Why does the Low-Touch Economy Matter in the Luxury Industry?

While some of the COVID-19 safety restrictions are being lifted, the way we shop is still drastically different. Consumers are still scared, worried, and fearful – and rightfully so. What can the luxury industry do to calm nerves and keep business flowing?

Low Touch Economy_Shop Window Display_Why does the Low-Touch Economy Matter in the Luxury Industry_TDF_Visual Merchandising Manufacturer
Shop Window Display_Low Touch Economy_Why does the Low-Touch Economy Matter in the Luxury Industry_TDF_Visual Merchandising Manufacturer

(Photo: Shot at Burberry, Shenzhen, China)

Before the pandemic, Low-Touch Economy or Zero-Touch Economy was made popular from the surge of online shopping. Low-Touch Economy is where sales are made without face-to-face contact between customers and salespeople. Since the COVID-19 pandemic broke out, this no-contact business model has quickly become the “new normal.

Harmonised retail stores combine physical layouts, digital technologies, and human experiences. How can brick & mortar stores adapt? Why does the Low-Touch Economy matter? Eventually, it will complement online shopping.

Understanding Low-Touch Economy

The Board of Innovation‘s strategy report released this statement regarding Low-Touch Economy:

“It is the new state of our society and economy which permanently changed by Covid-19 with the characteristics of low-touch interactions, health and safety measures, new human behaviours, and permanent industry shifts.”

This model stresses the use of technology to reduce physical human contact. We’re witnessing a significant shift from a high-touch economy (physical shopping experience) to the low-touch economy (technology-driven business model).

To keep up with sales during the pandemic, the retail industry considered redesigning the shopping journey to harmonise retail stores by offering features like pick up in-store, purchase online, and at-home delivery.

Low Consumer Confidence in In-store Purchases

According to a recent poll by Ipsos, 63% of consumers are avoiding shopping in physical stores. Consumers are avoiding shopping in brick & mortar stores because they fear physical human contact. Online shopping and in-store pick up are becoming a more popular option.

The research found by Mckinsey showed that 13% of American consumers use self-checkout in-store, and 79% of them would like to continue with this shopping experience. Due to the coronavirus’s impact, consumers have adapted to digital-led experiences and are willing to continue even after the coronavirus pandemic subsides.

An article published by Mckinsey, Adapting customer experience in the time of coronavirus, notes that this dramatic change in shopping experience can deliver lasting memories in consumers’ minds. A low-touch economy will help boost consumers’ confidence and be a complementary piece in the sales strategy.

Online Shopping is Booming

Due to social distancing and travel restrictions, the luxury industry streamlines its sales strategy with remote solutions to boost online sales. One-on-one chat, live streaming videos, and social media promotion are helping brands keep up sales during the pandemic. Kering said that 13% of its total retail sales were from e-commerce in the first half of 2020, up from 6%.

To utilise the low-touch economy and follow the customer behaviour of shopping online, the luxury goods sector has been putting online shopping at the forefront of their marketing efforts. The low-touch economy has created a digital revolution in the luxury industry.

For example, Moncler, a luxury fashion brand, announced that it planned to increase its online sales to 20% of its business by 2023 and move the online operation from Net-a-Porter to in-house. Statista’s Luxury Goods Report foresees that online sales of luxury leather goods, cosmetics, and fragrances will soar by 33%, reaching USD 101 billion in 2025.

Successful Low-Touch Retail Examples

Consumers fear traditional brick & mortar stores. The luxury industry has been forced to re-engineer sales channels and catch up to set their digital presence. The low-touch economy has caused a spike of online shopping and in-store pickups. The luxury industry’s challenge is migrating to a harmonised retail store while still providing the lavish shopping experience consumers expect from luxury retailers. BCG forecasts the sales of luxury goods will return to pre-crisis levels by 2023.

Harmonised retail store_Low Touch Economy_Why does the Low-Touch Economy Matter in the Luxury Industry_TDF_Visual Merchandising Manufacturer

(Photo: Shot at Burberry, Shenzhen, China)

Hear what Steve Dennis (strategic advisor and keynote speaker on retail innovation) has to say about it.

“Showing up in remarkable ways at the moments that matter in a customer’s journey is what I call “Harmonized Retail.” 

Although physical retail may not be a priority channel, we will not remove physical retail from the customer journey. Burberry seamlessly created a harmonised journey under a low touch economy. At the same time, Nordstrom made a better shopping journey for its consumers. We can all learn a thing or two from the remarkable shopping experiences they offered to customers during the pandemic.

Burberry Social Retail Store

Burberry’s first social retail store in Shenzhen delivers a digitally immersive customer journey by combining harmonised retail concepts down to even the smallest details. The digital visual in the interactive shop window display brings an evocative living sculpture. The impressive window display offers an exciting experience before shoppers even enter the store. 

After entering the store, the digital exploration of brand and products continues. Burberry collaborated with Snapchat to create a unique in-store gamified experience through an exclusive Snapchat Lens. By scanning the QR code, it brings customers into the world of Burberry’s Animal Kingdom, which is their current animal-themed pop-up. Besides, the QR codes let customers learn more about the product information and the brand. Burberry is creatively leading the way for other harmonised retail stores.

Nordstrom

Department stores, including Bloomingdale’s, Nordstrom, Macy’s, and luxury brands such as Louis Vuitton, Burberry, and Saint Laurent, offered “buy online, collect in-store” long before the pandemic. Nordstrom aims to provide stock available to all channels so that customers can access everywhere. When customers see the products on social media or live streaming video, they can choose to order immediately and pick up in a local store or opt for home delivery.

Shea Jensen, a senior VP of customer experience at Nordstrom, also mentioned that ordering online and picking up at local Nordstrom stores let customers explore extra items and brands. Customers can come to the physical stores to feel, touch, try the products, and even enjoy additional post-sale services after purchasing the items online.

Final Thoughts

The low-touch economy has forced a shift in sales strategies in the luxury industry. We believe physical stores will not die during the aftermath of the pandemic; instead, they will compliment online shopping. It’s not about choosing one or the other; it’s about seamlessly incorporating both shopping mediums to create a better customer experience. 

According to the In-depth: Luxury Goods 2020 conducted by Statista, digital-native luxury brands invest in physical stores to increase the traffic to their e-commerce business and complement the lack of touch-and-feel senses. Customers can explore the products with their five senses, which we cannot create online. When consumers start re-entering physical stores, attractive and sensational shop window displays will support the in-store customer journey.

At TDF Asia, we offer flexible visual merchandising solutions in just 5 easy steps. Learn more about creating window displays, product displays, and fixtures for the luxury retail industry. Please don’t hesitate to contact our project management team at enquiry@tdf-asia.com or give us a call at +852 2116 9583. 

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