored, suggesting that fulfillment is the true value born out of both luxury goods as well as luxury experiences. Bertola et al. (2017), adds that the meaning of contemporary luxury is evolving along with its progressive transition of its core values from something tangible to a more intangible, abstract dimension, which supports Jogiastra’s explorations of experiential luxury and as such contributes to a paradigmatic shift in the positioning and consumption of luxury products along with consumers’ relationships with luxury goods. There is a focus on the brand’s story, narrative, and values in which customers want to be a part of through immersive experiences and a genuine-feeling campaign that reflects the brand’s ethics and place in society (Deloitte, 2016). Many companies are adopting the luxury strategy and conveying values that were once associated with luxury. Apple, for example, uses luxury strategy of premium pricing and limited product range as well as sleek, elegant aesthetics to put itself ahead of the market. However, Apple itself is not considered a luxury brand. It is a premium brand (premium as in higher price point compared to its direct competitors) using luxury branding strategies. The masstige as explored previously, also adopts the luxury strategy to evoke a sense of luxury while still keeping prices low and affordable. This presents a challenge to luxury brands as it seeks to find its footing back into today’s world of fashion. Evident in the turbulent times of luxury today, many brands are struggling to maintain their customer base. With high street brands trading up, there is no longer a place for contemporary luxury brands such as Aquascutum which has gone bankrupt in April 2012 and even more recently BCBG Max Azria in March 2017. The struggle of keeping a luxury brand relevant is in itself a big challenge, especially with customers becoming more demanding. This is added with the threats from new up-and-coming designers with a fresh view of fashion and possibly with a more organic understanding of today’s consumers and millennials. Sites like Moda Operandi and Net-A-Porter are bridging the gap between luxury and the online platform, offering fully online e-commerce to luxury consumers worldwide. Net-A-Porter has a more traditional mall-style e-commerce carrying many different brands across the luxury spectrum. They also have editorial content which is available both online and in print as a supplement to the core business–something that is becoming more and more important to consumers nowadays. According to both Emily Weiss, founder of Glossier and Lauren Santo Domingo, co-founder of Moda Operandi, an editorial voice is very important to connect with the audience in a way that is authentic and builds trust (FT Business, 2016).

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L U X U R Y

R E T A I L

The Slow Evolution “There are new ways that customers are shopping. It’s not that they’re buying less, they’re just buying different.” –Rosen, 2017

As explored in the first chapter of this section, luxury’s roots began in old Europe’s royal courts, which, according to Thomas (2008, p.21) “set the standards for lavish living.” The evolution of luxury retail in a nutshell evolved from small family-owned artisan businesses which were primarily couture, to groups and corporations owning multi-brand businesses (which are still the norm today) and on the shop floor from single touchpoint retail to multi-channel retail and now transforming further into omni-channel retail. That being said, luxury, despite the ability and capital to explore and transform the very definition of retail, has been very slow in adapting new technologies and strategies (Deloitte, 2015). According to Weinswig, the managing director of Fung Global Retail & Technology (2017), a lot of luxury brands were wary of e-commerce due to lack of control over third-party platforms and as such the growth that is evident today is from a small base while luxury is catching up to online mass market retail. This itself should present an opportunity for luxury brands to take control of the online environment. Something that thirdparty resellers cannot do is present a full and coherent brand story and value due to having a wide range of other brands. Retailers also used to focus on sales per square foot to determine success (Sim, 2014) with a misconception that for luxury brands, human interaction at luxuriously design physical stores is enough, and that the only digital aspect would be a shiny new website (Viglezio, 2015). Emerging technologies have slowly been embraced by luxury brands, however, most of the time it serves as more of a “window dressing” strategy or a marketing technique as mentioned by Viglezio (2015). Burberry is an example of a brand that is proactively putting digital and innovation into its brand strategy and realising that digital channels and newer forms of retail are not simply a separate entity or a marketing ploy but a viable strategy. Luxury brands are no longer dictating the market the way it used to, instead influencing the market through various different channels.

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“A number of things have changed in the luxury industry. As you know, the luxury industry was growing 8 percent before — now it is growing 2 to 4 or 5 percent in the next year and it’s going to stay there. Now, in this slow growing market [brands are] considering digital very seriously,” - Olivier Abtan, a partner at the Boston Consulting Group.

Consumers no longer take things at face value and instead look at different sources of information, powered by social media and digital influencers, before deciding what is ‘worthy of purchase’. When Net-a-Porter first came into the industry in 2003, luxury brands and groups were still primarily against online retail. Today, it has become a worldwide business with over 9 million visitors per month (World Retail Awards, 2017) and has risen to a value of nearly £2 billion. Other sites like Farfetch and Moda Operandi are also paving their way into a new world of luxury e-commerce. For the longest time, luxury brands have always relied on human touch and communication to sell their products, however, accessibility and convenience is becoming increasingly important, especially to willing customers who might live far away or prefer to have things shipped straight to their door. Time is also becoming even more of a luxury, especially for people who can afford to purchase luxury goods.

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D I G I T A L

L U X U R Y

Road to Omni-channel “The original challenge for luxury brands was how to replicate the luxury shopping experience online, but increasingly the more valuable investment is how to use digital technology to enhance the luxury store experience.� –Deloitte, 2016

Retail is a fundamental to the whole brand experience and identity because consumers perceive products as puzzle pieces to a wider system in which the retail system supports the heightened perception of (Corbellini & Saviolo, 2009). Corbellini and Saviolo also adds that most customers will never see the whole collection like managers so commercial managers must strategically design distribution and retail channels in order for the end consumer to receive a proper glimpse into the brand. Retail serves not only as an outlet for final sales, but as part of a much larger system involving the entire company.

Figure 8: Evolution of retail channels (Rund, 2015, accessed from: https://blogs.informatica.com/2015/10/14/commerce-relevancythe-next-generation-of-omnichannel-commerce/#fbid=y6yLtcShE7M)

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Traditional retail has evolved through several types of channels. Luxury fashion brands may start from single channel ateliers that serve as both the showroom and the studio of the designer. Some designers may even only open the ateliers to certain clients via appointment. When the company grows, it might focus on multi-channel experiences where there is a single customer view but the channels have different functions and are seen as separate entities from each other. “The same customer could be visiting a physical store, calling a contact center or making an online purchase, but the company would see it as three separate clients” (Boulay, 2015, accessed from: https://blog.mailup.com/2015/11/a-latam-perspective-the-road-to-omnichannel-marketing/). A noticeable improvement from the preceding retail channel model is cross channel commerce where customers start to become the center of the strategy through better understanding of the customer touchpoints and the journey to purchase. At a glance, this might seem similar to omni channel commerce, however, the difference with omni channel retail lies in the purchase journey. Cross channel commerce has a set journey for the customer that starts at point A and ends at point B, whereas for omni channel retail, there is not a set journey but rather a system of touchpoints that customers can interact with, each working synergistically with each other. Sopadjieva et al. (2017) conducted a study of 46,000 shoppers showing that omnichannel is a cure for the fluctuating retail market today. An important part of the study states that customers love to use the retailer’s touchpoints both in app form and in-store digital tools. Customers want to be able to buy online and pick things up in-store, which can also often lead to further purchase of another product as they enter and browse the store, or buy a product in-store and have it shipped for them whether it be for convenience-sake or gift giving. Even more compellingly, Sopadjieva et al. adds that omnichannel consumers spent an average of 4% more on every shopping occasion in-store and 10% more online than single-channel consumers who only shop in brick-and-mortar stores. In addition to that, with every added channel the customers interacted with, shoppers spent even more money in-store with 4+ channels leading to a 9% increase on average. The changing habit of consumers also play a role in this. In previous years, impulsive purchases were thought to be the majority of a brands’ revenue, however, in this study, it is also mentioned that searching about the product or brand online prior to purchase leads to greater spending in-store. The term “showrooming” and “webrooming” is becoming a commonplace which should not be seen as lost sale, instead as part of a customers’ journey to purchase as it not only increases exposure and knowledge about the product, but justification from the customers’ standpoint through reviews or interacting with the product in person before making a purchase online. The key is the presence of choice and as such a degree of accessibility.

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P A R T

T W O

Case Studies

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(Top left) Moda Operandi’s Lauren Santo Domingo for FT Times; (right) Lily James for Burberry’s My Burberry Blush Campaign

In the pursuit to luxury digitalisation, there have been two companies who presented something incredibly different to the market and disrupted the luxury retail scene. This section will explore how Moda Operandi, a unicorn in fashion tech, and Burberry, a heritage brand who is integrating digital into their DNA, has used digital channels to enhance their consumer’s shopping experience and how it adds value to the company. At the end of each section, the luxury shopping experience framework will be critically analysed based on these two cases to see its viability and where it needs to be modified.

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Moda Operandi New York Showroom ‘Moda Madison’

C A S E

S T U D I E S

Moda Operandi: The Luxury Retail Disruptor - 36 -


B A C K G R O U N D

At a time when luxury brands are limiting distribution to maintain exclusivity and attract the ultra-wealthy, Moda Operandi, along with others in an elite group of startups, are combining tech and fashion to bring luxury goods conveniently to younger, tech-savvy, jet-setter clients in a way that is both accessible, yet manages to maintain exclusivity. Co-founded in 2011 by Lauren Santo Domingo and started as a members-only site, Moda Operandi brings the concept of exclusive trunk shows online in a way that no other retailer has done before. Customers can pre-order pieces from the full collection an hour after the original runway show with possible customisation options. The best thing about the trunk shows (or as Moda calls it, pre-tail) is that while most department stores will only carry 25% of the collection, Moda Operandi offers the full collection to pre-order from. This means that Moda clients have a low chance of seeing someone else wearing the same thing in the streets, which is something that luxury clients value greatly. In addition to their trunk shows, in 2013 Moda introduced the Boutique which functions the same way a traditional luxury e-tailer would. The Boutique uses data from their trunk shows and has its buyers buy the best selling pieces from the designers’ collections to feature in the Boutique. According to Moda’s CEO Deborah Nicodemus, the trunk show represents 60% of total volume internationally while the Boutique represents 40%. Moda Operandi’s average price points are higher to other luxury retailer with its clients spending on average $1,200 online and nearly four times that amount when they shop in person in Moda’s showrooms (Edelson, 2016). Moda’s events and showrooms are invite-only for their curated clientele (via Moda stylists), which allows the space to remain private and exclusive. The showrooms themselves do not act as an inventory but rather a curated selection to show their clients. Every time a client comes to the showroom, Moda endeavours to display a new designer based on the clients’ preferences. This means that Moda Operandi’s stylists play a big part in the success of the company. Moda Operandi understands that time is the true luxury, as such the stylists do a lot of the work for their clients, helping them curate their wardrobes online, packing their travel suitcases, and taking clients to runway shows. Stylists would even go to the homes of clients, which equates to 5% to 10% of the business (Nicodemus as told to Edelson, 2016).

Moda Operandi’s Website/Core Platform

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D I G I T I S I N G

T H E

L U X U R Y

E X P E R I E N C E

Moda Operandi first and foremost understands the changing habit of their clients. It is birthed through the understanding that for high profile clients and the ultra-wealthy, time and convenience is the true luxury. According to González (as cited in Popomaronis, 2017), the average age of luxury shoppers also went down from 48 to 34, meaning that the prospectus clientele would be younger and as such more tech-savvy. They also realise that there are a lot of wealthy fashionistas who might not be within reach of a certain designer or brand. The core of the business is centred around the clients and what clients appreciate. Chiara Feragni, a successful blogger-turnedentrepreneur and owner of The Blonde Salad, says that customers now have more power (2016), which is also agreed by Deloitte (2016) that customers now are the ones dictating when, where, and how they engage with brands. This means that brands need to, aside from staying desirable, make it simple for customers to interact with the brand. Trunk shows used to be a buyer-only exclusive, however, through photography of the show’s pieces and publishing the pieces up for pre-order online, Moda makes their clients both the buyer and the editor. The online trunk shows typically last up to two weeks. Customers would pre-order by paying a 50% deposit and is then charged the outstanding balance when the designer fulfils the order. Not only that, it has made it so that the client is able to make orders easily via their website or app. Their website hosts a variety of features including an editorial section which its cofounder, Domingo, says plays a big part in building trust and authenticity with their customers, and allows Moda Operandi to “share, educate, and inspire customers” (Domingo as told to FT Business, 2016). The website also allows customers to select their location and appropriate currencies. That said, for a lot of countries outside the Americas, Europe, and the Middle East, the primary currency is USD with an extremely heightened shipping cost of up to €55 for express shipping. Countries outside the EU and US are also subject to added duties and taxes, which adds to the overall cost of the items. All deliveries are offered tracking, which is essential considering the value of a lot of the goods sold through the site. According to Moda CTO, Keiron McCammon (as told to Instart Logic, n.d.), high-visual impact is key in luxury e-commerce. Beyond aesthetics, website and app performance is also very important. According to Eaton (2012), Amazon calculated that a page slowdown of a mere one second could cost $1.6 billion in sales per year. While Amazon is not a luxury company, it presents a baseline as luxury companies are generally expected to be much more intuitive than sites like Amazon or Ebay as it becomes part of the brand retail experience.

Figure 9: Abandonment rate based on page load time in seconds (Eaton, 2012, accessed from: https://www.fastcompany. com/1825005/how-one-second-could-cost-amazon-16-billion-sales)

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Figure 10: Moda Operandi’s app not only allows tracking of past purchases and future deliveries, it also connects clients to their stylists through an in-app messaging system (Moda Operandi, n.d. accessed from: https://itunes.apple.com/us/app/ moda-operandi-designer-fashion/id781702094?mt=8)

40% of Moda Operandi’s customers access the site via mobile devices and are very imagedriven. This means that the new platform would have to be responsive, able to accommodate large amounts of images in high resolutions and interwoven narrative, all while being fast to load. According to Instart Logic, the agency commissioned to rebuild Moda’s platform, this was made possible by Instart Logic’s Performance Suite for HTML streaming and image streaming by sending applications in small pieces rather than large downloads and adapting image and file sizes automatically for the right device type. Today across the entire site and app, load times are shortened to two to three seconds from six to eight seconds, boosting the web performance by a reported 30% (Instart Logic, n.d.). Since the platform revamp, certain tools that Moda Operandi uses are NetSuite for enterprise resource planning; Amazon Web Services for core database, data storage, and warehousing; Heroku for runtime server infrastructure; and New Relic for as a diagnostics tool for the web’s performance. This shows how deep digital and technology is embedded in Moda Operandi’s DNA. Stylists play a large part in bridging the online luxury experience with the client. Because Moda does not have any stores other than their showrooms, the stylists are mobile and are able to accommodate to their clients wherever and whenever. New customers are able to request stylists based on their wardrobe needs such as vacation attire, in-season fashion updates, and style revamps. There are a total of 10 specialty stylists, six of whom are New York-based, three are London-based, and one based in Los Angeles. Several stylists also offer services in other languages including Greek, Portuguese, Korean, and Russian. Despite not having stylists based overseas, Moda Operandi’s international consumers still equate for 40% of their total clientele (Domingo as told to Ellison, 2016). Moda Operandi also offers stylist consultations via email, especially for overseas customers.

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C H A N G I N G

T H E

F U N C T I O N

O F

B R I C K - A N D - M O R T A R

According to Arani (as told to Lizette, 2015), being able to sell luxury online is difficult, especially because the difference in luxury goods lie mostly in the details such as the weight of a purse’s clasp, the lining of a pocket, or the quality of stitching–all of which must be felt. For Moda Operandi, however, selling luxury goods online has not been an issue. With an elite clientele spending on average $1,700 (Ellison, 2016), Moda’s target audience is no stranger to luxury goods. They do, however, value convenience and the personalised service Moda stylists provide. In 2014, Moda Operandi opened their London showroom called Moda Mews, which functions not as an inventory or a walk-in shop, but an invitation-only space for their elite clients to shop a curated collection that changes each month. The showroom is geographically removed in London and is located in the affluent neighbourhood of Belgravia. Nicodemus, CEO of Moda Operandi, wanted a private space away from general traffic to maintain a private and exclusive shopping experience for their clients (Edelson, 2016). The showroom hosts individual clients, up to five each day, with the showroom transformed for each customer based on their preferences and their stylist’s recommendations. It is reported that customers spend up to four times more in-person reaching an average of $4,800 per visit. When the showroom first opened, Moda expected it to do sales of $350,000 in the first quarter and instead had sales exceed $472,000 in the first week alone. The success of the showrooms lies in the personalised and private shopping experience–it is like having a personal closet curated for the client in a beautiful space. Since opening one more showroom off New York’s famous Madison Avenue, Moda Operandi has also offered bridal, couture and precious jewellery lines exclusively in showrooms using the same system of stylist referral and appointments. With the help of Moda’s stylists, couture clients receive a digital look book of four designers with five to ten dresses each. Once the clients choose their desired pieces or designers, a customised book containing the client’s selections, a bill of materials, and a schedule of the first fittings are sent. The fittings take place in the showrooms, which adds to the exclusive experience. The couture lines today account for 10% of Moda Operandi’s sales (Edelson, 2016). The function of Moda’s Brick-and-Mortar ‘store’ is, therefore, completely different to the traditional store model. Other than the fact that the showroom is open by invitation or recommendation only, which makes it available only to the most elite clientele, the showroom does not serve as inventory. Rather, it functions as an extension of Moda’s services. The commitment to have a private shopping experience, which is something that cannot be received in traditional stores regardless of the store’s price point (as evident in Hermès’ ultra luxe but always crowded Paris flagship), is something of much value to Moda’s high profile clients for whom public shopping can border on paranoia (Schneier, 2016). A lot of high spending clients, especially with a high profile background, are prone to danger wherever they go. Bomb sweeps are frequent whenever a Middle Eastern Royal visits a shop, for example, which breeds paranoia and as such, online shopping has been a preferred channel. Moda Operandi’s understanding of their customers is deeply reflected by their decision to keep the showrooms private to cater to high profile, high spending “webroomers” (defined as researching products online before purchasing in-store [Khan, 2015]).

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“Moda has a great voice on social media and we have an incredible online presence. Sites that don’t have a human touch or even a founder’s face can be somewhat of a headless machine, lacking a soul” –Lauren Santo Domingo, Co-Founder of Moda Operandi

Moda Operandi’s London Showroom ‘Moda Mews’ showcasing a curated selection for a specific customer


‘ N E W

L U X U R Y ’ :

A C C E S S I B I L I T Y

&

E X C L U S I V I T Y

Moda Operandi’s model of online shopping can at first glance seem quite democratic. While the Boutique and Trunkshows are no longer invite only and is open for the general public, Moda is still able to exude a sense of exclusivity through its stylist services and expensive designer lines. Because the designers and lines that Moda Operandi carries are extremely high end, that alone separates the site from others such as Farfetch and Net-a-Porter which carries more affordable designers (albeit still in the high end category of fashion) and with a significantly less average spending per shopping cart. Personal stylists are also able to source unique pieces such as gowns and jewellery, grant access to exclusive invite-only shows and showrooms, as well as work like a personal concierge to their most elite clients. It is unknown whether this service is only available to those with high enough loyalty points, however, it can be assumed that this service is available for only a select and curated clientele. The value in Moda Operandi as mentioned many times in this section is their ability in understanding their clients. Moda Operandi knows that for a lot of their clients, time is the true luxury. Having pieces that is available to the masses is definitely not an issue given the price points of a lot of the items. For the sake of convenience and privacy, customers are willing to make online orders built on trust that Moda Operandi builds through their editorial voice. Moda Operandi understands that exclusivity and accessibility can go hand in hand especially when done right. Moda rewards its high spending clients with exclusive services, yet still caters to their aspirational customers with site-wide access (given that they can afford the pieces themselves). Being able to view and pre-purchase pieces before anyone else also gives people the feeling of exclusivity and being ahead of the curve that only Moda Operandi through their Trunkshow can give. According to Pike (2016), the opportunity of growth currently lies in high volume purchases from aspirational customers, which is reflected in Moda’s decision to open the Boutique. This model of accessibility-exclusivity works to grow the business but maintains the luxury aspect of Moda Operandi. It taps into the ultra wealthy niche, giving a shopping experience that is previously unavailable to them, while still catering to the masses to drive growth and create a safety cushion for Moda.

Figure 11: Moda Operandi’s exclusive services by request through personal stylists function like a concierge for their customers (Moda Operandi, n.d. accessed from: https://www.modaoperandi.com/mostylists)

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Figure 12: Each Moda stylists have their own distinctive style and specialty (travel, events, casual style, etc.) with some also speaking more than one language to accommodate different clients (Moda Operandi, n.d. accessed from: https://www. modaoperandi.com/editorial/meet-our-stylists)

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Burberry Beauty’s 2012 Campaign

C A S E

S T U D I E S

Burberry: The Digital Revolutionist - 44 -


B A C K G R O U N D

The Burberry brand and its iconic trench coat is not anything unfamiliar to both fashion lovers and enthusiasts. The quintessentially British brand had its roots date back to the pre-war era of 1856 when Thomas Burberry, a 21-year old former draper’s apprentice, opened his first store in Basingstoke. His rise to success started when he introduced gabardine–a fabric that is waterproof yet breathable, an essential for British weather. When the war came, the British war office requested that the company adapt its popular line of officer coats to accommodate in trench warfare, which resulted in the now iconic trench coat. After the war was over, the coat remained a best seller to this day. Following the success of the trench coat, Burberry employed high profile figures such as Audrey Hepburn and Ronald Reagan as brand ambassadors to evoke a sense of sophistication, elegance, and refinement. Since then, the brand remained one of the most iconic and successful British fashion houses. In the 2000s, Burberry became the standard uniform of the “chavs” of England’s working class which led to plummeting sales (Hope, 2015). Similar brands who experience this ‘perceived degradation of exclusivity and elegance through flashy logo-bearing pieces were Gucci and Louis Vuitton, which were the preferred uniform of the nouveau riche rappers of the time. As a result of licensing, its famous Burberry check was everywhere from caps to baby carriages. In 2006 when Angela Ahrendts stepped in as CEO, she wrote in an HBR article that of all 60 of Burberry’s top managers weren’t wearing any Burberry garments despite the significant discount that employees get. It spurs the thought “If our top people weren’t buying our products, despite the great discount they could get, how could we expect customers to pay full price for them?” (Ahrendts, 2013, accessed from: https://hbr.org/2013/01/burberrys-ceo-on-turning-an-aging-british-icon-intoa-global-luxury-brand). Since then, Burberry has undergone a massive overhaul, bringing value and sophistication back into its brand image, buying back all the licenses to their check patterns. Burberry also brought back focus to the trench coats, marketing them to who they see as the ‘consumers who are being left out’–millennials. To accommodate millennials, Burberry rebuilt its platforms from the ground up, equipped the sales team (who are predominantly below 30 years old) with iPads to support audiovisual technology being placed into the stores, and created emotive brand content from music, movies, heritage, to storytelling. In 2009, Burberry also introduced artofthetrench. com which showcased Burberry trench coats being worn by stylish people all over the world through social media posts. According to Ahrendts (2013), the site had 2.5 million visitors, and their main site had more visits than walk-ins to all their stores combined. In 2012, Burberry launched customization to go with their relaunch of the iconic trench coat. In addition to this, on February 5th, 2016, Burberry became the first large fashion house to rethink their fashion shows by combining men’s and women’s collections into a twice-annual model. This fashion show overhaul also resulted in a ‘see now, buy now’ model that luxury fashion immediacy hopes would tackle the issues of fast fashion copies of the pieces.

Figure 13: Burberry’s ‘Runway to Reality’ fashion immediacy scheme (Burberry, 2016, accessed from: https://pursuitist.com/ burberry-unveils-retail-theatre-concept/)

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S E A M L E S S

O N L I N E - O F F L I N E

I N T E G R A T I O N

Spearheaded by Burberry in the luxury fashion sector, online e-commerce is growing significantly (Amed & Berg, 2016). Burberry, ranked as among the top 500 in InternetRetailing UK 2017 report, is widely known in the luxury sector as blurring the lines between online and offline (Davis, 2014). In terms of omnichannel integration within the brand, Burberry’s main platform where the company derives the most traffic from is burberry.com. As mentioned in the previous section of this study, the site contains not only Burberry’s products, but also content that the brand sees as relevant to millennials. Burberry understands that the key to immerse prospectus clients in the brand is through content, and today it is in digital. In terms of omnichannel sales, according to Christopher Bailey (as cited in Lauchlan, 2017), Burberry has been putting in efforts within a 3-year omnichannel growth goal. Burberry has said to increase the amount of inventory by merging together online and store stock, which increases online stock availability by 7%. The Burberry app, which has recently launched, is sought by the brand to become a core part of the digital universe by allowing customers to move across platforms seamlessly and through personalised experiences. When logging in to the app, it will ask the user to create an account or sign in with an existing account to offer a bespoke experience. It uses data gathered throughout platforms as well as shopping trips to suggest new things and editorialised content. It also allows for a shareable wish list system and store trip planning. While the app currently does not offer the amount of rich content that the website offers yet, its ease of use including loading speed and the added ability to pay using ApplePay is very user-friendly. In addition to a refined digital platform, Lauchlan (2017) adds that structural changes are made to support Burberry’s omnichannel endeavours with a focus on streamlining and making the system more efficient. To begin, Burberry has decided to relocate their office, Burberry Business Services, to Leeds, bringing together teams from procurement, finance, HR, Customer Service, and IT. Moving out from the costly London cuts down both cost and centralises the functions together to improve efficiency. Cutting down operational costs means that saved capital can be used elsewhere to push the business forward, possibly supporting in Bailey’s digital radicalism as Burberry seeks to expand its digital content reach.

Figure 14: Omnichannel retail barriers (L2 Think Tank, 2014 accessed from: https://www.l2inc.com/research/omnichannel-retail-2014)

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When put against the retail barriers seen above, Burberry has made efforts to tackle a lot of issues relating to omnichannel success. Starting from the bottom, while there has not been any published information on how employees are compensated for omnichannel behaviour, store staff are equipped with an improved CRM system to drive sales. In 2016, Bailey states that Burberry has 12 million people in its CRM database (Preez, 2016). With this data, sales assistants on the store level can gain access to customer data including recent purchases and will then be able to sell relevant pieces to customers. Isolation of departments has been resolved with the relocation of Burberry’s offices into a single unit in Leeds. In-store technology is not an issue with Burberry’s multitouchpoint consumer interaction. With the endeavour to mirror their digital platform, the brand equipped store assistants with iPads to show customers personalisation options and order out of stock items on the spot across all stores, RFID that triggers details and videos in mirrors and a 22-foot screen at the centre of the store which streams live runway shows in their London flagship (Gaudoin & Bourne, 2012). This also solves the problems of ‘lacking digital commerce technology’, customer data sharing, and store associate training. Back-end technology is currently in continual improvement with the latest being their refinement for procurement processes using Ariba’s digital catalogue-based system. According to Bailey (as told to Lauchlan, 2017), the efficiencies achieved during the pilot phase are “a 50% reduction in the number of steps to raise a purchase order, a 65% reduction in time taken to approve an order, [and] a 100% increase in the number of invoices processed without manual intervention”. In addition to this, Burberry has Burberry World, which is a suite of apps designed in collaboration with Salesforce and SAP that allows sales, service staff, and customers to interact as one community. The Chatter app also allows sales and service staff to access CRM and customer data on a global scale as seen on the iPads equipped by every salesperson (Doran, 2014). As for the company’s business model, in the annual report it is as follows:

Figure 15: Burberry business model according to the 2016-2017 annual report (Burberry Annual Report 2016-2017, 2017)

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S E A M L E S S

O N L I N E - O F F L I N E

I N T E G R A T I O N

As seen in the chart, digital is focused on the ‘sell’ aspect of the business model, meaning in terms of product development and sourcing, it is unknown whether an integrated system has been put in place. Systems relating to the creative value chain has not been disclosed by the company. Looking at the above, it can be said that there is ample reason why L2 gave Burberry a ‘genius’ rating (Bailey as cited in Burberry Annual Report 2016-2017, 2017).

Burberry’s ‘digitally-enabled cultural space’ in the Regent Street Flagship, London


Burberry’s new app launched in 2017.

Burberry’s RFID-activated mirrors in Hong Kong.

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T H E

F O C U S

O F

P E R S O N A L I S A T I O N

Burberry is a major luxury brand with (as of May 2016) 498 stores worldwide. With only price point being the barrier of exclusivity, Burberry understands that to maintain desirability and uniqueness in their products, personalisation needs to be in place. Uniqueness has always been one of the biggest drivers of a luxury purchase to the elite. While for aspirational customers, owning a piece of the brand is enough, for the elite and true luxury shoppers, a product must be one of a kind. As such, personalisation and customisation has gained popularity in recent years. Burberry’s 20162017 annual report highlighted digital personalisation and targeted customer experience. Through the release of Burberry’s new app, the brand is seeking to offer a more personalised experience through algorithms that take into account customer data and habits to offer targeted and bespoke value. Because customers are required to sign into an account to access the app, much like Apple’s Apple ID strategy, the account will centralise the whole customer experience that will also be applicable when customers shop in-store. This also means that shop assistants will have information about each registered customer to better cater to their shopping needs.

Figure 16: Burberry’s scarf bar offers monogramming and customisation of scarves (White, 2015, accessed from: https:// senatus.net/media/files/myerscms/senatus_TkStb6.jpg)

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Figure 17: Monogrammed Burberry heritage trench coat (Crawford, 2016, accessed from: http://themanhasstyle. com/2016/03/02/burberry-monogramming-for-iconic-trench/)

In addition to this, Burberry has also offered monogramming and customisation on its products. Monogramming is available throughout Burberry’s selected leather goods, trench coats, scarves, fragrance, and rucksacks. The monogramming service is available as an in-store service as well as through the app. Customisation, on the other hand, is available through their bespoke fragrance service available in-store only in 8 locations all over the world, and their newly launched scarf bar that allows full customisation and monogramming on their scarves. The fragrance service allows the customer to choose between 3 varying concentrations of seven individual fragrances with a monogrammed bottle. What is bewildering is that the clients are unable to mix fragrance combinations, given the popularity of the fragrance layering trend (Long, 2013). The fragrances themselves are far too complex to layer, however, having a ‘fragrance lab’ with the notes of the original bespoke fragrances isolated can allow customers to make a truly one of a kind scent. This can be made exclusive to the regent street store to begin with and expand to the rest of the 8 locations. Since fragrance layering is very popular in the Middle East as stated by Long (2013), it would make sense to also make this available to the Middle Eastern market, possibly in Burberry’s locations in Dubai. The scarf bar, on the other hand, allows full customisation in their Regent street flagship and from Burberry.com. The website also offers a tool to recommend threads according to the selected scarf and a real-time preview of what it would look like (Millington, 2015). The decision to create a personalised experience on a scale as big as Burberry’s business has not been easy. While Burberry might not be able to cater to customers individually with stylists as Moda Operandi does, their target audience is also a lower tier and in a much larger scale than Moda. The push for customers to create accounts allows Burberry to keep track of its global audience in a way that is both efficient and, when paired with in-store personalised service, bringing value to individual consumers. The problem arises when the customisation service, especially monogramming, becomes too common due to the availability of it in Burberry’s digital platform, that it no longer is regarded as an exclusive to higher tier customers.

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Figure 18: ‘Burberry Bespoke’ monogrammed fragrances (Burberry, n.d. accessed from: https://uk.burberry.com/bespoke-fragrances/)

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“This mix of something that is very traditional, very conservative, very historic, with something that is very innovative, very pioneering, with a touch of eccentricity – that is what defines Burberry as a brand.” –Christopher Bailey, Chief Creative Officer and former CEO of Burberry

The iconic Burberry check and label on the heritage trench coat

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P A R T

T H R E E

Research Findings


Creating Digital Value Based on the research found in literature, the two case studies, and an additional interview with VERB, a digital luxury marketing agency, the findings indicate that it is not only that luxury brands have been slow to adapt, but also that there is a lack of focus and relevancy from brands where digital channels are concerned. Clara Saladich, the marketing manager of VERB, states that the biggest problem luxury brands have is the lack of focus strategy, which then establishes channels that exists just because ‘they have to’ instead of carefully selecting their channels for a bespoke customer experience (2017). This is further supported by the fact that Moda Operandi does not have certain channels that other brands have simply because they are not of value to their customer base. For example, click & collect or traditional omnichannel retail is irrelevant for their customers who are frequently travelling and whose experience in-store is frequently accompanied by bomb sweeps and social anxiety due to their high-net-worth or even in some cases royal clients. Instead, Moda Operandi creates a private retail space which is accessible by invitation only and only accommodates one client (with optional guests) at a time, which has worked tremendously well for the company. Burberry, on the other hand, has a much wider customer base and as such is able to experiment with more things to suit each marketing persona. Burberry’s focus on omnichannel, however, is a big investment that, if companies are looking to replicate, will require a significant investment. Regarding accessibility vs exclusivity, the way that today’s consumers are behaving, convenience has become the luxury along with time. A lot of young professionals are used to convenience with the limited amount of free time that they have, which is further supported by the rise of paying for services. Luxury brands can leverage from this by creating a customer experience that is not only expected of a luxury brand but also make the experience convenient and time-saving. Moda Operandi with their stylist program functions more like a concierge service for their exclusive clientele, making shopping with Moda a comfortable and enriching experience. While this model of service is not replicable on all companies considering the difference in basket worth per customer (Moda Operandi’s clientele is on a very high threshold), having additional services as part of the shopping experience can also add value. Burberry’s service includes personalisation and customisation, which supports the feature through their app, making it available for more of their clients given the size of their customer base. The primary separator of the exclusive ends up becoming pricing and the willingness to pay a premium for service. Location is no longer an issue when deliveries are able to reach different places. The key that is often overlooked when creating a digital experience is how important a client’s role is to the success. Chris Donnelly, the Founder and Managing Director of VERB, has stated that the success of digital strategy relies heavily on how well a

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C R E A T I N G

D I G I T A L

VA L U E

company knows their customers (2017). While it has been ‘marketing 101’ for the longest time, understanding consumer behaviour today is more than just looking at sales per channel or site visits. Every time a client engages with the brand’s digital channels, even if it is not on the brand’s channels, they are giving data that can be used by companies to understand what customers value. Donnelly adds that a first step would be using Google Analytics to define ‘marketing personas’ to define a client’s preferred time to purchase, how long they stay on your site, the age range and interests, the source or referral page that generated site traffic, etc. Through this, companies are then able to create a more robust and relevant social media strategy, a strong SEO and SEM if applicable, and which influencers are able to strengthen the brand awareness. SEO or search engine optimisation, a component of the larger category, SEM (search engine marketing), is the process of garnering website traffic by ensuring that the site appears either on top or high on the list of results by a search engine. This is done through selective keyword usage, meta descriptions, title tags, heading tags, etc. It also covers social sharing integration within the content of the site, which generates extra traffic (Google, 2010). SEM itself is a form of internet marketing that involves the promotion of websites by increasing their visibility in search engine results through SEO or advertising (Yang & Wang, 2014). Advertising may include things like paid search, pay per click and Google ads services. Since most people are on their phones these days and are always searching for information on search engines, companies must make sure that their web page appears at the top. According to a study from Slingshot SEO, 18% of organic clicks go to the 1st position on the search results list, 10% to the second, and 7% to the 3rd. Anything beyond that can be assumed receives relatively minimal traffic (Dearringer, 2012).

“One of the biggest challenges for brands is to keep up with the consumer’s need for immediacy: the fact that we are used to ‘expect everything yesterday’. Having the control at our fingertips, being able to order an Uber instantly or having our same-day deliveries are some examples of what we, as consumers, are expecting as a norm.” – Clara Saladich, 2017

With the increasing importance of convenience, delivery plays a significant role in customer experience and satisfaction. According to Saladich in the interview conducted (2017), to achieve the immediacy that the clients are expecting, brands need to innovate internally, improving the supply chain and internal processing efficiency. As such, digital can play a significant role on the consumer path-to-purchase synergy from initial digital research to final offline delivery. Logistics are continually being developed with delivery companies now having apps that allow customers to track their packages in real-time. For people who are constantly busy and might not always be at home to accept delivery, being able to track packages and even being given a one-hour delivery window is very helpful. In addition to offline immediacy and deliveries, the need for immediacy in online processes is also critical. Explored in the two case studies, it is evident that both companies have made significant strides to ensure loading times both in mobile devices and websites are no longer than 2-3 seconds with an average of around 52Mbits/s for USA and UK internet speeds (Smith, 2017). Visual experience and aesthetics are essential to luxury brands, especially the ability to zoom into product details. As such, back-end technologies that allow for faster data transfer while still supporting high-quality images is essential to create a rich narrative.

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Blogger Lainy Hedaya and her companion in a Moda Operandi exclusive runway - 57 -show


Digital Intergration Framework for Luxury Fashion Pe r s

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Figure 19: Digital Integration Framework for Luxury Fashion (Jogiastra, 2017)

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B R E A K D O W N

Based on the findings concluded in the preceding section, a framework was made to put together the fundamental elements of digital integration for luxury brands. The key in this framework is that it revolves around the customer and what can be of value to the target audience. Depending on each brand’s key customer preferences, the digital channels may be different–and should be different to create a system that is bespoke and faithful to the whole customer experience. C O R E C O R E

Q U A D R A N T : U N D E R S T A N D I N G

O F

C U S T O M E R S

Luxury value is very customer-centric. The same bespoke service that is expected from a luxury store should be consistent throughout. Understanding the customer is the key factor of digital success. Being at the centre of the framework ensures that the rest of the quadrants are centred to the knowledge of customers through marketing personas, CRM databases, data analysis, consumer feedback, etc. With the help of data-driven marketing, every bit of customer habit data can be measured, scored, rated and ranked to see where the value lies for a specific customer persona. This can even be done in real-time to assess the progress of new launches and marketing activations to understand better what increases customer retention and interest rates. Data such as how often the customer visits digital channels, at what time of day and for how long is key to create micro-optimisations to then create an effective and efficient strategy as well as being costeffective. O U T E R Q U A D R A N T 1 : P E R S O N A L I S E D C H A N N E L S

As stated before, not all digital channels are relevant to the particular persona that the brand attracts. Moda Operandi, for example, does not have a large following in China, therefore it would not be as valuable to add WeChat (a Chinese social media platform) to their digital services. It would instead make more sense for Moda to expand their stylist and showroom locations to include Dubai as a lot of their clients are based in the Middle East. Live-streaming would also add value to their trunk shows as it would allow clients to view the collections in real-time, how the fabric flows, the moving details of the outfit, all before pre-ordering the collection. In Burberry’s case, live-streaming is already something that they are doing that allows Burberry’s digital customers as well as the in-store customers to experience the fashion show. An added value to Burberry’s current platform could be a 360° view of their products to show off the product in an elegant way digitally. The ability to zoom the views to showcase the fine details is also just as important–customers want to be able to see the fabric and material down to its grains to judge a product. This allows customers to make informed decisions about a product prior to purchase which could also then mean a reduced returns rate. Having personalised channels eliminates the common mistake of businesses having social or digital platforms just because ‘they have to’. If it does not add value or bring prospectus value to the business, there is no reason to have it. Having too many channels that can otherwise be irrelevant to consumers can only confuse them.

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O U T E R Q U A D R A N T 2 : P L A T F O R M O F E N G A G E M E N T

Much like a flagship store, having a ‘digital hub’ such as a main website serves as a central platform for engagement. This is the platform that brings together all the other digital channels as well as connects the online with the offline. Having a definite presence in digital means that people who are new to the brand know where to find the richest amount of content about the brand and can then branch out to other channels that they may be more interested in. It serves to immerse the customer in the brand’s ideals, values, and aesthetics. The performance and richness of the platform are also essential. When it is seen as a digital flagship, it makes a lot of sense to bring the same translatable or corresponding experience that the customer would get in-store. Burberry World, for example, is Burberry’s primary platform, which their flagship stores worldwide aim to reflect. In Burberry’s case, the stores are the ones who are part of the digital platform and not vice versa. This works for Burberry because of their wide global reach and not all customers are within reach of any of their flagships. Instead, Burberry brings the experience likened to a flagship store to the digital space in order to reach their global audience. With convenience being the luxury factor, the fact that this makes the brand more ‘accessible’ would not diminish brand value as certain exclusive services can be made available only for certain loyal customers or have certain products appear only to certain digital accounts in limited quantities. O U T E R Q U A D R A N T 3 : A U T H E N T I C & P E R S O N A L I S E D

C U S T O M E R

E N G A G E M E N T

There is nothing worse than inauthentic engagement as a customer. People are getting savvier and can easily tell whether a brand is being genuine or is only ‘in it for the profit’. It is important to think about not only what a brand says and stands for, but also how it is being conveyed (Saladich, 2017). Luxury has always been about personalisation, and as such, the language and consumer engagement must feel as genuine as possible. Burberry, for example, prompts each user to create an account which would put into their database the names and preferences of the customers to give personalised service both online and offline. This relates back to the first point of understanding the target consumers. Lauren Santo Domingo, co-founder of Moda Operandi, also adds that having a face associated with the brand can add authenticity and make it feel like the brand’s spokesperson is the one speaking to you. Great examples are Olivier Rousteing of Balmain who embodies the values of the newly reformed Balmain, Lauren Santo Domingo herself for Moda Operandi being the embodiment of the high-net-worth it-girl Moda attracts, and Christopher Bailey as the quintessential Burberry British creative. Moda Operandi’s editorial voice also serves as an excellent example of creating genuine trustworthiness–they are only selling what they love. It is also important to have the same tone of voice and brand values throughout the whole experience, paying attention to the finer details such as corporate practices and emails to the customer. O U T E R Q U A D R A N T 4 : E F F I C I E N T B A C K - E N D

T E C H N O L O G Y

&

S U P P O R T

To support successful digital integration, the biggest investment needs to be made to back-end technologies in order to bring the most optimised experience to the customer. There are many things that can be improved using digital technologies to bring about an even more valuable and enriching digital experience of which are CRM & consumer analytics, internal data relay, procurement, sourcing & traceability, delivery & logistics, online performance, multimedia cloud technology for faster multimedia loading times, SEO & SEM among other technical things. Some of these might not be directly noticeable to the customer but plays a significant impact to the entire consumer experience. The technical needs of digital luxury are very high with the need to go above and beyond what non-luxury brands offer. As with the products themselves, it is the finer details that differentiate the digital luxury experience from a regular luxury experience. Burberry is one of the best examples of brands investing in digital restructuring. While the digital radicalisation Burberry is undergoing might not apply to all brands, the fundamental improvements in back-end technology can definitely be set as a baseline to any brands seeking success digitally.

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F R A M E W O R K

I N

C O N T E X T

The case studies serve as great examples for successful digital integration as mention before. When broken down into the framework quadrants, the systems in place become even more clear as to why the digital systems suceeded. The key remains at its core, however, the outer quadrants are also important as they provide the support to realise the digital integration.

ELEMENT

MODA OPERANDI

BURBERRY

CORE U N D E R STA N D I N G OF CUSTOMERS

Business model built around the understanding of the customer base, powerful CRM and personal (and emotional) connections through stylist services and trustworthy editorial voice, not using any channels or services that are irrelevant to customers.

Very powerful CRM database and incentivises customers to build their personal data through brand engagements, personal engagement through CRM data (in-store and online), only use channels that are relevant to the customer base with analytics.

PERSONALISED CHANNELS

Showroom is really made to cater to Moda’s elite clientele, only have a select amount of channels that add value to their customers, added the ability to directly contact stylists through in-app messaging service.

Created ‘The Art of Trench’ as a social media campaign, livestreaming their fashion shows, digital channels are available as additional touchpoints to allow for seamless online-offline integration, supports WeChat for Chinese customers.

P L AT FO R M O F ENGAGEMENT

Website, app, exclusive showrooms.

‘Burberry World’ website, newlylaunched app, stores worldwide.

AUTHENTIC & PERSONALISED CUSTOMER ENGAGEMENT

Editorials and curated selection, one-to-one stylist and customer service interactions, Lauren Santo Domingo as face of Moda Operandi is the ‘Moda Girl’, personalised service.

Building editorial content along with app, Burberry acoustic celebrates local British talent, CRM database allows personalised interaction from every channel, Christopher Bailey as the face of Burberry.

EFFICIENT BACK-END TECHNOLOGY & SUPPORT

Fast website and app loading speed, high resolution imagery that zooms on product detail, rich website content, responsive site, free USA & UK delivery, expedited delivery.

Fast website and app loading speed, high resolution imagery, rich content on various channels, responsive site, offers ApplePay, free next-day delivery and collect-in-store options, offers live chat and contact requests for customer service.

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P A R T

F O U R

Conclusion & Discussion

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C O N C L U S I O N

Growing Value Creation in Luxury Forms of digital integration today have been proven to be key to the modernisation of the shopping experience. With digital adoption rates continually rising and predicted to account for 36% of overall transactions and with only 40% of luxury brands selling online, there is ample opportunity for luxury brands to not only facilitate this change in consumer behaviour but also redefine what a luxury shopping experience means for today’s consumers. Rounding up the current state of digital luxury has provided invaluable insight into the prospects of the industry. This analysis has sought to identify the current problems in digital luxury and justify a proposed framework to aid in successful digital integration within luxury. Based on the research found in literature, the two case studies, and an additional interview with VERB, a digital luxury marketing agency, there are key findings that have been identified: •

Luxury brands have been slow to adapt

There is a lack of focus leading to the opposite of the bespoke luxury experience

Convenience is becoming the new ‘exclusivity factor’ that brands can provide, and that while accessibility is widened, it can also, at the same time, be more targeted through data

Knowledge of customers is key to developing a relevant digital experience

Personalisation can and should be done

Back-end support technology is crucial to the success of digital channels

The findings indicate that it is not only that luxury brands have been slow to adapt, but also that there is a lack of focus and the bespoke service people have come to expect from luxury brands. For so long luxury has kept within the idea that the brand sells a dream, however, allowing the clients to make their own dreams and instead immersing them in the tools needed to create that vision is the narrative that engages people more. In this case, it is making the luxury shopping experience as thought out as possible, allowing clients to interact with various touch points that are relevant to them and with performance that will not deter from the shopping experience. Growing value in luxury comes down to whether it will be of value to customers and as such is primarily based on how the company can make use of client data creatively. Luxury is very much a bespoke-type company, meaning each luxury brand would need to find what works for them instead of going by what everyone else is doing. This is evident with not only two of the case study subjects, but other brands who have ended up setting itself apart from their competitors and excelling in what they see as added value. Not only that, there needs to be a cohesive system that puts together all of the different elements that form the solid groundworks of digital integration. The development of the framework was very much centred on this knowledge of customers and system so that companies can move forward depending on what applies to their customer base. The next section will detail the development of the framework from its initial stage to its refinement.

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D I S C U S S I O N

Development of Framework

In the initial phases, the goal of the framework was to provide an incremental development of digital integration, showing how brands can develop their digital integration from the fundamentals to more emerging technologies once the fundamental, key technologies are in place. The original framework was made by Deloitte (2016) as a luxury path-to-purchase chart which was not necessarily a framework but has potential to become one. The chart featured the various paths of the consumer shopping journey and categorised the different channels into yesterday’s, today’s, and emerging technology. In the beginning of the literature review, it was discussed how certain ‘technologies’ were misplaced in the chart. When the chart was also brought up in the interview with VERB’s specialists, Donnelly and Saladich, the argument was that nearly all of the emerging technologies have been implemented by several brands both luxury and non-luxury, which then means that it no longer becomes ‘emerging technology’ if it has been successfully implemented and matured. During the development of the framework, it was decided that the focus would be primarily on shopping experience, and as such, the following framework design was based on the shopping experience quadrant of the original chart. There were several issues that arose because of this, however. The fact that in the literature review, it was heavily stressed the importance of looking at the whole shopping experience as a system and as a whole went completely against what the framework was suggesting. While it is possible to look deeper into the shopping experience, disregarding everything else that would effect the experience in the framework goes against this very theory. In addition to this, the two case studies explored the different ways the two subjects have integrated digital into their business models and there is no one-size-fits-all solution when it comes to digital channels. There are baselines when it comes to performance, however, the channels and services that a brand can offer does not have to be all the same. If YouTube does not work for one brand, for example, there is no reason why they need to have it. Donnelly and Saladich has also stated that there is a lack of focus on digital channels and this is precisely what the lack of focus meant. This meant that the whole proposition of the framework has been fully rebutted and would need to be rebuilt from the ground up.

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As the framework was at that stage, not only did it go against the theory obtained throughout research, but it also meant limiting channels to only those within the framework and, if put into use, would mean an oversaturation of the same channels for every brand which could then mean loss of varietal value and uniqueness. There was thought to make the framework more of a maturity matrix, however, it was at this stage that the different elements of the current framework were thought about. It was key to make customers the core of whatever the framework was going to be structured as. In addition to that, there were elements that were key to digital integration, some of which were made into one of the four elements in the most recent rendition of the framework. These include: platform of engagement (a core website or omni-channel platform), commerce & marketing channels, engagement channels & customer relations, and authenticity. From this, it was further developed into the ‘digital integration fundamentals’ which included, at its core, understanding of customers, which can support personalised channels, main platform of engagement, authentic/personalised response & customer engagement, and efficient backend technology & support. Initially this was also supported by an additional section of ‘the luxury difference’ which included SEO, SEM & social media excellence, even more personalised engagement, and convenience being the ultimate luxury, however, luxury experiences should again depend on the company and what they want to invest on most. The key of luxury value is stated in the literature review as ‘excellence that brings fulfilment’, and this notion is also very much applicable to digital integration. The reason that the framework is in the form of a circle is meant to mean that everything, when brought together, forms the whole of the luxury shopping experience with the customers at its core. Many different forms were thought of during development, from a cone to a pyramid, cycle and a matrix. However, there were flaws with the other tested forms. For example, making it in a cone such as the first iteration of the framework would mean that the different components would be in different hierarchical positions, implying that one is more important than the other. While the core importance does go to understanding customers, the other elements are on the same level of importance. As such, the framework developed from the original cone into the circular puzzle that it is currently in.

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F R A M E W O R K

P R O G R E S S I O N

Figure 20: Original Deloitte path-to-purchase chart taken as the base of the framework (Deloitte, 2016, p. 10)

Figure 21: The ‘shopping experience’ section was extracted to allow more focus into the framework.

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Lifestyle Advisors Digital Pop-up

Exclusive Collection Pre-orders

Omni-Channel Retail

Personalisation Store as Brand Experience

Click & Collect

Emerging Technology

M-commerce

Apps Personal shopper

In-store

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Luxury e-tailer

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Figure 22: The first framework draft containing refined quadrants and components (Jogiastra, 2017)

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Figure 23: The framework was rebuilt from the ground up in order to correspond with the findings (Jogiastra, 2017)

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C O N C L U S I O N

&

D I S C U S S I O N

Recommendations for Further Study It is hoped that this research will stimulate and encourage even more studies about digital luxury and the future of fashion mainly luxury fashion. This research has been primarily theoretical, and as such, it would be very beneficial to have other researchers take up on the framework and experiment on it in collaboration with luxury brands looking to integrate digital into the business model. Actual collaboration would allow for a more controlled and in-depth view of the progress leading to success and allowing for refinement of the framework as the project goes on. It is also encouraged for other researchers to look at how the framework can be improved as the industry matures. There are aspects of the framework that can be delved further to gain even more insight, particularly on the back-end technologies as efficiency on back-end technologies as logistics are being continually improved. There are issues of the security of luxury deliveries considering the value of the items that need to be addressed and can be looked– possibly creating a better system that allows for more secure package transfers and traceability. There is also the realm of authentic customer engagement that can be considered, especially how companies can speak to their customers that bring genuine trust but also remaining to be professional and refined. Is there a tone of voice that suits a particular type of brand? Would having the creative director as the face of the brand put too much pressure and end up becoming a case of mismanaged creativity? What happens when the designer is no longer a part of the brand? Many questions can definitely be looked at regarding the quadrants of the framework as well as the future of digital luxury, and further insight will only aid luxury brands to become even better.

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C O N C L U S I O N

&

D I S C U S S I O N

Personal Reflection Throughout this project, I gained not only many insight regarding the current state of luxury, but also the many aspects and systems that make (or break) a luxury brand. While there was an abundance of information regarding ambitious ideas of how luxury can go digital or how AI can be the future of luxury, there was a lack of information or analysis about how successful certain digital channels are for luxury. For example, there was plenty of news about Burberry’s digital ventures, but the specific numbers and how successful the channels ended up becoming are scarce. In addition to this, both case study subjects either refused or did not reply to participation requests which made the case studies purely based on published and public information. I would have liked to obtain more answers straight from the two companies’ representatives themselves. If I had more connections and resources, I would have liked to gain insight straight from the companies especially regarding the framework. At the start of the project, I had a lot of confusion regarding defining what I wanted to do. I knew that I wanted to delve into digital luxury, however, I was not sure what was to be my exact topic. I spent far too much time thinking about what I wanted to do instead of building analysis on current situations to begin contextualising what would be my research question. I also ended up making my initial topic far too ambitious, which led me to become overwhelmed with what I needed to do instead of maximising what I could have done at the time. While it was a shame that I did not have a fashion tutor this time, the support I received from my supervisor and interviewees were immensely beneficial. I was able to gain the knowledge I would never have gotten myself and think about certain aspects that have never crossed my mind. With regards to the learning plan, while I have strayed quite far from my original field of study which revolves around branding and graphic design, I feel like I have gained a wider range of knowledge that will help me in my future endeavours. With the skills that I had prior to the course and thesis combined with the knowledge I gained throughout my journey, I have become one step closer to being a well-rounded entrepreneurial designer.

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R E F E R E N C E S

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The Future Laboratory (2017) Luxury Futures Report 2017, The Future Laboratory. LS:N Global. Available at: https://shop.thefuturelaboratory.com/products/luxuryfutures-report-2017 (Accessed: August 31, 2017).

Zorfas, A. and Leemon, D. (2017) An Emotional Connection Matters More than Customer Satisfaction, Harvard Business Review. Available at: https://hbr.org/2016/08/an-emotionalconnection-matters-more-than-customer-satisfaction (Accessed: August 31, 2017).

VERB Brands (2017) How Is Digital Shaping The Luxury Industry?, VERB Brands. Verb Brands Limited. Available at: http://verbbrands.com/trend-highlightshow-is-digital-shaping-the-luxury-industry/ (Accessed: August 31, 2017). VERB Brands (2017) The Evolving Luxury Hospitality Market: The Key To Growth, VERB Brands. Verb Brands Limited. Available at: http://verbbrands.com/theevolving-luxury-hospitality-market/ (Accessed: August 31, 2017). VERB Brands (2017) The Highlights Of Millennial 20/20, Verb Brands Limited. Available at: http:// verbbrands.com/highlights-of-millennial-2020/?utm_ content=buffer79e29&utm_medium=social&utm_ source=linkedin.com&utm_campaign=buffer (Accessed: August 26, 2017). VERB Brands (2017) TREND Highlights: The Evolution of Luxury Hospitality - Verb Brands, VERB Brands. Verb Brands Limited. Available at: http://verbbrands.com/ trend-highlights-the-evolution-of-luxury-hospitality/ (Accessed: August 31, 2017). VERB Brands and Andjelic, A. (2017) Can Hospitality Hack Its Own Growth?, VERB Brands. Verb Brands Limited. Available at: http://verbbrands.com/interviewspotlight-can-the-hospitality-industry-hack-its-owngrowth/ (Accessed: August 31, 2017). VERB Brands and Buchanan, V. (2017) Trend Forecasting In The Luxury Industry, VERB Brands. Verb Brands Limited. Available at: http://verbbrands. com/interview-spotlight-victoria-buchanan/ (Accessed: August 31, 2017).

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E X T R A S

Appendices


I N T E R V I E W

E V I D E N C E

An interview was conducted as part of the methods in this research. The interview was done with the help of Clara Saladich, Marketing Manager of VERB Brands, who also included Chris Donnelly, Managing Director of VERB Brands, and Victoria Buchanan, Strategic Researcher at The Future Laboratory in the interview responses. Alongside the interview, several additional resources was also given as additional material. The interview covered seven questions alongside visuals of the framework in development for industry analysis. The original emails containing the questions and answers are as below:

Thursday, Aug 3, 1:38 PM

Re: [VERB - Hello] Possible Research Opportunity by Michelle Raena | michelle.raena@gmail.com Dear Clara, Thank you so much for your reply! This project that I’m doing now is the third and final project I’ll be doing in the course–my thesis. After research about redefining luxury value in the first semester, a case study on the acquisition of Christopher Kane by Kering on the second, I’m focusing on digital luxury and how luxury brands can integrate digital into the brand strategy and have it add value beyond making headlines and marketing. My research is based on a path-to-purchase chart from a report by Deloitte (attached in this email) and critically analysing it to create a viable framework focused on the shopping experience for the customer. I have made a simplified framework draft, however, as you are the digital luxury experts, I would like to have your opinion as to how I can make it viable for luxury companies and brands. I have no plans on publishing the thesis as of now, however, should there be an opportunity for me to publish it, I will get back in contact with you and ask for permission in case you'd want anything omitted or anonymised. But as of now, it is just to submit to my tutor. The questions that I have are as the following:

1. How would you define digital luxury and what makes a luxury digital experience different from any other digital experience? 2. What do you see lacking or overlooked in most luxury digital channels? 3. Luxury brands are often making small investments in digital such as smart watch collaborations (Hermès & Apple) or 3D-printed garments, however, a lot of the time it can seem like more of a marketing move or a creative decision than a deeply strategic one. How would you justify to your luxury clients that integrating digital in a strategic level would be beneficial for the company? 4. In the case of luxury, limited accessibility has always been something that is embedded in luxury strategy. With the internet being as accessible and free as it is, how can luxury brands remain exclusive with the increase in accessibility? 5. What is the fundamental infrastructure that a company needs to have in place to implement successful digital integration? 6. With regards to the Deloitte path-to-purchase chart, what part of the consumer journey is key in today’s digital-native market and that luxury brands should be looking at, and which are otherwise less relevant to the experience? 7. Based on your professional opinion, are any of the emerging technologies mentioned there actually viable and adds value to luxury companies?

Also, I would like to ask if it would be okay for me to record the call? This is so I can transcribe the conversation as interview evidence. I heard about VERB via my tutor's recommendation. The work that you do is just amazing! Larsson & Jennings, in particular, was one that I personally experienced and loved! Many thanks again for getting in contact with me! I hope to hear from you soon!

Best Regards,

Michelle Raena Jogiastra (15032021)


Tuesday, Aug 8, 11:28 AM

Re: [VERB - Hello] Possible Research Opportunity by Clara Saladich | clara@verbbrands.com Hi Michelle, Apologies for the late reply. The truth is, we're swamped with projects at the moment and I'm afraid we don't have the time at this stage for a call and a deep analysis. Looking at your questions, I remember we answered some of them at our first TREND event in April when we discussed how luxury brands are embracing digital to attract the Millennial consumer. Here are useful articles that will help: verbbrands.com/trend-highlights-how-is-digital-shaping-the-luxury-industry/ verbbrands.com/interview-spotlight-victoria-buchanan/ verbbrands.com/highlights-of-millennial-2020/ verbbrands.com/interview-spotlight-can-the-hospitality-industry-hack-its-own-growth/ verbbrands.com/the-evolving-luxury-hospitality-market/ verbbrands.com/trend-highlights-the-evolution-of-luxury-hospitality/ The three first ones I think could be helpful Brief answers to the questions could be: 1. How would you define digital luxury and what makes a luxury digital experience different from any other digital experience? You can find luxury in digital when the excellent customer service is found throughout the whole path to purchase journey, from the research stage to product delivery, including a holistic approach to the physical and digital experience merging both into one. 1. What do you see lacking or overlooked in most luxury digital channels? I see a lack of focus strategy for luxury brands. Embracing digital doesn't mean embracing all the marketing channels. The strategy needs to be targeted and bespoke to each luxury brand (choose social media channels wisely and use each of them with a specific strategy instead of being in all of them just because 'they have to'). 1. Luxury brands are often making small investments in digital such as smart watch collaborations (Hermès & Apple) or 3D-printed garments, however, a lot of the time it can seem like more of a marketing move or a creative decision than a deeply strategic one. How would you justify to your luxury clients that integrating digital in a strategic level would be beneficial for the company? In the end, marketing means strategy and even if the purpose from the brand is not purely strategic, these sort of partnerships enhance brand awareness towards the consumer and also pushes the brand itself to become better and at the forefront of its competitors. A good example can be the partnership between Marchesa and IBM with their cognitive dress that captures data of the one who wears it. Impressive! 1. In the case of luxury, limited accessibility has always been something that is embedded in luxury strategy. With the internet being as accessible and free as it is, how can luxury brands remain exclusive with the increase in accessibility? For the next generation of luxury consumers, convenience is becoming the most important factor. Luxury has always been perceived as a slow industry sector throughout the entire process, from the time you order a product until you receive it. Victoria Buchanan, Strategic Researcher at The Future Laboratory explained this concept at TREND “Increasingly people expect this kind of sense of instant gratification. So when they get that from every other industry, it’s interesting to look at how the luxury sector responding to that” Buchanan concluded.


1. What is the fundamental infrastructure that a company needs to have in place to implement successful digital integration? The success of a digital strategy relies on how well you know your consumers. Understanding their digital habits, hobbies and online behaviour helps luxury brands define a more accurate digital strategy. As a first step, using Google Analytics to define 'marketing personas' is very useful to define when is their preferred time to purchase, how long do they stay on your site, how old are they, what are their interests, what is the source or referral page that took them to your site, etc. And in-depth site analysis allows the brand to take action on the rest of their digital touchpoints: a solid social media strategy, a strong SEO in place, SEM if applicable and even the use of influencer marketing to strengthen your brand awareness.

1. With regards to the Deloitte path-to-purchase chart, what part of the consumer journey is key in today’s digital-native market and that luxury brands should be looking at, and which are otherwise less relevant to the experience? Today, digital is relevant to the whole path to purchase process, but offline and customer service are equally important too. From the research stage to the final delivery. Today, luxury brands create stories around their brands and don't talk about themselves, but let their consumers talk about them. Luxury consumers become the best brands advocates. One of the biggest challenges for brands is to keep up with the consumer’s need for immediacy: the fact that we are used to ‘expect everything yesterday’. Having the control at our fingertips, being able to order an Uber instantly or having our same-day deliveries are some examples of what we, as consumers, are expecting as a norm. Digital plays a huge role to achieve this and I believe brands need to innovate from the inside, improving their supply chains and making their internal processes as efficient as possible in order to deliver a product or service as fast as possible and of the highest quality. The whole customer path to purchase needs to be integrated, from the initial digital research to the final offline delivery. 1. Based on your professional opinion, are any of the emerging technologies mentioned there actually viable and adds value to luxury companies? We believe most of those 'new' technologies are already being used and are definitely adding a huge value to luxury companies. To sum up, we are going towards more and more personalization, customisation and bespoke unique service towards the luxury consumer. So every technology that embraces this, will succeed in the luxury industry. Hope this helps, Michelle. Good luck with the thesis! Best, Clara

Clara Saladich Marketing Manager

+44 (0) 20 8977 2994 +44 (0) 742 909 2922 verbbrands.com @verbbrands The Old Truman Brewery | 91 Brick Lane | London | E1 6QL This email contains information which is confidential and may be privileged. Unless you are the intended addressee (or authorised to receive for the addressee) you may not use, forward, copy or disclose to anyone this email or any


E T H I C A L

C O N S E N T

Written consent was given by Clara Saladich on behalf of all the interviewees to both include names and orginal material as well as publishing the material online as part of the report.

Tuesday, Aug 22, 10:48 AM

Re: [VERB - Hello] Possible Research Opportunity by Michelle Raena | michelle.raena@gmail.com Hi Clara, Hope you’re doing well! The paper you sent me was very helpful! Thank you very much! As part of my thesis submission, I am planning to make a website page as a product of the research and include the full thesis for download. I am asking for your permission if you’d allow me to publish the thesis which has the interview we had earlier on. Would you mind? Or would you prefer I anonymise some parts? Let me know and I won’t publish it live or have a password-protected page for only my tutors to see. It will be in my website at michelleraena.com. Thank you! Best Regards,

Michelle Raena Jogiastra michelle.raena@gmail.com michelleraena.com Tuesday, Aug 22, 12:33 PM

Re: [VERB - Hello] Possible Research Opportunity by Clara Saladich | clara@verbbrands.com Hi Michelle, Of course! not a problem at all. Let me know when it's published and we can also take a look to it. Best, Clara

Clara Saladich Marketing Manager

+44 (0) 20 8977 2994 +44 (0) 742 909 2922 verbbrands.com @verbbrands The Old Truman Brewery | 91 Brick Lane | London | E1 6QL


O T H E R

I N T E R V I E W

A T T E M P T S

Other interview attempts have been made including with case study subjects, however, calls and emails were either unreturned or subjects refused to participate. Several requests have also been made through company contact forms not shown below.


F R A M E W O R K

P R O G R E S S I O N

D R A F T S

Below are drafts and mind-maps that were made during initial research phases as well as framework creation.


W E B S I T E

P U B L I C A T I O N

As part of the submission of this thesis, a page was made at http://michelleraena.com/digitalluxury allowing for a glimpse into the content of the thesis as well as a digital download link to the full paper. This website is available to the public and has received approval to be published by the interviewees and my supervisor. The website is responsive and works on all supported devices.


P E R S O N A L

D E V E L O P M E N T

P L A N

Over the course of one year, my personal development plan has evolved. Here are each semester’s Personal Development Plan charts:


P E R S O N A L

D E V E L O P M E N T

P L A N

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S E M E S T E R

1


P E R S O N A L

D E V E L O P M E N T

P L A N

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S E M E S T E R

2

SEMESTER

THE GOAL Achieving balance as a creative, entrepreneurial designer in the fashion and beauty sector as well as investigating new possibilities in the luxury sector.

THE PLAN Further articulate the future of luxury fashion and beauty, possibly looking into new communication strategies such as how companies engage with their consumers and make them a part of a community while still keeping the brand exclusive–maintaining exclusivity while becoming inclusive, looking at the visual profile of a luxury brand and how certain elements can be classified as luxurious, and hopefully identify a gap in the luxury market and where design can contribute to provide a better mode of business, in particular new ‘value’ for luxury fashion brands.

THE PROCESS

1

THE CONTEXT

THE SKILLS

Self reflection based on previous project

2 Critical literature review and exploration of existing research

3 Collaborate

with relevant people in the luxury fashion industry

4 Participate

in the fashion community of practice

5 Gain insight

through research, real life case studies and qualitative data

6 Evaluate & decode

by creating suggestions and solutions based on findings and data

SEMESTER 2 SPECIFICS

The information obtained from the project could be relevant and applied in an international context, provided that it is done with luxury brands in mind. With this I hope I could contribute in an international setting.

Creating or improving strategies and branding, brand communication and the importance of consumer engagement, luxury value chain, sustainability in luxury, analysing current situations and creating new propositions.

THE SCOPE

Luxury brand management Branding Fashion T H E C O L L A B O R ATO R S

Larger upcoming luxury brands, Walpole committee, previous collaborations, fellow students and tutors, community of practice members, researchers.

THE SOURCES Books, existing literature, Business of Fashion website for news articles, contemporary influences, websites, real life brands, tutorials, relevant people in the industry.


P E R S O N A L

D E V E L O P M E N T

P L A N

-

S E M E S T E R

3

3

SEMESTER

THE GOAL Achieving balance as a creative, entrepreneurial designer in the fashion and beauty sector as well as investigating new possibilities in the luxury sector.

THE PLAN

THE PROCESS

1

THE CONTEXT

THE SKILLS

Analyse the opportunities within digital luxury and how luxury brands can ease in to the digital revolution in a way that adds value for luxury consumers. Look at a possible digital integration framework for luxury brands looking to add digital systems into the business model. Past research about luxury value and the Christopher Kane & Kering case study will add significant knowledge into the topic as it covers both the company and customer view points. The third part of the research will focus on the shopping experience, delving into experiential luxury.

Self reflection based on previous project

2 Critical literature review and exploration of existing research

3 Collaborate

with relevant people in the luxury fashion industry

4 Participate

in the fashion community of practice

5 Gain insight

through research, real life case studies and qualitative data

6 Evaluate & decode

by creating suggestions and solutions based on findings and data

SEMESTER 3 SPECIFICS

The information obtained from the project could be relevant and applied in an international context, provided that it is done with luxury brands in mind. With this I hope I could contribute in an international setting.

Creating a digital integration framework, analyse luxury value and customer engagement towards a company, growing value creation for luxury, luxury value chain, brand communication, current situations and creating new propositions

THE SCOPE

Luxury brand management Digital Fashion T H E C O L L A B O R ATO R S

Digital luxury experts, luxury brands driving digital luxury, previous collaborations, fellow students and tutors, community of practice members, researchers.

THE SOURCES Books, existing literature, Business of Fashion website for news articles, contemporary influences, websites, real life brands, tutorials, relevant people in the industry.


M I C H E L L E

R A E N A

J O G I A S T R A

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Digital Luxury: A Thesis by Michelle Raena Jogiastra  

Luxury is changing and integrating digital into the business requires certain key elements. This study looks at the current issues in digita...

Digital Luxury: A Thesis by Michelle Raena Jogiastra  

Luxury is changing and integrating digital into the business requires certain key elements. This study looks at the current issues in digita...

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