Analysis

Opinion: Fulfilment, the next frontier for luxury retailers’ omnichannel expansion

 Luxury retailers were once hesitant to go online but are now embracing ecommerce, and fulfilment is likely to be the next thing in their sights, according to Georges Berzgal, vice president for Europe, global ecommerce at Pitney Bowes. 

For years, many luxury brands resisted the shift to ecommerce. Their tech-savvy, high-demanding customers, have however forced a change in tactics.

Most recent estimates from 2015 confirm online sales made up 6% of the total for luxury goods and this number is expected to grow to 18% by 2025. Brands including Moët Hennessy, Louis Vuitton, SE’s, Fendi and Chanel are now experimenting with online sales and aiming to improve their online offerings in response to customer demand.

In a sense online commerce has become the equivalent to a store unrestricted by any borders. Products not available in a country are only a search away online, in a market reachable by freight.

Subsequently, luxury has become one of the top-selling categories across borders. Nonetheless, cross-border commerce can be complicated. Consumers continue to demonstrate unique habits and shopping preferences by country. Factors ranging from payment methods and local currencies to delivery logistics, and excise duties and taxes vary from place to place.

Unlocking fulfilment for luxury brands

One of the main challenges luxury brands face when expanding globally through online channels is making sure their products reach their customers in the same condition and luxurious manner as they would if they were buying in-store or in-country.

Despite merchants’ efforts to improve the shipping and return processes, it remains a major frustration for consumers. Even the most basic elements of the customer experience such as shipping the right item, accuracy in address and tracking, a transparent returns policy and proper duty and tax, bring consumers headaches when shopping online.

In fact, a recent study revealed that several high-end brands are only utilising best practice during the consumer journey around 50% of the time. This includes the entire ordering experience, delivery as well as packaging and returns.

Particularly, the luxury industry target audience is very different from the mass market retailers’ customer base. They typically travel more, have multiple shipping addresses, and have expectations based on best-in class providers. They pay a lot of money for each product and they expect to not only receive it in a timely and correct manner, but also to experience the whole luxury feeling these brands offer in-store, from packaging and customer service response time to delivery and return options.

So, what do luxury brands need to consider when improving their supply chain performance?

1) Have a deep knowledge of trade regulations and global and local agreements

Different countries have different regulations regarding exotic materials as well as complex tax and trade requirements. A product, material or fabric that appears quite ordinary in one country could well be illegal in another. Knowing this in advance will save both retailers and consumers time and money.

2) Trustworthy logistics providers

Brand reputation is on the line with every single delivery, and any mistake could risk ruining a long-term relationship with a valuable loyal customer. When delivering for a high-end brand, providers fulfil an ambassadorial function, so that’s why transport and logistics need to be irreproachable and consistent with the image of the products and the brand.

Providers need to ensure secure product handling, as well as lead times, quality, accuracy, traceability and reliability during the delivery service.

3) State-of-the-art tracking technology and security measures

Security is a huge concern when delivering high-end items. Retailers, subsequently, need reliable carriers that can carry high-value items from the first mile through to the last. Efficient real-time tracking systems allow brands to get reliable information of the location of the product and guarantee optimum transport conditions.

4) Attention to detail

Customers who are used to top-notch brand experiences in cities such as New York, Hong Kong or Paris can become frustrated when they don’t receive the same treatment online. They may end up feeling they are paying for quality they don’t receive.

Many brands are missing out on the details and little things that make all the difference, such as covering the product in standard parcel paper rather than delivering it in a more luxurious manner. The key is to maintain that feeling of luxury throughout the whole consumer journey.

Conclusion

The high-end fashion world, at times, is struggling to transfer the luxury experience of the bricks-and-mortar stores into online. Focusing on the entire journey and offering added value to customers during the fulfilment stage will allow luxury retailers to capitalise on the possibilities offered online at home and abroad.

Technology can allow luxury merchants to excel at global commerce by easily managing different challenges, from technical or local requirement barriers to international trade.

It can enable retailers to offer a localised experience to shoppers, be it currencies or an array of payment options and delivery methods, as well as duties and taxes that can either be paid at point of purchase or at arrival. Layer multiple shipping options from express to standard service, and retailers are pretty close to offering the end-customer a near-local experience.

More information and insight on cross-border commerce and online global shopping, can be found in Pitney Bowes 2016 Global Online Shopping Study.

Georges Berzgal is vice president for Europe, global ecommerce at Pitney Bowes