Why Video is Becoming Key in Driving Ecommerce Sales for Luxury Brands

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No sector has been hit as hard by COVID-19 as a luxury. No other niche has a greater need to digitally transform itself to drive e-commerce sales through slick video advertising on brand-safe channels.

Luxury’s problem has been that purchases have typically been made in-store. The shopping experience is all part of the pride of ownership and a feeling of belonging to a particular high-end brand’s values and community. To put that into context, nearly three in four luxury customers say they want a close relationship with a physical store and the community that an upmarket brand attracts. That is around twice as high as the average shopper, according to GlobalWebIndex.

The trouble is that COVID-19 has seen retail outlets temporarily closed down around the world, which is clearly bad news for a sector based on physical locations. However, as McKinsey points out, it is even worse when you consider a luxury brand that will typically make between 20% to 30% of its revenue from tourists. In fact, half of all luxury purchases made by Chinese consumers – the world’s largest luxury market – were made on shopping trips abroad.

Little wonder, then, that Bain & Company is predicting three different scenarios for luxury that will see sales fall during 2020 by anything from 15% to 35%.

E-commerce serves pent-up demand

There is a digital transformation message luxury brands need to take on here but also a glimmer of hope.

The lesson is obvious. Relying on retail outlets is a risky business model, particularly when those stores rely on tourists for up to a third of sales. Ecommerce is no longer a nice-to-have addition, it’s a necessity.

Secondly, there is a lot of pent-up demand with 37% of Indian and 31% of Chinese revealing they have put off luxury purchases by 10% and 7% respectively, yet say they will prioritize these goods once their economies begin to recover from the global pandemic. This dwarfs the UK and USA where prioritizing luxury purchases lies at 3% and 2% respectively.

With this demand looking to be unleashed in the coming months, it is clear luxury brands can no longer rely on physical sales. They need to digitally transform their shopping experiences into a powerful omnichannel offering. They need to get their e-commerce operations in order, and they need to promote them.

Performance matters

Performance marketing has traditionally been used to drive short term sales, and associated with less than optimal creative or messaging, whereas the ‘brand’ piece has been about building equity and status in the longer term. Little wonder that luxury brands have often eschewed the bottom-of-the-funnel.

But it’s time to think again. Lower funnel need not mean lower quality. In fact, it shouldn’t. Performance and brand are coming closer together out of necessity, and the circumstances surrounding COVID are only accelerating this trend.

Those pent-up consumers are ready to spend now, whereas once luxury was seen as a ‘considered’ purchase. And customers are already spending big money online – one only has to look at luxury marketplaces such as Net-a-Porter and MyTheresa to see this, both of whom know the power of performance. Some 20% of activity on our platform is now performance-led, and quickly growing as we introduce cross-funnel solutions for brands.

It should be no surprise: guaranteed performance marketing outcomes are crucial to ensure e-commerce activity is as effective as possible at a time when marketing budgets are being reviewed and squeezed. The key is to ensure that ‘performance’ and ‘brand’ activity are closely aligned, rather than being seen as two disparate disciplines run in silos – cross-funnel activity across premium sites can generate valuable leads in the short, medium and long term.

Video is the key channel

Given the need to convey quality and a lavish lifestyle, video advertising is the obvious choice for a brand. For those already immersed or those considering the channel, the first point to note is there has never been a more exciting time for luxury businesses to devote themselves to video.

The major trends that were already taking place have accelerated this year due to lockdown as the worlds of media, data, creativity and e-commerce converge. Media is now digital and the insights to reach target groups, to turn them into customers, are data-driven.

Creativity is obviously still king, but it is not the only important factor as brands use digital insights, tools and channels to collaborate with partners and innovate new ways of telling their stories. A feature we offer, for example, is a tool that can turn 30-second television adverts to shorter spots that are suited to both desktop and mobile screens.

Brand safety is key

Just as important as the message itself, though, is where the story is told and here there are three emerging options luxury brands need to be aware of.

The first is the walled gardens offered by social media giants. Although they are well-known famous names, the 61% of digital advertising revenues they receive is not matched by the 35% of consumer attention they offer. They can also be dogged by issues, such as concern over political advertising which has recently seen Facebook boycotted by a who’s who of global advertisers. Google’s YouTube has similarly undergone boycotts over concerns about brand safety.

This is important to bear in mind with the second option of the open internet through which brands can spray their video advertising around the globe through a variety of interconnected ad networks. The issues here are well known. Brands don’t always know whether their ads are going to run in safe places or even if they will be viewable at all.

The third option, which is arising from concerns over the other two routes to market, is a curated path to the internet. Here, a provider like Teads, works with trusted publishers to offer reach and scalability on reputable sites.

Effective measurement

We are already seeing this option become increasingly appealing to luxury advertisers. With the approach of a global recession that is almost certain to follow the easing of lockdown restrictions, companies want to know their messages really are being seen by a targeted audience in safe environments. They want to be offered results rather than vague promises.

Whether they are new to video advertising or upping their game to compete in challenging markets, luxury advertisers need to make sure they are showing the right people, the right message on the most trusted, safe sites. For this, they need advertising partners to innovate new formats, buying methods, data capabilities and customer insight tools that protect their interests and offer results rather than vague promises.

Being both effective and safe are the two prime concerns coming to the fore. Only a curated video advertising experience can report back on the success of campaigns as well as provide sites that will not degrade the good name of a brand that has taken decades to build.

The future of retail isn’t footfall

The pandemic, and our responses to it, has fundamentally changed the way we shop. Even as lockdowns ease, footfall is nowhere near pre-pandemic levels, and nobody knows for sure when or where new waves, spikes and restrictions will fall.

Footfall is rapidly becoming an old-world metric: now the impetus must be on the overall e-commerce consumer journey. Performance marketing that drives quality visits to a site is a large (and growing) part of that.

The million-dollar question now is, what happens when they get there?

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