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Luxury store in Asia with sleek displays, upscale client experience

Luxury Retail done the Asian Way

Luxury store in Asia with sleek displays, upscale client experience Luxury store in Asia with sleek displays, upscale client experience

August 07, 2024

The Retail landscape in Asia is undergoing a dramatic transformation, influenced by varying economic conditions, evolving consumer behaviors and innovations in Retail strategies. As the next decade unfolds, these changes will reshape not only how consumers in Asia shop but also how retailers approach the market across this diverse continent. With Asians innate digital savviness and discernment for quality, retailers need to learn how to ride this new trend in the industry and adopt a new approach to marketing in a saturated business to stand out.

Should we venture out into the Central Business District of Singapore alone, that shift in its Luxury Retail landscape is palpable. Once portraying a traditional form of opulence, such marketing is now replaced with a more ambitious front of its products and services, commanding consumers attention at every single turn thanks to the evolution of technology, where engagement trumps sales.

Who are Asian Consumers

The Asian consumer is a force to be reckoned with. Both stylish and tech-savvy, she represents the great phenomenon in the APAC region; an ever-growing bourgeois class where with a greater spending power, came a greater demand for more Retail therapy and more Luxury goods.

Why tech-savvy you may ask? The triumph of Southeast Asia’s Retail technology revolution can be attributed to several factors, including the convenience of ecommerce.

Digital Adoption:

  • Mobile commerce accounts for approximately 60% of Luxury ecommerce transactions in the region.

  • Mobile commerce (m-commerce) sales in the Asia-Pacific (APAC) region accounted for more than half of total ecommerce in 2022, with the exception of Japan, where it was 39%. In Southeast Asia, more than 70% of internet users shop via smartphones. Additionally, 77% of internet users in APAC between the ages of 16 and 64 buy products online using their mobile phones every week

Demographics:

  • Ecommerce platform apps are used by the majority of consumers across all major age groups. But usage is presently highest among consumers aged 34 and below – at over three-quarters – and lowest among older consumers aged 55 and above – at just over half.

  • Millennials and Gen Z constitute over 60% of the Luxury ecommerce market in APAC, with a strong preference for online shopping.

  • Women account for about 55% of Luxury ecommerce purchases, particularly in segments like fashion, jewelry, and beauty products.

Before the pandemic happened, around 30% of Luxury purchases were usually happening outside of the consumers’ home countries. There was not a lot of local consumption of Luxury. Because of that, many companies were catering to tourists rather than local consumers.

But that all changed in the wake of COVID-19. The first big shift for marketers is how to cater to local consumers who had higher purchasing power but nowhere to maximize due to travelling restrictions. Luxury marketers had to think about how to incentivize local clientele to spend in their markets, as opposed to planning their purchases for whenever they travelled.

To date, the APAC ecommerce market is the world's largest and is expected to grow at a compound annual growth rate (CAGR) of 10% from 2024 to 2029, reaching $6.76 trillion by the end of that period.

How can the Luxury market leverage this phenomenon? This article seeks to understand the Asian consumer, their expectations and what Luxury brands can do to meet those demands seamlessly through Retail innovation.

Asian market: A growth opportunity for brands

The APAC Luxury goods market is expected to grow at a CAGR of 3–4.06% from 2024–2029. In China alone, they are expected to play a key role in the market's growth, accounting for over 50% of total sales by 2027.

That unquenchable thirst for Luxury, however, also bred a new trend: personalization. According to Luxe’s survey in 2018, personalization and customization have become the most sought-after services among Chinese millennials, with 20% of the respondents wishing that stores can have designated areas for customization service.

This corresponds with a latest study conducted by KPMG and GS1. 45% of respondents surveyed preferred the omnichannel approach, while in a boost for physical-first retailers, relatively few respondents said they could live with only shopping online. Should the numbers be further analyzed, countries in the APAC region averaged more than 40% in their inclination towards an omnichannel approach when engaging in Retail. This suggests that a one-size-fits-all Retail strategy – if ever it made sense – is becoming less and less meaningful.

Coupled with the immense digital knowledge in the APAC region, this would only make these consumers more discerning in their customer journey, giving them more bargaining power in their demands on what warrants a brand worthy of their loyalty.

The shift of how to engage with Luxury consumers through digital channels is a main factor. Asian consumers are digital natives, compared to their Western counterparts. In technological adoption alone, China, Singapore and Korea are leaders in new tech adoption – surpassing the developed markets of Europe.

But now Southeast Asia is becoming much more important, especially with growth in markets like Indonesia, Thailand, Vietnam and recently the Philippines. According to a report by Mckinsey, these countries had an average GDP growth of 5.8% with trade performance seeing a positive trajectory. Moreover, Luxury brands are slowly opening stores there and tapping into those consumers who historically have always been the elite group of consumers that would travel.

Gen z, who have grown up in the digital age, and their maturing millennial counterparts, will be pivotal in reshaping the Retail landscape in the APAC. Being more discerning in their preferences, they are the group of consumers challenging established brands by engaging with smaller but more personalized Retail brands across the region. Thus, Retail must adapt to this rapidly changing demographic by offering a personalized and high-touch shopping experience, utilizing innovative technology and interacting with these consumers in genuine and relatable ways.

To gain a more in-depth insight into an Asian consumer’s behavioral loyalty, Valtech surveyed 50 customers for a Luxury client and gleaned insightful observations about their behavior and pain points within a customer’s journey when interacting with the brand.

White luxury store displaying shoes and handbags on minimalist shelves and tables

The Asian consumer: Their wants and their needs

  • Seamless omnichannel experience

    • From the aforementioned survey, Valtech noted that one challenge Retail brands face when attempting to interact with Asian consumers is a disjointed experience.

    • Multiple factors played into this pain point for customers when interacting with the brand.

    • Respondents voiced their grievances of bad customer service and the hassle and effort required to enter the physical store, an experience that pales in comparison to shopping online, where such pain points are limited. This creates a customer experience lacking in cohesion and customers are reluctant to pledge their loyalty to the brand.

    • Thus, to maximize sales while ensuring constant engagement with customers, brands are expected to make their customer journey easier to navigate, with customers being able to transition from online to offline with ease.

  • Phygital Experiences

    • 32% of consumers say they’re likely to engage with in-store experiential moments.

    • Being tech savants, it comes off as almost second nature for Asian consumers to demand an experience within a store where they can interact with the brand at numerous touchpoints.

    • A brand’s physical store serves as a touchpoint of storytelling, allowing customers to interact constantly with the brand.

    • Adds on to the disjointed experience customers face, which then amplifies their reluctance to pledge their loyalty to a brand that is unable to make their experience seamless.

  • Personalized in-store customer experience

    • With the rise of ecommerce and especially travel Retail, Luxury Retail brands have the means to leverage their customers’ data to glean insights on their consumer behavior and preferences.

    • This was in stark contrast to previous practices where Luxury markets were unable to cater to their customers’ needs due to a lack of visibility of customer insights for different region specific markets

    • This is especially applicable to brands who intend to nurture and retain travel Retail customers for conversion in local markets.

    • Tying in with having a seamless omnichannel experience, customers would be inclined to interact with a phygital store that not only has complete transparency but also visibility of its product catalogue and options, especially options that match their previous purchases of the brand.

  • A sense of belonging with the brand

    • While customers value their individuality, they also value the idea of a community within the brand

    • Relevance is trumping loyalty. According to a recent Kantar study, 71% of loyalty programs fail to boost growth because they are all about pushing down transactions rather than connecting at the personal level. Kantar even talks about the rise of the “kinship economy.” Because emotions are at the heart of communities, the latter are the next frontier in customer experience, a critical factor of brand performance.

Doing more: How brands can meet the Asian consumer halfway

With this changing expectation of Asian consumers, brands must once again improvise their strategies to meet these demands, or at best, meet their consumers halfway. This is especially so when these Retail brands attempt to leverage technology in their favor to create that omnichannel experience.

Integrate ecommerce into other channels

Integrating one’s ecommerce into the brand’s other channels in a more seamless way enables the former to become an extension of your store, ensuring a smooth transition in how the consumer crosses over from one channel to another, thus eliminating the disjointed experience of consumers when entering the physical store.

For successful omnichannel transformation, investing in technology infrastructure is essential, whether through developing in-house solutions or partnering with third-party providers to create modern, flexible platforms. This infrastructure must provide access to clean, reliable and timely data in a secure manner.

Ultimately, it's vital that retailers maintain consistent data that supports a seamless customer journey across all touchpoints, from CRM systems and data management to supply chain, inventory, order management, point of sale and post purchase customer support.

Gucci and its use of a streamlined POS system

Gucci’s use of a streamlined POS system elevated their customers' Retail experience. Revered for its approach to a personalized customer experience, Gucci leveraged on their customer data and preferences through its POS system to enable personalized recommendations and tailored shopping experiences. From suggesting complementary items to recognizing loyal customers, the Luxury brand has ensured that every interaction feels exclusive and memorable, a characteristic pertinent to an Asian consumer’s customer satisfaction. Simultaneously, Gucci’s POS system seamlessly integrates with its online platforms, allowing customers to browse, shop and engage with the brand across multiple channels. Whether purchasing in-store or online, customers enjoy a consistent and cohesive experience, reinforcing brand loyalty and driving sales.

Gamification of experiences

Gamification helps in building a community that is actively engaged with the brand. However, gamification is best when it’s not one-and-done, and thus creating a regular cadence of gamification experiences for your customers is pivotal.

Increase engagement with the brand through in store-experiential concepts

For Gen Z consumers, they are inclined into gaining experiences rather than material things. Raised in a competitive educational landscape, authenticity is their currency.

Understanding their desires is crucial, but innovating the shopping experience is paramount. The fusion of social media and ecommerce represents the frontier of engaging Gen Z in a way that resonates with their ethos.

Moreover, anticipation and personalization will be key. Consumers will not only expect exceptional experiences but will also demand that brands preemptively understand and cater to their needs. The integration of local cultural elements into Retail experiences will further allow brands to enhance their uniqueness and appeal, providing a tailored experience that resonates with the local and international clientele.

As the Asian Luxury Retail market evolves, several brands are pioneering changes not just in customer engagement strategies but also across their entire business and operating models.

Burberry and TenCent partnership in Shenzhen

The Luxury brand’s decision to go phygital became a reality in Shenzhen after partnering with Tencent to create an interactive shopping experience for users. Their flagship stores allowed customers to interact with the digital displays and mirrors to try on clothing and accessories virtually, providing a seamless journey that ameliorates customers' online and instore through augmented reality.

These initiatives reflect a broader trend where brands are not just adapting to changes in consumer behavior but are actively shaping these behaviors by creating multifaceted experiences that combine shopping with social interaction, technology and personalized engagement.

The evolution of Asian Luxury Retail

The ongoing evolution in the Asian Luxury Retail sector showcases a blend of tradition and innovation, with local cultural nuances playing a significant role in shaping global brand strategies. For Luxury brands to meet these changing expectations of them to ensure loyalty, they must adapt accordingly through ingenuine methods to capture their customers attention. How do you see these developments influencing the global Luxury market? Let us know your thoughts and insights on the future of Luxury Retail in Asia.

Stay tuned for part two, where we further explore the future of Retail in the APAC region in the foreseeable decade as imagination and technology blends into reality.

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