This article appeared first in The State of Fashion 2021, an in-depth report on the global fashion industry, co-published by BoF and McKinsey & Company. To learn more and download a copy of the report, click here.
The primacy of digital has been a long time coming for luxury, but even as discovery shifted to platforms like Instagram and WeChat, the sector was slow to embrace online retail. When stores shuttered during the first half of 2020, however, the critical importance of e-commerce became immediately apparent. Kering, for one, saw its share of online revenues more than double.
Momentum in e-commerce channels will continue to grow in 2021, but with long-haul tourism still frozen and store traffic struggling to rebound, the French luxury giant’s chief client and digital officer faces a challenging environment for omnichannel in the year ahead. Not only does Grégory Boutté have to find a way to make Gucci’s network of nearly 500 stores relevant in an overwhelmingly digital world, he also has to fast-track an e-commerce overhaul at Kering’s other billion- dollar-plus brands like Saint Laurent and Bottega Veneta.
BoF: You’re Kering’s chief client and digital officer. Can you tell us a bit more about the connection there?
Gregory Boutté: I think François-Henri [Pinault]’s vision in creating this role was that digital is the means to an end. My job is about starting from the clients, leveraging digital to create the best experience for them.
BoF: For all Kering brands except Gucci — including Saint Laurent, Balenciaga, Bottega Veneta and Alexander McQueen — Yoox Net-a-Porter had been operating their e-commerce businesses via a joint venture until this year, when you were set to move those functions in-house. Why?
GB: If a quarter of our business and so many of our interactions with clients are going to happen online, we want to control that experience. We think our clients want to move seamlessly between the different channels: making it so if you buy online you can pick up in store, you can book an appointment in-store online, you can reserve a product to try on, you can buy online then return it in-store. The only way to build those bridges is if you control both sides of the equation.
BoF: Those sort of click-and-collect services and in-store appointments are no doubt more important since the pandemic, even if we’d already been hearing a lot about this “omnichannel” approach in recent years. Are there any other ways you plan to blend online and offline services for the next phase?
GB: One area where we accelerated some efforts on omnichannel is distance sales, making it so a client visiting our e-commerce site can actually interact with sales associates in the store. So, if a customer says yes to using the feature, a sales associate in the store could chat with the customer, or even do a video and have them show some particular products and even close a sale. We’ve piloted that in some regions with a programme called Gucci Live and we’re getting an amazing response from our clients, both in terms of qualitative feedback and conversion.
BoF: Before the pandemic, McKinsey had forecast that e-commerce would account for around 20 percent of overall luxury sales by 2025. Kering exceeded that forecast in some regions this year, five years earlier than expected. After such a rapid surge, will online sales channels still grow next year?
GB: Our e-commerce revenue during the first half of 2020 went from 6 percent to 13 percent of overall retail revenues year-over-year. In North America we were as high as 26 percent e-commerce — so already ahead of the 20 percent McKinsey expected for 2025. I expect e-commerce to continue to accelerate in the coming years, because this is addressing a fundamental trend in our business. We’re seeing a lot of the luxury growth coming from younger generations as well as Chinese customers aspiring to buy our products, and the common theme between those two populations is that they’re ultra-connected. Of course, in terms of the share of e-commerce it will normalise a bit, since a lot of [what] we saw in the first half of the year has been driven by our retail network being closed. But I think it will be at a much higher level than expected prior to the pandemic.
BoF: One trend we’ve been seeing in the digital space in recent years has been faster growth for big brands while smaller brands underperform. What’s driving that polarisation online? Do you think that gap will continue to widen next year?
GB: That’s not just online; it’s a generalised phenomenon that digital is a part of. Building a luxurious experience online and building a digital footprint is very hard to do and requires significant investment. To have an e-commerce platform that is global, that is also omnichannel, is incredibly hard. And if you want to have an impactful social media strategy, that’s also very hard because it’s not just one platform: you have to adapt your content for Instagram, Facebook, Line in Japan, WeChat in China, and KakaoTalk in Korea. Building relevant content for each of those requires a lot of investment. So bigger brands — or brands that are part of a bigger group — can do this better.
If I had one [piece of] advice for a small brand that’s not part of a group like ours, it would be to really pick their battles. My advice would be do a few things extremely well, and delight a niche of customers.
BoF: Without that kind of group investment, how can a small, or a medium-sized brand be the exception, and really win some visibility online?
GB: If I had one [piece of] advice for a small brand that’s not part of a group like ours, it would be to really pick their battles. When you look at a brand like Gucci which is going after every opportunity in the digital space, it’s very tempting to try to go after all of those opportunities too. My advice would be do a few things extremely well, and delight a niche of customers. Trying to do everything could result in being average, and not cutting through the noise.
BoF: We’ve heard so much in recent years about the importance of e-commerce for Chinese luxury consumers, especially those who buy through very advanced digital channels in China’s own distinctive online environment. What are Kering brands doing to scale up activity in this space?
GB: E-commerce is huge in Asia, but when you look at luxury, it’s still very nascent. That’s something that not everybody understands. The ecosystems are incredibly different from what we are used to here, as “.cn” e-commerce sites are less popular in China than [their “.com” counterparts] in Europe and the US, and there are some very specific players you have to work with. [But] Gucci has launched its [Chinese] site and we’re seeing tremendous traction there, and we are also building our presence in [the country’s] very specific ecosystem. We’ve opened flagship stores for some of our brands on [Tmall’s] Luxury Pavilion and we’re also opening WeChat stores. This is an extremely fast-moving market where we see new platforms and new usage happening all the time.
BoF: Could this diversity of approaches — being available to buy on WeChat, Tmall, or even livestream channels your brands have experimented with — open up luxury brands to a greater risk of counterfeiting? I would have thought you’d prefer to train customers to know there’s only one or two places to buy genuine Gucci or Saint Laurent, for example?
GB: This allows us to have better control rather than creating more risk. Our clients are incredibly savvy and they understand where they can find genuine products. They understand which channels are controlled by the brands they aspire to engage with and it makes the other channels look not as attractive. When we build our presence in a way that’s relevant for our brands in those parts of the ecosystem, I think we’re adding trust.
BoF: What sort of tech should we expect to see more of in your brick-and-mortar stores? There have been a lot of “store of the future” innovations touted in recent years, and I’d be curious to know which ones you see actually taking off?
GB: We’ve not made huge investments in IT like connected mirrors, but rather focused on tools that aren’t visible to our clients, which augment the performance of our sales associates. We want to leverage that human contact as opposed to digital for the sake of digital. We have an app we’ve developed in partnership with Apple, which allows the store associates to check stocks in real time so they don’t have to leave the clients. For clients who accept to be identified, the sales associates can also access their purchase history and recommend products and sizes based on past purchases.
You also have clienteling, managing contact details in the app so that the sales associates can reach out at a distance. This has proven to be absolutely critical in the context of the pandemic. During the lockdown with the retail stores being closed, sales associates could stay in touch with clients and do distance sales. Then as stores reopened, they could prepare appointments and reach out to customers in a personalised way.
BoF: We’ve also been hearing more about zero-inventory concepts this year as brands are trying hard to not hold stock. Some designers are even experimenting with a pre-order model. Are those ideas relevant for Kering’s brands in the luxury sector, perhaps as a return to the old model of couture?
GB: We’ve been rolling out algorithms that use AI to forecast sales for new products. What we’ve built so far is 20 percent more accurate than what we had been doing [before]. Zero stock is definitely something we aspire to, but it’s further down the road since we’re still in the early days of being able to predict exactly how our products are going to sell. We do use pre-orders sometimes, but we’re not going to switch to a model where we would produce on-demand for customers. Part of the magic of the in-store experience is being able to try a product in the store and then have it immediately. We want to keep that.
This interview has been edited and condensed.