Oliver Chen is managing director and senior equity research analyst for financial services company Cowen, covering more than 30 stocks in the retail and luxury sectors. Considered an industry expert, Chen frequently speaks at key industry events and was included on the NRF Foundation’s The List of People Shaping Retail’s Future 2019. He spoke with NRF about the pandemic’s impact on luxury retail.
Big picture: What is the biggest obstacle for luxury retailers? And the biggest opportunity?
The biggest obstacle is the acceleration of digitization. This is both an obstacle and an opportunity. Luxury retail needs to test, read and react as it integrates and balances the highly emotional and innovative with a reimagined digital experience.
Luxury has been slower to online adoption and so there’s an opportunity to catch up and innovate. What we’re seeing on the next frontier includes ideas such as live-streaming a shopping event, reimagining a shopping and store experience with augmented reality, and a myriad of personalization-driven innovation.
At the other end of the spectrum, specifically in grocery and broadlines retail, there has been exciting and rapid adoption of curbside pickup. There are awesome lessons for luxury in how broadlines retail is driving convenience to the customer. Luxury needs to do both: Maintain the emotional and storytelling side of the business and brand and execute on the convenience the new customer expects.
Another important note: Luxury needs to rethink how its brands can be culturally relevant in a new age. Point one is inclusivity and really thinking about racial injustice, as well as providing for all body types.
Check out a broader view of the consumer trends that retailers need to know about here.
A second point is sustainability. Consumers want purposeful shopping and a way to express themselves by buying brands that stand for their beliefs. Examples include visibility into carbon footprints and diverse leadership across the organization.
A third point is the rising significance of the entire stakeholder perspective, thinking about shareholders, customers, suppliers and communities. Luxury can work in tandem with this broader purpose and will need to think about these issues to manage a globally relevant business for the long-term.
You talk about the need to pivot to at-home engagement. What is that, and why is it important for a luxury retailer?
The whole idea of customer centricity has rapidly changed. With the crisis, the way people are spending their time, luxury brands have an opportunity and a role to respond. A lot about luxury is understanding the customer and the new needs around family, cooking, home, culture, relief and relaxation.
For all of retail, the new opportunity is in rethinking the store experience in the home. It means livestreaming and finding ways to engage customers in a safe manner that is virtual. It also means fashion shows being very different and videocentric. Salespeople can really engage by mobile phone and other ways. Luxury always needs to stay on top of the changing consumer needs.
You are anticipating a rise in re-commerce. What is the potential impact of that on luxury?
Customers are thinking about goods more holistically, meaning what we call the uberfication of retail and using assets as services. There is an emphasis on, “What about the afterlife of this bag or those goods?”
Retail is moving to a “less is more” model where new generations are not collecting more stuff for the sake of stuff. They’re thinking about simple. You have the sustainability angle around buying and selling what you need. There’s a value angle, a consumer angle, a financial angle and a new generation angle.
This isn’t really brilliant because we had vintage stores in the past. The mall was the original internet. There’s a lot of these themes that are hypercharged by the reality of where we are today. It’s a caution and an opportunity for department stores. They’re embracing it too, partnering with companies like ThredUP and Fashionphile.
From a brand perspective, you have to think about how to embrace the customer who wants to sell or buy in the aftermarket. The customer will do it anyway. Buying, selling and recycling your goods can be fun, experiential and engage communities. The aftermarkets can incorporate both exceptional value at savings of 50-90 percent off and super-premium transactions when limited-edition goods are scarce.
Many people feel that we’re just holding on, but there’s an emerging theory of harder times ahead. What do you believe the future holds for luxury?
The future is thrilling and dynamic. It’s the burden of luxury to execute to shifting demographics because millionaires are getting younger and have changing expectations. We believe inclusivity is the new exclusivity and health is the new wealth.
Furthermore, in a world where everyone is available at all times and places, how do you stay special? Walmart and Amazon are executing so well. That means that expectations from consumers are rapidly rising in all retail experiences.
Luxury will always be about wonderment, emotion, storytelling and understanding the heritage of a product and brand. It just has to be translated differently.
What advice would you give luxury retailers in reimagining their future?
Personalization is a big deal and retailers need to be thinking about how to personalize an experience, using data and technology in a way that is delightful, not creepy, and empowers store talent to be the best they can be.
Personalization is a really good theme for retail at large. One-to-one matters, and you can harness data in a way that maintains the specialness. This whole idea of convenience -- you have parts of a shopping experience that aren’t fun and parts that are. You have to use technology to eliminate the parts of the shopping experience that you don’t like and reinvest in the surprise and delight.
That does mean embracing features like buy online, pick up in store, ship from store, advanced inventory management and curbside pickup -- reimagining and embracing the new customers, which has to do with inclusivity, sustainability and streetification.
It’s hard to not mention the at-home revolution and innovating to the shift of the customer needs, which means trying to be one step ahead of understanding what luxury will mean for nesting and product innovation that embraces that. You really have to balance the art and the science and take creative risks.