Leading Disruptive Change in a Digital Economy
Strategy Case Study
The New Luxury Landscape: How Brands are Embracing Digital Transformation
Digitisation in Fashion – How is the industry changing?
The fashion industry, ranging from global discount retailers to exclusive luxury brands, drives a significant part of the global economy. Fashion is one of the most challenging fields, highly impacted by global economic uncertainty as well as distinct trends and industrial changes. In response to the pressure for growth and cost efficiency, many brands have started a series of initiatives to improve their speed to market and to implement sustainable innovation in their core product design, manufacturing and supply chain processes.
Having a clear mobile and social-media strategy is necessary but is not enough to capture full digital impact. To achieve and maintain digital leadership in the luxury industry—and to ensure that they allocate their digital investments wisely—companies must zero in on the most meaningful performance indicators and determine the actions that will make the most difference in achieving their digital objectives.
Value Proposition
It is no secret that we are well into a digital era, and almost every process is being digitized. Most businesses are looking into implementing digital techniques that will give them an upper hand over their competitors. Shoppers no longer want to make the long trip to the store just to purchase a single item; they prefer doing so from wherever they may be. Luxury brands are especially having a tough time accepting this reality because they thrive on the personal experience that they get to share with their customers (Apparel, Marchessou & Remy, 2018). Their primary goal is usually to give their customers that white-glove service that will keep them coming back. Digital platforms, according to the luxury brands, take away this experience hence their delayed assimilation into the digital world. However, the pressure by other businesses that are embracing technology in their business processes has forced the luxury brands to cave in and go digital too (Kapferer, 2014). To do so, they are forced to fully adopt technology as an integral part of their businesses instead of putting it on the sidelines.
A brand like Channel has only recently started advertising itself on social media platforms, especially Instagram. The process has so far been rewarding as the brand has crafted an impeccable social media presence topping A-list brands like Christian Soriano and Louis Vuitton, according to a recent study by PMX Agency (Dial, 2018). The brand’s followers became so many that they demanded two more accounts to be created, and it was done; one account for beauty products and other contained user-generated content. Chanel maintains the brand’s image even on their Instagram accounts by posting content that displays exclusivity and sophistication. They only collaborate with influencers that share the same audience and values as they do to ensure that their brand is represented appropriately.
However, other brands are also taking digital strides to ensure that they are not left behind. LVMH has come up with an accelerator program that focuses on visual-recognition predictive technology, biometric wristwear, chatbot customer service, and robotic technology that customizes clothing according to the customer’s body (O’Brien, 2019). Gucci has also come up with a project known as Gucci Hallucination. It makes use of virtual and augmented reality to enable users to feel as if they are living the lavish lifestyles that they desire. Tiffany & Co. have focused on dominating SERPs on Google (O’Brien, 2019). Searches for jewelry brand keywords will bring up majority of results linked to the company and images of the brand’s products. Neiman Marcus has focused on creating omnichannel shopping experiences for customers. This includes a website that remembers the customer’s preferences, such as their cloth sizes and brands that they like and personalized emails that inform the customers of the arrival of the items on their wish lists (O’Brien, 2019). There is also the “Memory Mirror” that enables customers to take videos of themselves trying on clothes. The “Snap. Find. Shop” feature allows customers to take pictures, then uses image recognition to find similar products (O’Brien, 2019).
Chanel has put so much focus on growing their social media presence that they have forgotten to explore other techniques of digital transformation. Social media should not be the only focus of the Chanel brand; instead, they should aim to adopt technology that puts them well ahead in the digital space. To achieve this, an application that uses artificial intelligence to identify counterfeit products can be developed. Customers can use the application that can be downloaded on their smartphones to determine whether a product they wish to purchase is a knock-off or a genuine of the Chanel brand. Most losses that luxury brands face are as a result of some businesses making imitations of their brand and selling them off to customers as the originals. This is because the customers have no way of checking the authenticity of the product when making their purchase and end up paying large sums of money for a counterfeit product. When the quality of the purchased product fails to satisfy the customer’s expectations, they end up putting the blame on the brand and not the person who sold them the product. Other customers who may have wanted to buy from the brand shy away from making the purchase because of such negative feedback. This tarnishes the name of the brand and reduces its customer pool.
Market Opportunity
The digital market is one that is growing exponentially, with brands coming up with unique ways to make themselves stand out. Studies have revealed that about 2.5 percent of America’s global imports, which is about half a trillion dollars, consists of pirated or counterfeit goods. These astonishing figures have caused retail companies to begin exploring technologies that can enable them to get ahead of the counterfeiters. Many customers wish that they could have the power to tell a fake product from the real one, but most of the time, they are unable to do so. The counterfeit brand makers are becoming so good at what they do that they can even fool an employee that has worked for the Chanel brand for years. This shows how such an application could be of great assistance to the brand’s customers. It would be like having a superpower that enables you to identify the authenticity of the brand’s product. Amazon already has its own version of such a program in the market that lets brands filter out fakes before posting them on the site (Apparel, Marchessou & Remy, 2018). This has been one of the contributors to the large customer base that Amazon has; people are sure that the products that they purchase from the website are authentic. If these counterfeiters realize that they will have no way of selling fake Chanel products, they will avoid making them as they will not be profitable. In this way, Chanel can gain back the customers that it lost as a result of falling prey to fakes, and their profits will go up.
Competitive Differentiation
Other luxury brands such as Balenciaga, Burberry, Dior, Fendi, Gucci, Louis Vuitton, and Prada are already in on the use of applications to detect counterfeits on the market (Duma et al., 2020). They all use a technology that is provided by a company known as Entrupy, which detects any inconsistencies in a product to verify its authenticity. The technology has extensive databases of information on the brands’ products and uses anti-counterfeit algorithms to detect fake products. The Entrupy technology has been fed with microscopic pictures of authentic handbags from these brands that date back many years (Kapferer, 2014). The algorithm that the technology uses analyzes the aspects that make the products genuine that are difficult for counterfeiters to reproduce. Even if the counterfeiters discover these intricate details, they find the process of reproducing them at a microscopic level to be too expensive compared to the returns that they expect from the products.
To differentiate our application from the technology used by Entrupy, we will make it available to the general public. Entrupy, at the moment, only offers its technology for use by businesses. The businesses scan the products that they come across and try to discover whether they are authentic or not before they allow them to be sold in various online and offline stores (Duma et al., 2020). The problem comes in when a customer comes across the brand in a store that does not have direct affiliations with the Chanel brand. The store may be getting its products off the black market where the goods do not undergo screening to determine their authenticity. In this way, the customer can only hope that the brand they purchase is a genuine product of the Chanel brand, but that is not usually the case. With our application, the customer can have control over the products that they purchase. All they need to do is take out their phone and take a few pictures of the handbag that they wish to purchase. The algorithms of the application will get to work scanning the images uploaded for any inconsistencies and give feedback on whether the product is a fake or not.
At the moment, suitable anti-counterfeit algorithms that will be used in the analysis process are still being developed by the use of machine learning and artificial intelligence. Samples of the various genuine products from the brand are also being analyzed by big data analytics and details being stored in the application’s database. This analysis involves scanning microscopic sections of the handbags and the information in the program’s memory to ensure that the application works with high accuracy. Features that will allow the samples of pictures that customers take to be stored in the database are also being installed. The application will also help in tracking those sellers that may think they have evaded the law by obtaining products from unwarranted sources as it will request for the customer’s location.
References
Apparel, A., Marchessou, S., & Remy, N. (2018). Luxury in the age of digital Darwinism. McKinsey & Company. Retrieved from: https://www.mckinsey.com/industries/retail/our-insights/luxury-in-the-age-of-digital-darwinism.
Cowan, T. (2018). Leading in the Digital Age: Disruption, Transformation, Data, Cybersecurity, Artificial Intelligence, (First Edition). New York, NY: Vecker Press.
Dial, M. (2018). Digital Transformation For Luxury Brands – How To Add Value In A Luxurious Way – Leadership, Brand Strategy & Transformation. New York. Print.
Duma, F., Labati, F., Brunetti, G., & Gadgil, M. (2020). Mastering the Digital Transformation as a Heritage Luxury Fashion Brand. Marché Et Organisations, n°37(1), 33. New York. Print.
Kapferer, J.-N. (2014). The artification of luxury: From artisans to artists. Business Horizons, 57(3), 371–380. https://doi.org/10.1016/j.bushor.2013.12.007
Kelly, K. (2016). The Inevitable: Understanding the 12 Technological Forces That Will Shape Our Future. New York, NY: Viking.
McQuivey, J. (2013). Digital Disruption: Unleashing the Next Wave of Innovation. Las Vegas, NV: Amazon Publishing.
O’Brien, M. (2019, October 25). The new luxury landscape: How Tiffany & Co., Gucci, and LVMH are embracing digital transformation. Retrieved from: https://www.clickz.com/new-luxury-landscape-tiffany-gucci-lvmh/214119/.
Paetz, P. (2014). Disruption by Design How to Create Products that Disrupt and then Dominate Markets. New York, NY: Apress.
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