Gucci passes Burberry on L2 Digital IQ Fashion index

Dive Brief:

Gucci has displaced Burberry as the leader in luxury fashion brand digital innovation, according to L2’s Digital IQ Fashion index, released Tuesday. Coach and Ralph Lauren tied for third, followed by Tory Burch, Kate Spade and Michael Kors, which tied for sixth.
“Gucci proves adept at translating core brand association to digital channels, over-invests in customer service, and maximizes visibility across both search engines and authorized retail partners,” according to a copy of the report emailed to Retail Dive.
Gucci's social media interactions have doubled in the past 12 months or so, thanks in part to designer and celebrity collaborations on image-heavy Instagram and Snapchat, and its SEO capabilities and online advertising have boosted its digital marketing reach, according to the report.

Dive Insight:

Digital marketing is becoming increasingly important in the luxury market, L2 says. E-commerce sales of luxury goods account for $19 billion in revenue or 7% percent of sales, and e-commerce is projected to drive two thirds of growth in the sector in the next five years, according to the report. Beyond that, regardless of where or how customers make their purchase, 60% percent of luxury goods purchases are in influenced by digital touchpoints. As growth has slowed in luxury, “mastery of digital channels for discovery, influence, and sales is an increasingly salient indicator of a brand’s prospects,” according to L2.

While digital consumption on mobile apps has increased 11% in the past year, luxury brands are eschewing apps in favor of the mobile web, where audiences are three times the size and growing twice as fast and which is aided by the integration of Apple Pay into Safari, the research found. As a result, the prevalence of fashion-centric iOS e-commerce apps fell from 23% to 17% since 2015, and while four brands created an e-commerce app last year, only Calvin Klein has done so since.

The rise of digital marketing corresponds with luxury’s belated adoption of (and comfort with) e-commerce more generally. That’s largely the influence of Amazon — which L2 calls the “elephant in the room” — which is poised to pass Macy’s as the largest U.S. apparel retailer sometime next year. That doesn’t mean that luxury retailers are comfortable actually selling via Amazon, though.

“While ‘masstige’ brands have partnered with the retailer, luxury brands have been recalcitrant,” according to L2. “Only 25% of Index brands distribute on Amazon, despite 92% distributing across other online retailers (e.g. Bergdorf Goodman, Saks Fifth Avenue, Nordstrom). LVMH, which posted its third straight quarter of sales growth in September, recently reiterated there’s ‘no chance’ of its brands working with Amazon for the foreseeable future.”

Luxury brands, following Burberry’s example, are instead taking their e-commerce operations in house, according to L2, except for sales on the upscale e-commerce sites of Yoox Net-a-Porter Group, through which a quarter of the brands on the index sell.

Despite the advances catalogued in the L2 report, there’s still wide room for improvement. Just 76% of brands generated any organic visibility on category terms, while a paltry 13% of Index brands spent on Google AdWords, far below the 82% that did so for brand-modified keywords like “Gucci Handbag,” according to the report.

In fact, 10 brands on L2’s index control three quarters of all the organic visibility received by the Index on category keyword searches. Perhaps not surprisingly, “masstige” and large luxury brands that specialize in accessories and leather goods dominate, but retailers outperform them. Nordstrom, Amazon and Macy’s all individually generate more visibility on luxury-oriented category terms than the entire Index combined, and Nordstrom alone produces twice as much, according to the report.

A handful of brands simply benefit from categories in which they dominate; Canada Goose gets visibility from a search for “parka,” while Diane von Furstenberg is visible on searches of “wrap dresses,” for example.

Some investments have apparently been deemed not worthwhile by luxury brands, L2’s research found. Certain features, like quick view, live chat, and single-page checkout, and technical features like geolocation, have declined, and many brands are apparently moving away from blogs and editorial content independent or siloed from their e-commerce. The prevalence of brands having some version of such content has decreased from 71% to 62%.