This has been a tumultuous year to say the least, but the luxury industry – which relied heavily on in-store sales and physical runway shows – has felt the pressure in several ways that other sectors haven’t. At once deeply traditional and experimentally digital, luxury has been forced to pack years’ worth of digitisation into months, necessitating real change in the way it designs, makes, and sells.
As part of our eCommerce focus, we spent some time with Ashley McDonnell, who heads up Global Luxury Accounts for Google, and who previously worked for one of the world’s largest luxury groups. In this exclusive conversation, we discuss everything from digital fashion shows to the dilemma of going direct-to-consumer or through a marketplace.
The Interline: COVID has obviously had a massive impact on every segment of fashion, but luxury is unique in that we expect it to have been insulated from some areas of risk, but perhaps more exposed to others. In you experience, how has the luxury industry fared this year?
Ashley McDonnell: By far the biggest challenge the luxury industry has faced was store closures. In normal circumstances, around 90% of luxury consumer goods and fashion are sold in-store, and the remaining 10% would be split between brands’ own direct-to-consumer channels, e-tailers like Net-A-Porter and Matches Fashion, or through retailers like Selfridges.
So when lockdowns started, a large majority of luxury brands’ sales were rendered instantly impossible. Which meant that their digital channels suddenly needed to expand from being only minor contributors to top-line sales, to being the only channels available.
What’s interesting also is that the current estimate is that as many as 99% of all in-store sales are influenced by what people see and research online. So while the industry has seen a big move towards digital sales as a result of COVID, digital engagement was already the norm before the pandemic. And that’s why I’m confident that the luxury industry will be able to weather this crisis, as it has done in the past.
The Interline: That’s a good point, because there were quite a few companies we could have pointed to as exemplars of digital marketing and digital customer experiences prior to 2020, and a lot of them would have been in luxury. Is it fair to say that that upfront investment in digital outreach and engagement puts luxury businesses in a better starting position?
Ashley McDonnell: The brands that were already set up for a digitalised future were definitely in the best possible situation, since they had not just the outreach channels but also, in some cases, the logistics and digital performance monitoring capabilities in place to sell effectively online. And because their brands are so strong, people are already accustomed to seeking them out digitally, too.
More than anything, though, COVID has demonstrated that other brands and other segments that weren’t as reliant on digital before this year now have no real choice. Take a company like Zara, which is going to be shutting thousands of stores because it’s now so apparent to them that they have the opportunity to grow massively online.
I also don’t think it’s likely that COVID’s impact on consumer behaviour is going to be temporary, and the brands and retailers that succeed in 2021 and beyond will therefore be the ones that digitise across the board. That means everything from supply chain to CRM. Because without that level of digitisation, it’s going to be difficult to get through not just what’s left of the current crisis, but future disruption as well.
The Interline: You mentioned supply chains there, and that’s something that can look very different for a luxury brand than it does for a fast fashion retailer; luxury businesses tend to have narrower supply chains. Does that make them more or less prone to disruption?
Ashley McDonnell: I think it’s a question of control as much as anything. Europe is still the hub for luxury fashion and leather goods, for example, so luxury brands don’t need to deal with the complexities of sourcing, dyeing, sewing and assembly all being spread across different continents. Having your supply chain centralised in that way is certainly better, from a risk-mitigation point of view, than having it distributed around the world – beyond your ability to directly control your production processes.
This isn’t a new trend, though; luxury has been trying to bring as much back in-house as possible lately. A few years ago, eyewear was a license business for most luxury groups, but today, as licenses expire, they’re taking that business back under their own control so they can manage everything from design and production to distribution. And that was being done for greater agility and efficiency prior to COVID, but it has the added benefit of making those businesses more resilient to this kind of upheaval.
The Interline: Thinking about digital channels again, luxury is obviously unique among fashion sectors because its calendar has long been centred around runway shows. Prior to COVID, fashion shows had already begun to broaden their audiences to some extent through “see now, buy now” initiatives, but for the most part they were still stubbornly physical events. That’s changed this year, but what’s your take on which approaches to digital fashion shows have worked, and which haven’t?
Ashley McDonnell: The very beginning of the pandemic in Europe coincided with fashion month. At that time, Giorgio Armani were one of the first brands to make a reactive decision and run their show online, without an audience; they still had the models, using COVID-safe precautions, and the runway was still in Milan, but nobody attended physically.
Things have come a long way since then – in a very short space of time. Building on the understanding that having a physical audience was likely to remain impossible for a year or more, brands have taken things into their own hands and created experiences that were digital-first, rather than being remote versions of in-person shows. I think the best example of this that I’ve seen was Louis Vuitton’s women’s show this autumn. It ran through YouTube Live, which made it accessible to anyone, but they also mixed live and virtual elements into an exciting, interactive whole. And their digital-first approach allowed them to have digital front rows as well, so that influencers and celebrities were still visible watching the show. That blend felt as though it came the closest that anyone’s come to recreating the magical moments that have made in-person shows so important for so long.
The Interline: And how about purely digital shows? Because those have been tried in several different ways – with different technologies underpinning them, and to different extremes. Have any of them truly worked, and are they even remotely affordable, and sustainable, in the long term?
Ashley McDonnell: The last few years we’ve seen some really interesting evolutions of the crossover between technology and fashion from an augmented point of view. We’ve had Cameron Wilson creating the world’s first digital modelling agency, going on to work for Fenty and Balmain, putting digital models on the red carpet, and launching campaigns that are one hundred percent virtual. That’s something I think brands are really open to at the moment, because there are so many practical and logistical constraints around physical photoshoots. But it’s also something that’s attractive in terms of cost as well, because it can replace a lot of different outsourcing expenses – from models and photographers to assistants and production managers.
So while you’re right that all-digital shows are currently very expensive, time-consuming things to put together – bringing together everything from product design to visual effects – the costs of doing physical shoots and runway shows can be even higher. And while the overheads associated with fashion shows are relatively fixed, virtual shows are only going to become more affordable and accessible as the platforms, rendering suites, and game engines used to produce them improve.
The Interline: That’s an interesting perspective, but visual fidelity and flexibility aren’t the only technological hurdles that have stood in the way of doing shows digitally in the past. As well as being creative buffets, fashion shows are also selling events, and as they’re being opened up to a more general audience, the option is emerging for customers (as well as retail buyers) to actually purchase or pre-order what they see on stage. Is this a channel that fashion brands are pursuing further?
Ashley McDonnell: As you know, Burberry really spearheaded this with “see now, buy now” campaigns where items were available to either buy or pre-order the moment they were shown. Those weren’t digital-first productions, but they were forward-thinking in that they pioneered the idea of the fashion show as a consumer-accessible channel for purchasing as well as engagement.
Since then, the idea hasn’t stagnated exactly, but I’ve mainly seen strong examples from makeup and beauty brands rather than fashion brands. Makeup Forever, which is part of the LVMH group, is currently running a campaign with YouTube Try-On, which allows viewers to try different lipsticks shades in augmented reality, and it integrates directly with the company’s transactional systems – so customers watching a video can sample products instantly, and then also buy them. And I think that sort of interaction is going to become vital as visits to store dwindle and brands need to build out their online presences into online sales channels as well.
The Interline: The idea of an online presence certainly seems like something that’s evolving rapidly, as customer engagement, customer experience, and eCommerce converge. There are now a lot of potential paths from initial exposure to transaction. How is that changing the way that brands communicate online?
Ashley McDonnell: In the past, the store was always king. It was the destination that we tried to bring people to, because we knew that was where the highest conversion rate was, and it was where the large majority of sales took place. Today, brands need to start thinking of their online presences in that same way – orienting their various different touchpoints around the goal of bringing shoppers to their eCommerce stores. But at the same time, stores are going to open again, whether it’s just for a few weeks before Christmas, or permanently next year, when vaccines are being rolled out. And brands are then going to want to use their online presences to encourage store visits again – whether it’s running social and search campaigns or YouTube videos – and the structures and solutions already exist to allow them to monitor the impact of what they’re doing online and how it’s translating into store visits.
The Interline: You mentioned search there, and that’s likely to become an important factor if we’re assuming that consumer journeys are likely to begin online – whether they culminate in an online sale or an in-person one. What does the future of product and brand search look like?
Ashley McDonnell: A lot of people don’t know this, but Versace is actually the reason that Google image search was created, about twenty years ago. Jennifer Lopez wore that famous jungle dress to the Grammy’s, and afterwards the entire world was searching for “JLo jungle dress”. But at the time Google only returned articles, when what people wanted were images, and that surge in visually-oriented search was what led to the creation of the images tab. And when Versace revisited that show in 2019, and Donatella brought Jennifer Lopez back in, Google was actually involved in creating the interactive digital elements of the show – which gives you an idea of how far things have come.
Visual search is now a huge component of the consumer journey. Whether it’s looking for a specific brand and item, or searching more generally for a category, people still don’t want to see text – they want to see images. Google has recently rolled out a new product called image extensions that brings visual assets into the area where you would normally see a snippet of text about a company, or contact details. So right now, if you search for Christian Dior, for example, you’re going to see images plucked straight from their current collections in the main search interface. And I think that’s going to become the new normal for product-driven industries.
The Interline: The other big question facing brands that want to either establish or scale eCommerce operations is whether to go it alone, or to sell through a marketplace like Amazon. What’s your take on that choice?
Ashley McDonnell: If you’re a new, emerging brand, or an established one that isn’t mature enough yet in digital, the quickest way for you to sell online is going to be through a marketplace. But that will also be, in my opinion, a short term approach – and one that’s unsustainable for your profit margins and your brand image.
If you’re intending to be in eCommerce for the long run, then the goal should be to own as much of your relationship with the end client as possible. And I think that’s evidenced by the fact that all the big luxury groups that traditionally relied on wholesale arrangements are now trying to bring as much as possible back in house.
The Interline: Finally, since we’re talking about visual search and owning the eCommerce experience, how important do you see digital product creation and visualisation being?
Ashley McDonnell: I think it’s going to be essential. Traditional photoshoots are effectively impossible right now, and when brands started experimenting with looking for locations for future shoots digitally, a lot of them realised that it made more sense to do completely digital or virtual shoots instead. And on top of solving the challenge of where and how to shoot, virtual photography also allows brands to make modifications to products as they go, and improve their sustainability credentials in terms of resources, logistics, and time.
Once you have a 3D asset, too, you can start to explore innovative ways of making use of it. There’s a lot happening in the crossover between fashion and gaming right now, for instance, with Louis Vuitton creating a capsule collection for League of Legends, and that says a lot about how brands are thinking about virtual reality, augmented reality, and 3D rendering as components of a complete digital ecosystem.