The Luxury of Personalization

luxury shopping
February 28, 2018

The luxury retail industry is at a crossroads. Global revenue growth has slowed, the consumer base is changing rapidly and there’s a race to quickly and effectively harness digital strategies even as they evolve. A recent Moody’s report suggests that while luxury retail’s earnings growth is picking up, it is still well below the double-digit numbers experienced in previous years. This is a sign the industry should consider bolder strategies to shore up profits while concurrently expanding to new markets and new consumers.

Luxury branding has been synonymous with its distinctive products — promising each customer high-quality materials and impeccable design. The industry’s retail model is equally pronounced, as it relies on a conservative product assortment at a higher price point, centered on the individual customer. In a way, luxury has been the embodiment of personalization, but as brands begin to reevaluate their marketing strategies and what’s next, artificial intelligence inevitability comes under consideration.

If 2017 was the year of mulling AI’s potential, 2018 may very well be the time that potential is realized. While luxury retailers have started to embrace AI capabilities, the industry is still exploring what AI means to them, and more importantly, how it will view and speak to their customers. As Alex Bolen, chief executive officer of Oscar De La Renta put it, “To engage with a brand in a uniquely personal way is the ultimate luxury.”

The Legacy of Data Heritage

With luxury brands continuing to expand globally, marketing to new consumers and trying to build retention among existing buyers, they have and are amassing vast amounts of incredibly valuable data. The data collected can inform behaviors and preferences of consumers in new regions, new demographics and, conversely, longtime customer habits. If a brand isn’t using this data to appropriately connect with their audiences, they are sacrificing the vital personal touch. The intelligence needed to engender an individual connection is fueled by a brand’s data reserves and ignited by effective content and incentives driving more sales.

AI has been touted as “the answer,” but this chatter has created white noise that seems intimidating and confusing to many brands. Countless technologies tout AI prowess, yet retailers are still grappling with how it applies to them and their specific challenges. One distinguishing advantage of AI, unlike business intelligence, segmentation, or data analytics programs, is that AI helps create new data. It can synthesize existing data points and trends to create new information, identify patterns and allow marketers to stay one step (or many steps) ahead.

A recent Deloitte study found that, among luxury brands, a one-size-fits-all approach was thought to be needed in order to support global growth. However, that same study found that such a strategy does not in fact resonate with the changing consumer base — 45 percent of respondents want personalized products and services. As the U.S. luxury market continues to underperform, retailers need to take a long, hard look at how to use the data in their backyard to create true personalization.

The Future Buying Power

Bain & Co. suggests Millennials and Gen Z will make up 45 percent of global luxury buyers by 2025, with digital natives continuing to upend “traditional” retail norms. Luxury has a new audience and while brands shouldn’t forget their traditional buyers, they need to understand the habits and values of this burgeoning demographic if they want any chance of building retention and succeeding in their respective growth initiatives.

Millennials are unlike any generation before them, growing up in a connected and global environment, on average using 4.5 devices when interacting with a brand. They care about their peers and global social issues, put an emphasis on work/life balance and enjoy spending money based on their values and lifestyle choices. Having strong, independent ideals makes them model consumers of luxury goods — Millennials want to be heard and seen as unique. These digital natives are ushering in the next generation of consumers who have access to more data than ever before. To succeed among this savvy group of consumers, brands must leverage that data to deliver highly personal interactions.

The Authenticity of a Digital World

The luxury space has been slower to embrace a digital footprint than other retailers, believing their affluent consumer base would prefer in-person interaction with brands and products; the seemingly nonreplicable firsthand experience. While bricks-and-mortar endows the customers with an immersive brand and style experience, the mentality around store ubiquity is changing as online purchases have continued to take a larger share of all luxury sales.

The shift toward digital does not signal an end to traditional bricks-and-mortar, in fact quite the opposite. If integrated properly, a digital strategy amplifies the in-store and brand experience as a whole. For example, as many retailers seem to move away from physical storefronts, Amazon has done the opposite. Its shops have performed well and are flawlessly integrated with its digital experience by showcasing gadgets, experimenting with retail technology and building loyalty. Furthermore, Amazon’s recent $13.7 billion acquisition of Whole Foods highlights its commitment to retail’s marriage with real estate — Amazon made a bet on consumers continuing to value the synergy between the online and in-store.

Sixty percent of retail and e-commerce companies expect to establish AI marketing strategies in the next year, according to an Emarsys study conducted with Forrester. That same study found 73 percent of consumers prefer buying from brands that personalize a shopping experience which, in turn, creates brand loyalty. The digital parallels and consumer preferences mean that luxury retailers should not feel forced to abandon their brick and mortar roots but rather reevaluate the foot traffic.


Whether its virtual reality catwalks, blended reality mirrors or AI-enabled marketing solutions, luxury is experimenting with innovation. In today’s digital age, it’s of course critical to analyze data, stay ahead of changing consumers and embrace an authentic digital experience, but luxury retailers must not lose sight of what made them successful to begin with — a high-end, personal connection that makes each consumer feel exclusive and important.