Three digital transformation lessons wealth management firms can learn from luxury fashion brands
I recently took part in a Crealogix discussion panel on digital transformation in private banking and wealth management, where I discussed parallels between digital challenges facing this sector and those I’ve encountered in luxury fashion and high-end retail.
We’re living in an increasingly digital world – businesses like Amazon and Netflix have set expectations for on-demand products and services, whilst connected devices are permanently changing the way customers work, shop and interact with brands. The high net-worth customer profile is changing too, as purchasing power shifts from baby boomers to digitally-native millennials, who expect a different type of luxury experience to that of previous generations.
Despite a shift towards digitisation, some of the largest fashion brands such as Cartier, Dior and Prada have historically been resistant to adapt to e-commerce – a pattern we see today with many of the established wealth management firms. This has been driven in part by fears that digital channels will erode the exclusivity and quality of service that high net worth customers have come to expect. Many of these brands also initially lacked the capabilities required to operate as successful technology businesses.
Early digital entrants within luxury retail, such as Yoox Net-A-Porter, have subsequently emerged as the real winners in this space by recognising the convenience that digital channels can offer to customers. Over the last 20 years, YNAP has grown into a billion-dollar business with four distinct brands, now managing online operations for some of its established predecessors like Valentino. We’ve seen a subsequent revolution in digital adoption in this industry and even the most resistant players have started to develop their online offerings in order to remain competitive.
Similarly, it’s becoming increasingly clear that wealth management brands built on exclusivity could be under threat from the new breed of digital-native investment platforms.
So how can wealth management firms adapt to the online space? Lessons from luxury retail suggest focusing on three areas: building online trust with customers, identifying ways to replicate the offline experience, and finding the right digital skills.
1. Building online trust and credibility
Like wealth management, luxury retail is about more than the products themselves. It’s about the entire customer experience – personal service, expertise and the overall quality of the interaction. Trust is fundamental to the transaction.
Creating trust without face-to-face interactions requires high quality customer service – whether it be 24/7 customer support, a personalised user experience or simply reassurance that your money is protected. A clear customer service strategy is therefore paramount in building credibility with customers online.
Trust and brand loyalty are also hugely influenced by word-of-mouth recommendations. Links, likes and online reviews used to discover and share a product or service are highly transparent in today’s digital world and are just as important as in-store discovery and expert recommendations. Keeping track of your reputation online is crucial to remaining credible with your customers.
2. Redefining the offline experience, online
Replicating the traditional customer experience online is a big challenge. Success lies in focussing on the quality of your content, developing a simple user interface and providing a seamless experience across your online and offline channels. Digital channels should be used to complement rather than replace offline channels, giving customers access to the same information and services on their mobile and web browsers as they have in store.
Personalisation is also important. As with wealth managers, luxury brands rely on strong, individual relationships with their customers, based on years of interactions. Whilst offering 1:1 services to all customers is unsustainable and costly, defining a top-tier of clients and offering them a dedicated account manager who knows their preferences inside out, can build loyalty amongst your most profitable customers. Net-a-Porter’s team of 50+ personal shoppers have done just this, which has been key to its success in generating repeat purchases whilst maintaining a human element to the brand.
3. Finding the right digital skills
The decision to embrace digital is not without its technical challenges – brands built on personal relationships don’t necessarily have all the resources, skillsets or capabilities needed to adopt a digital strategy.
A digital strategy requires web development, data analysis and ongoing reporting and iteration in order to be successful. Digital transformation may therefore require a shift in your existing business model. Whilst the whole organisation needs to own and embrace the strategy, it is possible to work with partners to create a digital experience that matches your brand and your customers’ expectations.
Some retailers choose to use external developers to build their own in-house platforms, while others have invested in customised off-the-shelf solutions to get off the ground quickly. Both have their merits.
Embrace the unknown
Whether in high fashion, luxury retail, wealth management or private banking, the vast majority of luxury brands will probably need to embrace digital in some form. Whilst there’s no single right answer, based on my experience in luxury retail, the key to success is to invest time at the outset to think through your strategy, develop a clear vision of the offline/online experience, and build relationships with partners you can trust. And, of course, to get there before everyone else catches up.
By Nitasha Dhiri, independent strategy consultant – luxury retail