What Deal-Hungry Consumers Mean for the Luxury Category

Consumers across income levels are increasingly searching for the lowest-priced item. And while this might be advantageous for the likes of Amazon and Wal-Mart, other brands — particularly premium varieties — are challenged to strike a balance between product and price. This is perhaps best represented in Radial’s latest report, “Outsmart E-commerce Giants to Win Online Shoppers in 2018.”

The white paper includes findings from the omnichannel commerce technology platform’s study, which surveyed more than 4,000 consumers in the U.S., U.K., Canada and Australia to understand their online spending behavior.

According to the survey, over 60 percent of participants said that purchasing a product at the lowest price was the highest priority when shopping online. In the U.S., 60 percent of consumers expected their item to be delivered at no additional cost and only 23.5 percent expressed a willingness to pay up to $10 for deliveries.

Clothing and accessories continue to reign as the top item that global consumers purchase online — 55.5 percent. Health and beauty categories trailed slightly as almost 29 percent noted the segments as the top items purchased online.

Here, Stefan Weitz, executive vice president of technology services at Radial, discusses the findings of the report, and how retailers and brands should respond.

WWD: As consumers increasingly hunt for deals, how should the luxury category respond?

Stefan Weitz: As premium brands are pressured to grow revenues and share, many will look to expand their core audiences through either deals (something that many have eschewed) or through new, adjacent brands that they can create to attract a new segment which preserves their top-tier brand’s exclusivity. And while most consumers say price is still their top criteria when searching for a product that generally refers to commodity products — bespoke or high-luxury still enjoy the relative immunity to the deal mentality.

WWD: According to the research, consumers value speedy — and free — delivery. How can retailers aim to keep step with Amazon’s expedited services?

S.W.: Amazon has completely changed the game for consumer expectations as it relates to the online shopping experience. Consumers expect retailers to deliver packages quickly, with 34 percent of respondents expecting their packages to ship in under a week. However, what most don’t know is that delivering a seamless experience is a complex and costly undertaking. On average it can cost 70 cents on the dollar to complete an e-commerce order, which is simply not sustainable. To provide the experience consumers want, retailers need to ensure their entire network is operating seamlessly and they are negotiating the best possible partnerships with freight and fulfillment services. This could mean they seek a third-party provider that manages the network for them and helps to drive down costs. In doing so, they are able to transfer those savings so that the consumer directly benefits.

WWD: The survey found that the majority of online shoppers have a membership to an e-commerce marketplace. What does this signal to retailers and brands?

S.W.: Marketplaces are increasingly the first-place online shoppers head today, indicating consumers value convenience, selection, and cost savings above all else. Selling on these channels can boost sales and serve as a great introduction to the market, however has the potential to damage visibility as the entire sales process becomes marketplace branded.

For retailers, this means they need to be smart about their marketplace strategy and use it as a gateway to drive traffic back to their site. Once retailers get consumers to their site, they need to find the most engaging ways to keep them there. Whether that is through branded packaging, personalized messages, or great customer service, retailers can leverage marketplace channels in a strategic way to attain customers and not get lost in the shuffle.

WWD: What should be in every retailer and brand’s 2018 strategy?

S.W.: Interestingly, the report found that more important to consumers than expedited shipping is free (or inexpensive) delivery. With the rise of e-commerce, free shipping has become an expectation in the U.S., with 60 percent of consumers not willing to pay for their goods to ship and only 23.5 percent willing to pay up to $10. While consumers still want to receive their goods within a reasonable time frame (34 percent expect under a week) they are far from cognizant of the fees associated.

Across the board, inexpensive shipping or using things like shipping should be a priority that retailers focus on in their 2018 strategy. Retailers can be creative in ways that they get goods to customers. Options like buy-online-and-pick-up-in-store provide consumers with inexpensive ways to receive their goods on their own timeline.

WWD: In your opinion, how will the role of the physical store evolve in the coming 12-24 months?

S.W.: Over the next 12-24 months I expect to see more stores use their bricks-and-mortar locations as fulfillment centers. Consumers are interested in saving money and getting goods in a reasonable timeframe, while retailers have massive bricks-and-mortar networks that can be put to use. Once retailers are able to get consumers into stores they can then demonstrate additional value and use the opportunity for upsell.

More from WWD:

What Net Neutrality Means for E-commerce

Amazon Prime Members: Ready, Willing, Able

Affluent Consumers Hunt for Deals, Too

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