Luxury brands struggling to make sales via social networks

By September 20, 2013
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Despite substantial investment, luxury brands are struggling to convert engagement generated by social networks into actual goods purchases.

Luxury goods makers have long been reluctant to take their brand universe online, largely through fear that the virtual customer experience may end up detracting from the prestige of their products. Nevertheless, faced with the growth of social networks, many of these firms have been driven to create an online presence, and have sometimes been successful. This is particularly the case with UK-based Burberry and The Art of Trench, a campaign which went viral, and more recently Hermès, a traditional prestige brand that still has only a very limited online presence. In stepping up their online campaigns, many luxury brands have now become experts in digital engagement. However, a recent report reveals how difficult it is for these firms to convert online presence into solid sales on digital platforms.

Low conversion rate of digital engagement into real sales

Digital innovation think tank L2 has just produced a report entitled ‘Intelligence Report: Social Platforms’, which assesses the presence and performance of around 250 luxury brands across 15 social platforms. The findings show that the role played by social networks in new customer acquisition is vanishingly small. Over the last four years, fewer than 0.25% of all new customers have been recruited via Facebook and fewer than 0.01% via Twitter. Moreover, customers acquired via these platforms tend to spend less over the long term than those recruited via other channels. In the digital sphere, sponsored research and email approaches are still proving to be the most effective ways of contacting customers, with respectively 10% and 7% of all new customers acquired by these means. Faced with close to zero return on their online platform investment, even the most active brands such as Burberry are now cutting down on this expenditure, despite the ever-increasing number of people coming on to social networks.

Towards greater e-commerce integration?

One of the main reasons why social networks are largely failing to achieve new client acquisition is the very limited integration of transaction tools into the base platform. These networks would therefore certainly benefit from the inclusion of e-commerce tools enabling seamless navigation and purchase. Twitter for example has just appointed former Ticketmaster President Nathan Hubbard as its first head of e-commerce, with a brief to enable transactions to be carried out directly on the micro-blogging site, a functionality which up to now has only worked as a hypertext link, thereby forcing the user to switch platforms in order to complete  his/her transaction. A number of startups are also working to transform social network platforms into e-commerce sites. Portland, Oregon-based Chirpify has linked up with PayPal to make Twitter-based transactions simply by sending specific words prefaced with ‘@’. However so far it is platforms such as Vine and Instagram, which are better geared to highlighting visual brand content, that are achieving highest marks when it comes to engaging with consumers. These creative networks engender 25 times the level of engagement enjoyed by other types of socialnetwork.

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