Global luxury markets are growing steadily – but luxury retailers need to change their strategy to make the most of that growth.
According to report by research house BCG, retailers must adapt to new levels of market complexity, accommodate new kinds of purchasing behaviours, push into new geographies and cities, evaluate different business models, and do more with digital technology.
Luxury players must anticipate such changes by focusing not on regional-level strategies – often their conventional market lens – but on city-level approaches or at least on strategies that target a cluster of cities whose inhabitants have roughly similar buying behaviours.
“While creativity, quality, and brand protection will remain paramount, brands need to plan their go-to-market strategies more systematically – including marketing, assortment, merchandising, and pricing – at the city or city-cluster level,” said BCG principal Sarah Willersdorf.
BCG has outlined three core ways brands and retailers can work together to optimise sales as demand patterns change worldwide:
- Conduct deeper market analyses at the city and cluster-of-city levels.
Brands and retailers armed with a deeper understanding of local demand and consumer behaviours can cluster cities beyond the geographic boundaries of countries. Brands need to continue to market locally and also market effectively in tourists’ countries of origins. From a retail perspective, assortments need to cater to demand from locals as well as tourists. - Localise go-to-market strategies.
It is no longer enough for brands to target the elites in emerging markets with splashy ads for existing “Western” products and retail assortments. Now, astute brands are developing highly localised approaches to marketing, assortment, and merchandising. - Develop aggressive strategies to reach tourists.
The proliferation of tourism will continue to drive growth for brands. Travellers from Brazil, China, India, and the Middle East have been especially keen spenders while vacationing abroad. Luxury brands and retailers must understand the tourist mix at a city level and develop strategies that create brand awareness before tourists’ journeys begin.